Educated migrants and Bangalore’s economic growth

Look at the population chart of Bangalore. Its population has grown 25x in the last 70 years. Formation of Karnataka state with Bangalore as capital helped it attract first set of migrants. Becoming home to many public sector companies did bring in the second wave of growth. Thanks to IT, Bangalore’s population saw a steep growth in the new century. And this wave was different than the earlier one’s as it attracted the educated migrants with higher incomes. (Link: http://timesofindia.indiatimes.com/city/bengaluru/Bangalore-gets-lions-share-of-educated-migrants/articleshow/18344203.cms). These new migrnats to the town took the GDP per capita of Bangalore to 3x of national average and made it cosmoplitian. If someone wants to witness India’s growth story, they better begin with Bangalore.

Most of these IT, ITES, BT, Pharma jobs were in export oriented firms. So for every one job created in this sector, at least one more job was created in the domestic services such as Education, Healthcare, and Transportation. That helped attract migrants from everywhere, within the state, from neighboring states, from distant north and east regions too. And it became home to many returning from abroad. You will also find non-native expats living in Bangalore with ease and comfort as well. If we assume there are 5 lakh residents of Bangalore working in IT and related sectors, another 5 lakh people in indirect services, and add two dependents to each of them, they would add up to 30 lakh people or approx.. 30% of Bangalore’s population. So what happens to the US economy concerns Bangalorean’s than the domestic economy.

Since it was already home to IT, e-commerce (Flipkart and Amazon) took roots here and it is seeing higher number of start-ups. Infrastructure development also provided jobs to many making it a self-reinforcing phenomenon. This nice story would continue provided the IT run continues. But it is facing many challenges. As the sector is reaching a maturity phase, its growth rates have slowed down to single digit as it is fast approaching saturation. Automation, cloud computing etc. are changing the resource requirements needed in the IT sector. As a result the numbers of new jobs are not growing like before. With that, new migrants coming into Bangalore is also slowing down. Moreover Bangalore’s road infrastructure is not sufficient enough to move around easily. Costs have gone up a lot in the past decade. Either due to cost or for other reasons, if IT companies begin to explore other towns, though it seems less likely, it would affect Bangalore’s economic growth. Migrants can leave as fast as they come. And the supporting jobs too would be gone in no time. E-commerce has too many players and some of them will have to wind up their business and a majority of start-ups too would run out of cash if they do not produce a marketable product. If and when such a thing happens, it will be Bangalore which will see the worst impact. Self-reinforcing phenomenon will become a self-defeating process with support jobs too disappearing. 

Will the IT industry find new avenues to grow? That would decide what happens with Bangalore’s growth too.

US interest rate up by 0.25% but equity markets are down by 20-30%

This would look weird. After US Fed raised interest rates by 0.25%, all emerging market currencies (including Rupee) started their downfall and equity markets all over the world are falling sharply, they lost 20-30% after the Fed’s announcement has come in. How can this small change in capital costs have such a big impact on the stock markets?

Reducing money supply in the system

My hypothesis is, it is the liquidity contraction in US which is causing the damage and not the interest rates directly. Here is my attempt to explain. First we need to understand that, all central banks decide the rates first and to ensure market follow that rate, they adjust the money supply or the liquidity in the system. Increase in the money supply will make rates drop. Reducing money supply will cause rates to rise. So when US Fed increased its rates, it had to cut its money supply in order to ensure interest rates catch up with decided rate. Let us look at the data.

US M0 Money supply. Source: Tradingeconomics.com

Data shows that M0 money supply in US dropped by $24B in the last month. That much money disappeared from the system. When we get next month’s data, we will see that trend is continuing. This reverse money flow triggered a serious sell-off in the equity markets and damaged many currencies as the money had to be converted into US Dollar before it got back to US central banks and finally disappeared from the system. Even a sell-off of $5B can pressurize the equity markets as there won’t be buyers for such a big sum sitting on the sidelines, so that leads to price erosion very quickly. As selling intensified (remember this money will not come back into the system), equity and currencies saw a bigger damage.

How it all started?

If you see the chart, Fed’s balance sheet started expanding after 2008 financial crisis. Their decision to print new money (through QE) to save their economy led to increase in balance sheet, from less than a $1 trillion to $4 trillions in a five years period or so. At the end of 2014, they decided to stop QE’s, so balance sheet expansion had also stopped from then. And in the end of 2015, they decided to raise the rates. This reversal led to contraction in money supply now in the beginning of 2016. Whatever went up with easy money, is seeing a reversal too but the correction is very quick.

How long it can go on?

If Fed raises rates again, we will see further contraction in money supply in the US and it adds to pressure in global equity markets and currencies. If they delay their plan, markets would see a breather. If they announce a fresh QE, markets will see a new high. Most likely scenario is, they will raise the rates in a slow manner. That would mean markets may not come back quickly and remain depressed for some more time or throughout this year. Whatever air was there in the markets, probably it is gone by now.

Is there a new recession around the corner?

No. Since US economy was doing good and employment levels were high, US Fed decided to raise the rates. But the adjustment in money supply resulted in revaluation of asset classes. Dollar gained at the expense of other currencies and a rout in commodities. This correction may not be indicating any problems with the economy but those who depended on easy money would do badly.

What will happen to Rupee?

Rupee, commodities and real estate will see headwinds until the turbulence in internal market calms down which is likely to last for the entire year. Comparatively India is doing good but that would offer no big relief to Rupee. Though Rupee may not see huge damage from here, it may not go back to 60 (for a dollar) levels any time soon. 65-70 will be the new norm. The financial markets made a bad start in 2016 and the data suggests that there would not be any strong reversals and 2016 is most likely to remain a depressed year for market participants.

ಅಳಿಯನ ಅವಾಂತರ

 ಮದುವೆಯಾದ ಮೊದಲ ದೀಪಾವಳಿಯ ಆಚರಣೆ ಸಾಧಾರಣವಾಗಿ ಎಲ್ಲರಿಗೂ ಸಂಭ್ರಮ, ಸಡಗರ ಕೂಡಿದ ನೆನಪು ತಂದರೆ, ನನಗೆ ಮಾತ್ರ ಫಜೀತಿಗೆ ಬಿದ್ದ ನೆನಪು ಮೂಡಿಸುತ್ತದೆ.

ಅದು ೨೦೦೯ರ ದೀಪಾವಳಿ ಹಬ್ಬ. ಅದು ನಾನು ಮದುವೆ ಆದ ವರ್ಷ. ಹೀಗಾಗಿ ಹಬ್ಬದ ಆಚರಣೆಗೆ ನನ್ನೂರಾದ ಮಸ್ಕಿಯಿಂದ ನನ್ನ ಹೆಂಡತಿಯ ಊರು ಸಿರುಗುಪ್ಪಕ್ಕೆ, ನನ್ನ ಎಸ್ಟೀಮ್ ಕಾರಲ್ಲಿ ಹೋಗಿದ್ದೆ. ನನ್ನ ತಾಯಿಯೂ ಜೊತೆಗೆ ಬಂದಿದ್ದರು. ಮದುವೆಯಾದ ಮೊದಲ ವರ್ಷವಾದ್ದರಿಂದ ಮಾವನ ಮನೆಯಲ್ಲಿ ಆರತಿಯ ಜೊತೆಗೆ ಹೊಸ ಉಡುಗೆಯ ಉಡೊಗೊರೆ ಸಿಕ್ಕಿತು. ನಂತರ ಸಾಯಂಕಾಲ ಕಳೆದು ಕತ್ತಲು ಆವರಿಸಿಕೊಳ್ಳುವ ಹೊತ್ತಿಗೆ, ಪಟಾಕಿ ಸಿಡಿಸುವ ಸಂಭ್ರಮ ಶುರು ಮಾಡಿದೆವು. ಮನೆ ಅಂಗಳದಲ್ಲಿ ಚಿತ್ತಾಕರ್ಷಕ ಬಣ್ಣ ಹೊಮ್ಮುವ, ಕ್ಷಣಾರ್ಧದಲ್ಲಿ ಜೀವ ಮೈ ತಳೆದು ಮರು ಕ್ಷಣದಲ್ಲಿ ಸತ್ತು ಬೀಳುವ, ನಾನಾ ವಿಧಧ ಪಟಾಕಿಗಳ ಸಿಡಿಸುವ ಆನಂದ. ಸರಕೆಲ್ಲ ಮುಗಿಯುವ ಹೊತ್ತಿಗೆ, ಕೊನೆಗೆ ಉಳಿದದ್ದು ಉಕ್ಕಿನ ಗುಳ್ಳೆ. ಅದು ಚೆಲ್ಲುವ ಬಣ್ಣದ ಬೆಳುಕು ಎಂಥ ಅರಸಿಕರಲ್ಲೂ ಮೋಡಿ ಉಂಟು ಮಾಡಿ, ಅಲ್ಪ ಕಾಲದಾದ್ದರೂ ಉಲ್ಲಾಸ ತುಂಬುತ್ತದೆ.

ನಾನು ಮತ್ತು ನನ್ನ ಪತ್ನಿ, ಅವಗಳಿಗೆ ಒಂದಾದ ನಂತರ ಒಂದರಂತೆ ಜೀವ ಕೊಡತೊಡಗಿದೆವು. ನನ್ನ ತಾಯಿ, ಅತ್ತೆ ಮತ್ತು ಮಾವ ದೂರದಿಂದ ತಮ್ಮ ಈ ಮಕ್ಕಳ ಆಟ (ಮದುವೆ ಆದ ಮಕ್ಕಳು!) ದೂರದಿಂದಲೇ ಮುಗುಳ್ನಗೆಯೊಂದಿಗೆ ಗಮನಿಸುತ್ತಿದ್ದರು. ನಾನು ಒಂದು ಉಕ್ಕಿನ ಗುಳ್ಳೆಯನ್ನು ಹಚ್ಚಿ, ಅದನ್ನು ಎತ್ತಿ ಕಾಂಪೌಂಡ್ ಗೋಡೆಯ ಮೇಲೆ ಇಟ್ಟೆ. ಬೆಳಕು ಇನ್ನು ಎತ್ತರಕ್ಕೆ ಚಿಮ್ಮಿ, ಪುಳಕ ಹೆಚ್ಚಾಯಿತು. ಇದರ ಪುನರಾವರ್ತನೆ ಮಾಡಲು ಇನ್ನೊಂದನ್ನು ಉಕ್ಕಿನ ಗುಳ್ಳೆ ಹಚ್ಚಿದ ತಕ್ಷಣ ಕೈಯಲ್ಲಿ ಹಿಡಿದು, ಕಾಂಪೌಂಡ್ ಗೋಡೆಯ ಮೇಲೆ ಇಡುವಷ್ಟರಲ್ಲಿ ಅದು ಕೈಯಲ್ಲೇ ಸಿಡಿದು ಹೋಯಿತು.

ಆ ಕ್ಷಣ ಕೋರೈಸಿದ ಬೆಳಕಿಗೆ ಮತ್ತು ಕಿವಿಯ ಪಕ್ಕದಲ್ಲೇ ಕೇಳಿಸಿದ ಸಿಡಿತದ ಜೋರಾದ ಶಬ್ದಕ್ಕೆ, ಎಡಗೈಯನ್ನು ಕಣ್ಣುಗಳಿಗೆ ಏನೂ ಬಡಿಯಲಾರದಂತೆ ಅಡ್ಡ ಹಿಡಿದು, ಮೊಳ ಕಾಲಲ್ಲಿ ಕುಳಿತು ಬಿಟ್ಟೆ. ಸಾವರಿಸಿಕೊಂಡ ನಂತರ ನಗು ಬಂತು. ಆದರೆ ಆ ನಗು ಮರು ಕ್ಷಣವೇ ಅಳಿಸಿ ಹೋಯಿತು. ಬಲಗೈಯಲ್ಲಿ ಉಕ್ಕಿನ ಗುಳ್ಳೆ ಸಿಡಿದದ್ದರಿಂದ, ಹೆಬ್ಬೆರಳ ಒಂದು ಭಾಗದ ಚರ್ಮ ಸಂಪೂರ್ಣ ಸುಟ್ಟು ಹೋಗಿತ್ತು. ಹೆಬ್ಬೆರುಳು ಮತ್ತು ತೋರು ಬೆರಳಿನ ನಡುವಿನ ಭಾಗದಲ್ಲಿ ಒಂದು ಬೊಬ್ಬೆ ಎದ್ದು, ಅದರಲ್ಲಿ ನೀರು ತುಂಬಿಕೊಂಡು ಜೋಲಾಡತೊಡಗಿತು.

ಅಳಿಯ ಮಾಡಿಕೊಂಡ ಅವಾಂತರಕ್ಕೆ ಮನೆಯವರು ಮನೆಯಲ್ಲಿ ಸಾಧ್ಯವಾಗುವಂಥ ಪ್ರಥಮ ಚಿಕಿತ್ಸೆ ಮಾಡಿದರೂ, ಅದು ಸಾಕಾಗುವಂತೆ ಕಾಣಲಿಲ್ಲ. ಪರಿಚಯದವರನ್ನು ಕರೆದು, ಅವರ ಬೈಕಿನ ಮೇಲೆ ನನ್ನನ್ನು ಆಸ್ಪತ್ರೆಗೆ ಕಳಿಸಿದರು. ಅಲ್ಲಿ ಮುಟ್ಟಿದಾಗ, ಅಂದು ಹಬ್ಬದ ದಿನವಾದರೂ, ರೋಗಿಗಳ ದೊಡ್ಡ ಸಾಲೇ ಕಂಡು ಡಾಕ್ಟರನ್ನು ಕಾಣಲು ಎಷ್ಟು ಹೊತ್ತಾಗ ಬಹುದೋ ಅನ್ನಿಸಿತು. ಆದರೆ ನನ್ನ ಕೈ ಅವಸ್ಥೆ ಕಂಡ ಎಲ್ಲರೂ ದಾರಿ ಮಾಡಿಕೊಟ್ಟು, ಡಾಕ್ಟರನ್ನು ಕಾಣಲು ತಕ್ಷಣ ಅವಕಾಶ ಮಾಡಿಕೊಟ್ಟರು. ನನ್ನ ಕೈ ಪರಿಶೀಲಿಸಿದ ವೈದ್ಯರು, ಆಸ್ಪತ್ರೆಗೆ ಹೊಂದಿಕೊಂಡಿದ್ದ ಔಷಧ ಅಂಗಡಿಯಿಂದ, ಒಂದು ಮುಲಾಮನ್ನು ತರಿಸಿ, ಮದ್ದು ಸಿಡಿದ ಜಾಗಕ್ಕೆಲ್ಲ ಬಳಿದರು. ನನ್ನ ಮುಂಗೈ ಚರ್ಮ ಅದಕ್ಕೆ ಸ್ಪಂದಿಸಿದ ಒರಟು ಭಾಗ ಎನ್ನುವಂತೆ ಭಾಸವಾಗುತ್ತಿತು. ಆದರೆ ಅದರ ಕೆಳಗೆ ಮೂಳೆಯ ಭಾಗದಲ್ಲಿ ಮಾತ್ರ ಸಹಿಸಲು ಅಸಾಧ್ಯ ಎನ್ನುವ ಎನ್ನುವಷ್ಟು ನೋವು.

ವಾಪಸು ಮತ್ತೆ ಬೈಕಿನ ಮೇಲೆ ಹಿಂದೆ ಕೂತು ಮನೆಗೆ ಬರುವಾಗ, ಗಾಯಗೊಂಡ ಕೈಯನ್ನು ಬೀಸುತ್ತಿದ್ದ ಗಾಳಿಯಲ್ಲಿ ತೇಲಿ ಬಿಟ್ಟೆ. ಅದುವರೆಗೆ ಶಮನವಾಗದಿದ್ದ ನೋವು ಆಗ ಆ ತಂಗಾಳಿಯಲ್ಲಿ ಮರೆಯಾಗತೊಡಗಿತು. ಅದನ್ನು ಬೈಕ್ ಓಡಿಸುತ್ತಿದ್ದವರಿಗೆ ತಿಳಿಸಿದೆ. ಅವರು ನನಗೆ ಹಾಯೆನಿಸುತ್ತಿದ್ದರೆ, ಗಾಡಿಯಲ್ಲಿ ಇನ್ನು ಸ್ವಲ್ಪ ಸುತ್ತಿಸಿ, ಆಮೇಲೆ ಮನೆಗೆ ಕರೆದೊಯ್ಯುವಾದಾಗಿ ತಿಳಿಸಿದರು. ನಗೆ ಮತ್ತೆ ಮುಖಕ್ಕೆ ಮರಳಿತು.

ಅದಾಗಿ ಒಂದು ತಾಸು ಕಳೆದ ನಂತರ, ಯಾರ ಒತ್ತಾಯಕ್ಕೂ ಮಣಿಯದೆ, ವಾಪಸ್ಸು ನಮ್ಮ ಊರಿಗೆ, ನನ್ನ ತಾಯಿಯನ್ನು ಕರೆದುಕೊಂಡು ಹೊರಟು ನಿಂತೆ. ನಾನು ಕಾರನ್ನು ಒಂದೇ ಕೈಯಲ್ಲಿ ಓಡಿಸ ಬೇಕಾಗಿತ್ತು. ಆದರೆ ಅದು ಕಷ್ಟ ಏನು ಅನಿಸಲಿಲ್ಲ. ಅವಶ್ಯಕತೆ ಬಿದ್ದರೆ, ಸ್ನೇಹಿತನೊಬ್ಬ ಕರೆದೊಯ್ಯಲು ಬರುವುದಾಗಿ ತಿಳಿಸಿದ್ದ. ೬೫ ಕೀ. ಮೀ. ನ ದಾರಿಯನ್ನು ಒಂದೂವರೆ ಗಂಟೆಯಲ್ಲಿ ಸವೆಸಬಹುದಾಗಿತ್ತು. ಎಡಗೈಯಿಂದಲೇ, ಗೇರ್ ಬದಲಾಯಿಸುತ್ತ, ಹಾಗೆಯೇ ಕಾರು ಚಲಾಯಿಸುತ್ತಾ, ಬಲಗೈನ್ನು ಕಿಟಕಿಯ ಉದ್ದಕ್ಕೂ ಇಟ್ಟುಕೊಂಡು ಹೊರಟೆ. ಅರ್ಧ ದಾರಿ ಸಾಗುವಷ್ಟರಲ್ಲಿ ಕೈ ಉರಿ ಆ ಗಾಳಿಗೆ ತಂಪಾಯಿತು. ಆದರೆ ಇನ್ನೊಂದು ಸಮಸ್ಯೆ ಎದುರಾಯಿತು.

ಮಾರ್ಗ ಮಧ್ಯದಲ್ಲಿ ಬರುವ ಸಿಂಧನೂರು ಪಟ್ಟಣವನ್ನು ಆಗ ತಾನೇ ದಾಟಿದ್ದೆವು. ಆದರೆ ಕಾರಿನ ಹೆಡ್-ಲೈಟ್ ಮೊದಲ ಬಾರಿಗೆ ಕೈ ಕೊಟ್ಟಿತ್ತು. ಅಮಾವಾಸ್ಯೆಯ ರಾತ್ರಿ, ಗಾಢ ಅಂಧಕಾರ ಕವಿದಿತ್ತು. ಕಾರನ್ನು ಪಕ್ಕಕ್ಕೆ ತೆಗೆದುಕೊಂಡು, ಆಕ್ಸಿಲರೇಟರ್ ಒತ್ತುವ ಭಾಗದಲ್ಲಿ ಸ್ವಲ್ಪ ಮೇಲಿರುವ ಫ್ಯೂಸ್ ಬಾಕ್ಸ್ ಗೆ ಕೈ ಹಾಕಿದೆ. ಕಾರನ್ನು ಕಳೆದ ಬಾರಿಗೆ ರಿಪೇರಿಗೆ ಬಿಟ್ಟಿದ್ದಾಗ, ಮೆಕ್ಯಾನಿಕ್ ಅದರ ಮೇಲಿದ್ದ ಮುಚ್ಚಳವನ್ನು ಸಂಪೂರ್ಣ ಸರಿ ಪಡಿಸದೇ ತೆಗೆದು ಬಿಟ್ಟಿದ್ದ. ಸಾಕಷ್ಟು ಗುಂಡಿಗಳಿದ್ದ ಆ ರಸ್ತೆಯಲ್ಲಿ, ಯಾವುದೋ ಒಂದು ನೆಗೆತಕ್ಕೆ, ಆ ಫ್ಯೂಸ್ ಗಳು ಹಿಡಿತ ಕಳೆದುಕೊಂಡು ಸಡಿಲವಾಗಿದ್ದವು. ಆದರೆ ಅದು ಸರಿ ಪಡಿಸುವ ನನ್ನ ಪ್ರಯತ್ನ ಫಲಕಾರಿಯಾಗಲಿಲ್ಲ. ಮುಂದಿನ ಇಪ್ಪತ್ತು ನಿಮಿಷದ ದಾರಿಯನ್ನು, ಇನ್ನೊಂದು ಕಾರಿನ ಹಿಂದೆ, ಅವನ ಬೆಳಕಿನಲ್ಲಿ, ಅವನದೇ ಗತಿಯಲ್ಲಿ ಸಾಗುತ್ತ ಮನೆ ತಲುಪಿದೆ. ನನ್ನ ತಾಯಿಗೆ ನನ್ನ ಸಮಸ್ಯೆ ಸಂಪೂರ್ಣ ಅರ್ಥವಾಗದಿದ್ದರೂ, ಮಗನ ಪರಾಕ್ರಮದಲ್ಲಿ ಯಾವುದೇ ಅನುಮಾನ ಇರದಂತೆ, ನಿಶ್ಚಿಂತೆಯಿಂದ ಕಾರಿನ ಹಿಂದಿನ ಸೀಟಿನಲ್ಲಿ ಕುಳಿತಿದ್ದಳು. ಹೀಗೆ ಬೆಳಕಿನ ಹಬ್ಬ, ನಾನು ಕತ್ತಲಿನ ಜೊತೆ ಸಾಹಸ ಪಡುವದರೊಂದಿಗೆ ಮುಗಿದು ಹೋಯಿತು.

ಆದರೆ ಪಟಾಕಿ ಸಿಡಿತದಿಂದ ಆದ ಆ ಗಾಯ ಗುಣವಾಗಲು ಕೆಲವು ವಾರಗಳನ್ನು ತೆಗೆದುಕೊಂಡಿತು. ಮೂಡಿದ ಹೊಸ ಚರ್ಮದ ಬಣ್ಣಕ್ಕೂ, ಮುಂಗೈನ ಉಳಿದ ಚರ್ಮದ ಬಣ್ಣಕ್ಕೂ ಹೊಂದಾಣಿಕೆ ಆಗುತ್ತಿರಲಿಲ್ಲ. ಸುಟ್ಟ ಭಾಗದಲ್ಲಿ, ಸ್ಥಿರವಾದ ಮಾಂಸವಿಲ್ಲದೇ, ಅದರ ಮೇಲೆ ಇದ್ದ ಚರ್ಮ ಗಟ್ಟಿಯಾಗಿ ನಿಲ್ಲದೇ ಮುದುಡಿಕೊಂಡಿರುತ್ತಿತ್ತು. ಕಾಲ ಕ್ರಮೇಣ ಅದು ಸಂಪೂರ್ಣ ವಾಸಿಯಾಗಿ, ಅದರ ಯಾವ ಗುರುತು ಈಗ ಕೈ ಮೇಲೆ ಉಳಿದಿಲ್ಲ. ಆದರೆ ಪ್ರತಿ ದೀಪಾವಳಿಗೆ ಬಾಣ ಹಚ್ಚಲು ಹೋದಾಗ, ನನ್ನ ಪತ್ನಿ ಆ ಘಟನೆಯ ನೆನಪು ಮಾಡಿ ಕೊಡುತ್ತಾಳೆ. ಈಗಲೂ ಉಕ್ಕಿನ ಗುಳ್ಳೆ ಹಚ್ಚುತ್ತೇನೆ. ಆದರೆ ಕೈಯಲ್ಲಿ ಹಿಡಿಯುವ ಸಾಹಸ ಮಾಡುವುದಿಲ್ಲ.

Seventh pay commission will improve social balance

Here is the link to official report: http://7cpc.india.gov.in/pdf/sevencpcreport.pdf

Seventh pay commission when implemented will increase the pay and retirement benefits of those in the Govt. jobs, especially for those having lower wages now. It is estimated that recommendations will impact 47 lakh serving govt employees, 52 lakh pensioners, including defence personnel (See more at: http://indianexpress.com/article/india/india-news-india/highlights-of-7th-pay-commission-report/#sthash.JkwlxFCv.dpuf)

That is approximately 1 crore people (or ~1% of India’s population) seeing more money in their hands. And there would be 3x people in services sector (education, healthcare, transport etc.) serving these 1 crore people, they will become indirect beneficiary. If we consider their family members of these (1 crore + 3 crore) earning members, approximately 10 crore people will see their life style being bettered.

First point. How will Govt. fund these increases in pay is important. If they raise taxes, it may become robbing one to pay another scheme. But that is not the case now. Thanks to lower oil prices. Govt. took out all the subsidies on Diesel and marginally increased the taxes, so in that account, Govt. has a surplus this year when compared to a deficit last year. Lower fiscal deficit is indicating that Govt. is doing a fine job of balancing spend and income.

Second Point. It is a known fact that money in the consumer hands is spent wisely than Govt. spending it directly. So the Govt. employees with higher disposable income can decide better what to do with their money. That way money will reach far wider than the schemes of Govt. which will end up in wasteful expenditures. That will benefit economy a lot.

Third Point. There is an income inequality between the private and Govt. sector. This pay rise will help bridge that gap. Higher pay will attract better talent and they will bring in much needed improvements. It may also reduce the hunger for money in Govt. employees reducing the need to earn money through corruption route.

Fourth Point. Those having lower income spend more of their incomes than the rich. A daily wage labor spends almost all (100%) of his income for leading his life. Those earning higher income, let us say Rs. 20 lakhs per annum and above, they may spend 50% of their income or less for their routine expenditures. Even if Govt. raises taxes to pay more to its employees, it may result in higher consumer expenditure.

To conclude, higher pay for Govt. employees is a welcome move as it improves social balance by reducing income inequality and improves the economy. Only thing the Govt. has to ensure is, the productivity of its employees, it has to get an economic equivalent of higher pay else there will be more froth in the form inflation.

World would be at peace again after few shakeups

I have a strange hypothesis. It is framed by the data connected through dots. It goes like this “Oil money funded anti-social organizations that scare off citizens and Govt.’s of many nations aiding to geo-politics. This disturbance was helping the oil producers to keep the crude oil prices high.” But in politics and markets, supremacy of one party is not eternal and every strategy will have an expiry date.

Now crude prices are halved as supply went high. Geo-politics, closing the boundary of a nation or blocking a sea route cannot drive oil prices high as oil can still be transported from other sources and through other ways which were not existent a few years ago. So when the oil producers are getting half the money what they were getting before, how do they feed the parasite mouths? But the organizations who made a living out of this money, know no other business than killing people. They need to show off how danger they could get, so the world’s peace was disturbed in the recent past. France became one of the victims.

The measures the world’s leaders take might help curb such activities. But the real blow is given by lower oil prices. The recent spike in attacks on civilized world shows that those outfits are desperate to show they can do their jobs well. But the times have changed. They cannot drive the oil prices back to $100/barrel. If oil prices are to remain low, which is a likely case, the fund flow to those holding weapons in hands will dry up. But until all their ammunition gets over, events like that happened in Paris are likely to repeat.

Money in the wrong hands is as dangerous as weapons in the uncivilized hands. When the money is in short supply to them, how will they acquire new weapons or hire new people to keep things going? When the money runs out, violence in the name of ideology too comes to a halt, unless they find a new source of money.

Cooling down of commodity super-cycle has made sure that the countries selling their natural resources go through a distress. As far as we can see, new money getting into the wrong hands is a least probability. So those outfits are fighting a losing war. But the ammunition in store has to come to an end before we see peace and normalcy being restored, everywhere.