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If you ever find yourself in Khari Baoli, in Old Delhi, India, Kake Di Hatti has been serving fine vegetarian food since 1942 and is worth visiting.
The Indian economy is interesting for several reasons. While I have a personal connection to India and have witnessed the changes from the late ’80s into the present day, in the larger scheme of things, the Indian economy is a case study in the failed implementation of Socialist policies and how Globalization forced the opening up of India’s economy. But with Globalization came challenges where Central and State Governments grapple with dichotomies. What is good for the bottom of the pyramid (both financially and politically) may not always be best for the middle classes, and vice versa.
The economy, and economics in general, remain poorly translated throughout the world. India is no different. In fact, conversations around business environments, business policy, and economics tend to be, on one hand, shallow and contentious, or on the other, detailed and for those who reside in towers. However, there seems to be a burgeoning middle ground. And that is the space, my friend Dr. Amol Agrawal and I, find ourselves in when we talk about the Indian economy.
Another aspect of the Indian economy, which is of prospective interest, will be its effect on sustainable, yet environmentally responsible, economic development; something that both Dr. Agrawal and I are concerned about, but more on that in later episodes.
Addressing the middle ground, it was refreshing to see the 2019–2020 Indian Economic Survey (IES) talk about Thali-nomics. The Chief Economic Advisor to the Government of India, Dr. KV Subramanian, touches upon Thali-nomics in his presentation of the Economic Survey, but in brief, the idea is to create a data proxy with which to discuss Food Inflation. A ‘thali’ or plate of food, is a near-ubiquitous concept in Indian restaurants, but more importantly, a ubiquitous food decision made, at least, two times a day by most Indian households; a decision they make for themselves and for others in their care.
Of course, this idea isn’t new. Food Inflation indices exist, studies between social and political upheaval and bread prices have been done, and one could even argue that the data as presented by Subramanian are inconclusive, since the cost of a Thali broadly traces the rate of economic expansion. That isn’t the point. The point here is to suggest that the IES is creating a framing reference with which everyone can talk about, and internalize information related to, food price trends. I use the word trends intentionally because Indian food prices vary due to Monsoon rainfall, but also, due to the fact that there are, at least, two growing seasons per year for most Indian farmers and consumers.
Staying with the theme of addressing the middle ground, Dr. Agrawal explains Fiscal Deficits, and Capital Expenditure in a similar vein, in our most recent conversation, as we discussed our expectations for the Indian FY 2020–21 budget. While the example occurs through the end of the most recent episode, if the Indian economy is of interest, I would recommend listening to all four episodes which cover the topics of the Nationalization of Indian Banks and its gradual undoing, Demonetization, and the introduction of the Goods and Services Tax regimen. Our aim is to lay down the framework with which we think one should view economic policy in India.
We expect good governance and data transparency in the FY 2020 Budget.
Coming back to capital budgeting, in brief, the analogy is such. As a child, if one’s pocket money isn’t sufficient to buy an Omelet and a soda, and fix one’s bicycle or buy a book and pen, what should one do? Conversely, if one has to borrow money, should one borrow money for buying the soda (consumption) or for buying a book and pen (capital expenditure), or perhaps, repairing one’s bicycle? The act of borrowing and repaying the lender is, of course, the fiscal deficit that governments assume. In India’s case, there are elements of both encouraging consumption and hence boosting demand, but also of creating and improving infrastructure. Thali-nomics allows for a transparent conversation about both. This is why it is useful now, but also, in the future as the environment and our policies in response to environmental change have an impact on food prices. What happens to food prices when India’s GDP Per Capita doubles? What happens to India’s purchasing power when this happens? It inevitably will, but how best to guide the system so that it happens sooner rather than later.
Data transparency isn’t just about making economic policy alone, it is also about enabling consumer choices. Switching gears, one can understand why poor transparency in healthcare data in the US makes for poor consumer confidence in the healthcare system, at large. It may also provide a rationale for the grassroots support that some Liberal candidates have with their versions of the Medicare-for-All platform. One can see such examples in other countries and in other economic spheres too.
Price transparencies are what make markets efficient and lend to the creation of better business models. I can’t wait to see an enterprising Indian food outlet offering a discount on their Thali as measured against a National Thali Index, or for seeking a premium based on improved value, delivered over the index.
Join us for our next episode where we discuss the Indian Budget FY 2020–21 where we’ll review the Economic Survey, this year’s Budget, and see if the Central Government is committing to transparency, at a broader level, something we’ve advocated for in our previous episode.
Join us when you can, at Framing References.