RBI's Sneaky Anti-Inflation Move

 A few days ago, on January 22nd, the Reserve Bank of India made a surprise announcement, that all currency notes(bills) issued prior to 2005 would be withdrawn from circulation. These notes can be identified from the fact that they carry no date of issue. Predictably, as with most government announcements, this was followed by confusion, consternation and commotion. The RBI announcement initially said that all such currency must be exchanged by June 30, after which it would no longer be legal tender. Or at least, that was the implied consequence. Then the RBI issued a clarification, that the notes could be exchanged without question up to June 30, after which one could only change currency at one's own banking institution. To further confound the public, the RBI said the currency would continue to be legal tender after that date, which should mean that one can continue to use it in everyday transactions. This is contrary to normal practice in withdrawing currency, in the sense that it is usually withdrawn via normal banking transactions, not through deadlines and conditions for exchange.

 There is widespread speculation on the reasons behind RBI's move, ranging from anti-counterfeit measure to ferreting out "black money". The RBI finally put out a statement that the move was designed to remove low-security currency from circulation although, typically, it added the confusing statement that, ideally, all pre-2010 currency should be removed, triggering further angst amongst the hoi polloi, who are now speculating that such a move will occur in the next year or two. There are now a rash of opinion pieces in the media speculating on both the reasons for the withdrawal as well as the macro effects. Generally, they seem to concur that there was intelligence on massive amounts of counterfeit currency of the pre-2005 variety, which is the easiest to duplicate, and that the move is intended to bring "black money" into the general economy. They focus on the mechanisms by which people would set about converting this "black money" into "white", including the possibility that touts and agents would facilitate this for a steep fee.

 Notwithstanding the RBI's claim that this is intended to strengthen the security of the currency, it appears that the execution was not properly planned. Banks are only now gearing up to meet the expected rush to exchange the currency, and of course, everyday use of pre-2005 currency will immediately be hampered, as people refuse to accept it.  With my usual curmudgeonly skepticism, I set out to examine the motive, methods and consequences of this action. To get at the motive, one could take the RBI's anti-counterfeit reason at face value, or look at the methods and consequences to arrive at a different motive. Looking at the haphazard handling of the announcement(with several "clarifications" following), and the ill-preparedness of the banking system to handle this, I don't find it likely that this was a pre-planned operation. It may have been, given the typical Indian way of executing a project, but I find it unlikely. It appears more as a project that was conceived in December and rushed out. A well-thought out project of this nature would have naturally examined all the logistics and consequences before rollout, and the facts on the ground do not bear that out. Banks are now rushing to obtain currency counters, counterfeit-detectors and new cash before the April 1 rollout. No doubt, the more well-heeled will use this fortuitous advance knowledge over the next two months to shift masses of their tax-avoided cash safely into the banks using their behind-the-scenes connections, and exchange crisp new cash for it. Just a matter of swapping cash from the strongroom, I would think, without disturbing the accounting.

 So, the consequences. As I said, the immediate impact is likely to be that people will have difficulty using their non-dated currency in daily transactions, as everyone looks to avoid having undated currency in their possession. I examined the bills I had in my pocket, but found only two without a date, both of the 10-rupee denomination. The date is quite difficult to read, or even see sometimes if there is dirt in the center crease. The average middle-class person, I would think, keeps less than 20,000 rupees on hand, given the ubiquity of ATM and debit cards. That should not pose a great difficulty to swap, even after the July 1 deadline. The poor, of course, probably have quite a bit less cash on hand. But, more importantly, would the 800 million Indians living in villages and small towns be aware of this change, or even care enough to do anything differently? They likely use the small denominations, which would not be the target of anti-counterfeiting measures, or of unearthing "black money". The difficulty, I think, is for the upper middle class, who keep fairly large sums of cash on hand(they spend money freely on dining and entertainment, I note), and small businessmen who typically keep everything in cash and pay no taxes. They usually don't have a "working relationship" with key bank executives, and in the short term will, I believe, overpay to acquire hard assets such as property and gold. I expect these will rise in price in the short term.

 Looking at a post-July 1 scene, I think the net result will be a fair chunk of the old currency being locked out of the monetary system. How much this will amount to, I have no idea. I guess a large part will depend on the RBI's ability to rein in the nexus between banks and their large cash clients, who are likely to have the lion's share of "black money" on hand, in the form of these old bills. Assuming the RBI is successful in this, the net effect would be to effectively curtail the real money supply in the system. And Rajan wants to do even more, removing all pre-2010 currency which, when one accounts for the massive role of the parallel economy, would put a very significant further crimp in real money supply. Economics 101 says that inflation is too much money chasing too few goods. When you reduce the supply of money, you reduce inflation. RBI Governor Raghuram Rajan's focus, ever since he took over, has been to curb inflation, which he recently described in strong terms as being the biggest threat to the Indian economy. When I look at how hasty this program seems to be for its purported intent, the unpreparedness of the banking system for this exercise, and the possible impacts on people and the economy, it seems to me that the real intent is to curb money supply, not by the normal channels, but by rooting out the money in the parallel economy. Successfully doing that would lead, not necessarily to deflation, but at least a significant lowering of inflation. So, looking at this thing from every angle, I am inclined to think that this is really a sneak attack on inflation by the RBI, and there could be some good collateral effects, like channeling money out of the parallel sector, people paying their taxes rather than paying touts to convert the cash, and so on. And, conveniently, the program ends shortly before tax filing time. I think it's a good move by the RBI, I just wish it was just a little better planned and coordinated.

When Persistence Is Just A PIA

 This is a quick rant on ACT, Atria Convergence Technologies, which is my local cable TV and broadband internet provider. I had ACT install a fiber-optic connection for my broadband, which I referred to in another post. This was a couple of years ago, and on the whole, I am satisfied with the broadband experience. And, on the whole, I have been satisfied with their billing process, and not so much with the way they string wires all over the place(a thought: couldn't they have placed a wireless hub that serves a radius of 400 yards, which would eliminate wires pretty much in my entire "stage"? It does go against FTTH- fiber to the home- but with the data rates provided, does it really matter?). Anyhow, I usually get an e-mailed invoice from them around the 3rd or 4th of the month, with a due date of the 15th.

 A little background on the billing: when I first got service, I had to pay a deposit(I forget how much it was), and then I was billed every month for the previous month's service. Sometime about a year ago, they changed the format, and started billing forward, which meant that one particular month I had to pay twice my normal bill. I was a little curious about that, since it seemed to me to be a reflection of one of two problems: either they were having trouble with customers paying their bills, or they were having a cash problem. I tend to think the latter, especially in light of what they are doing now.

 Anyhow, back to the billing. After the e-mailed invoice, ACT sends you a text reminder every single day until the 15th, regardless of whether you have paid your bill or not. I find this extremely annoying. For one, link up the text blast program with the billing program, so that only people who have not paid get the reminder. Secondly, wait at least until the 12th to send out a reminder. My practice is to walk down to the local ACT office and pay in person, usually well before the due date, and if I am going to be out of the country, I pay in advance for that period. A few months ago, ACT sent me a text message saying they would charge 25 rupees for an in-person doorstep payment collection. Since that didn't apply to me, I ignored it. The next day, a girl calls me and asks when she should send someone around to collect the payment. I tell her that I always pay at the office, and would continue to do so. Then I get a bill which includes the 25 rupee "convenience charge". As a matter of principle, I don't like people charging me for services I don't use or get(like BBMP's storm drain cleaning or BWSSB's sewage maintenance or Airtel's "value-added services"), so I went and had that cleared up.

 Then a few days ago, I start getting calls from ACT people reminding me that there is a 25 rupee "convenience charge" if the bill is not paid in person or electronically. I tell them, again, that I pay in person and in cash. Yesterday, I get a call from an ACT girl asking when the best time is to come and collect the payment. I repeat the previous conversation. This morning(a Sunday morning, no less), I get yet another call from an ACT person asking if I want to pay electronically or through a doorstep collection. By now, I'm getting upset, and I tell him that I don't want them calling me about this again. What is it with ACT and this persistence about collection in person? Do you need to hassle your customers for payment before the due date?  Do you need this 25 rupees per customer, or are you just needling the customer? I'm pretty sure you don't need to get government approval to raise your rates, which you have done this past year, and it's better to do that than slap charges on your broadband customers for a service you provide for free to your cable TV customers, It's just bad business practice to aggravate your customers.

A Flexibility With The Truth

 I have spent the majority of the past two years in India. Considering the uncertainty of my final departure date, I have gradually had to confront issues which normally would not affect the transient visitor, or aren't too much of an irritant on a short visit. Trivial things like preserving my gas connection, getting around, dealing with problems of electric and water supply, and the never-ending sewage issues. In dealing with these issues and more, I have come to the conclusion that the biggest single problem I encounter is the tendency of just about everyone I deal with to, let's say, be flexible with the truth. Sometimes they are little white lies, sometimes they are just deliberate omissions, sometimes they are flat out untruths which conceal fraud and deceit. Failing to tell the entire truth, or projecting fibs as the truth, is one of the top "cultural" problems foreign IT managers face with their Indian employees. Indian employees will rarely, if ever, admit to errors, or allow that they cannot meet a deadline or even acknowledge that a particular task is beyond their skill-set. It comes from a national mindset, in my view, of kicking the can down the road, and making bad compromises when the road ends, as we have just seen in the Khobragade episode. When all is said and done, I am deeply disappointed by the ubiquity of the practice in India.

 Some of you might find that a bit harsh, but if you were in my shoes, and admittedly I am more accustomed to at least a degree of transparency in most transactions, you would be just as frustrated and annoyed as I am. Even more so, when it's a question of legal liability, if the person you have a transaction with willfully misrepresents something to you, and you are not aware of that fact, it could put you at considerable risk. I recently encountered that situation, when I was told that a legal document had been processed. I was by now somewhat accustomed to the "flexible truth" in India, and asked for a hard copy, and got the run around. Finally, I was told that the courier company couldn't find my address, which was a bunch of baloney, since I never had a problem with that before. Turns out the document was not processed by the date represented to me, and that could have put me in trouble if I had trusted the other party.

 Recently, I decided that it would make more sense for me to have a vehicle to drive, instead of relying on cab services and not having the flexibility of traveling at will. So I started looking for a used car(which makes sense for a temporary resident) and began perusing classifieds online. First off, I realized that there was a difference between my idea of "good condition" and that of the sellers. Then I learned that a fair number of sellers were selling vehicles that, technically, they didn't own, mostly because they were keeping under the tax radar(that is, avoiding paying taxes) or because they were actually selling someone else's car. Of course, they wouldn't tell you this up front. They wait till you ask to see the title, and then launch into complicated explanations, ending with "But it's no problem!". Of course, it would be less of a "no problem" if you had proper title. The paperwork involved is another matter altogether, typical of the byzantine Indian system and worthy of a separate post by itself. Then there were sellers who claimed that their vehicles had not a single scratch or ding, and when you got to see the car, it looked like it had been through some sort of demolition derby. "But you can fix that cheap!". No, I don't think that's the issue. There were also sellers who claimed the vehicle was insured, and it wasn't. Then it's "I just got it day-before, and I will be getting the certificate tomorrow", which is Indian-speak for "It hasn't been insured after the first year". Or "Oh, everybody drives without insurance. You have a high comfort level!". No, I just want to drive a vehicle that is legal on the road. And then there are the "accident-free" cars. I checked out one that actually did look like it had never been in an accident, but when I really inspected it, it had all the tell-tale signs of having been in a severe front-end collision- misaligned hood, broken washer jets, cracked plastic bits behind the headlamps(they don't replace those because they don't think you'd see it), evidence of re-wiring and so on. I did not encounter a single vehicle that was exactly as represented.

 In a previous post, I had ranted about how people lie about appointments, or don't think it's a big deal to keep you waiting. As an extension to that rant, I find that they also lie about potential hurdles. If it means squeezing more money out of you, they exaggerate the possible problems. If it means their getting a contract, there are no hurdles, everything can be done by next Monday, if not sooner. When I had my sidewalk relaid, I explicitly asked that the ground be concreted before the pavers were laid. Unfortunately, I did not oversee the work, and now I have grass and weeds growing between the pavers. I had issues with my cable company, who began billing me before giving me the converter box(which was apparently on back-order),  even though I had pre-paid for six months of service of whatever premium service it was, but which necessitated a converter box. And after I had sorted that out, I started getting bills which claimed that there was a prior balance, which of course there wasn't, because I wasn't a "prior" customer. Then there was an issue with the electric company, which changed the meter. Of course, they didn't document the old reading, or the start of the new reading, so when I got the first bill, they charged me for four times my normal consumption. Well, not right off, because they actually sent me a bill with a credit because their system couldn't reconcile the low reading on the new meter with the high reading on the old one, but I knew that was an error, so I went to them to get it straightened out, and ended up getting clocked with a ridiculous bill. I tried getting that rectified, including making the reasonable argument that I could not possibly have suddenly begun using copious amounts of electricity just because a new meter was installed, but got such a runaround that I decided to let it go for now, but I will certainly let off some steam when I meet a senior BESCOM executive. [As I write this, I received the current bill from BESCOM, which claims I did not pay last month's bill. I double-checked my receipt, and I find that I had paid the bill three days after receipt, well before the due date. Now I will likely have to spend at least a couple of hours at the local BESCOM office trying to get this straightened out.]

 When I had my fiber-optic broadband put in, the company installed a box on the outside wall. This is what is called a Network Interface Box, and is standard practice for fiber-optic service . What they didn't tell me was that since I was the first on my block to get the service, my house was going to be used as a node for nearby connections. So periodically, they come and stick a line into the box, and throw the wires as usual through the trees and over rooftops to other houses, so now my house looks like it's being held up by strings. When my housekeeper questioned this, she was told that I get a discount for allowing this, which of course I don't, and was never offered one. A little white lie to cover a lie of omission.

 Sometimes, when I see something interesting that I want to buy, I will sort of hover around and listen to other people haggling over the price. Let's say the vendor wants a thousand rupees, and the buyer begins with a counter offer of five hundred. So they settle somewhere in between. Others come, and follow the same routine. I open my mouth and ask the vendor how much the item costs, and without batting an eyelid, he will say "Two thousand", even though he's been telling everyone else "One thousand"("ondu savara"). The presumption from my odd accent that I am a clueless outsider, and therefore ripe for a rip-off, really annoys me. I don't bargain much, if at all, so he would be likely to get a better price from me anyhow, but he gets nothing when he lies to me about the price, even when he becomes more truthful and says "Sir, for you, special price, thousand five hundred!". Yes, that's a special price indeed, just for me!

 Late in 2013, I bought a "handi"(copper pot) of biriyani from an outlet belonging to a chain that purportedly specializes in "dum" biriyani. I've always understood the primary ingredient of biriyani to be basmati rice, also known as biriyani rice. After it was delivered, I discovered that the "biriyani" was made, not with basmati or even premium long-grain rice, but regular short-grain rice. We had to make do with it, because it was too late to order from elsewhere. When the delivery guy returned for the handi, I complained about the rice, and he told me that this is what they make all their biriyanis with. My view is that when you make a dish with short-grain rice, the most you are entitled to call it is a pulao or pilav/pilaf. And you do not charge a premium price for it. When people ask me to suggest a biriyani joint, I tell them to stay away from this place. The next time around, I ordered biriyani from a place I recalled from my debauched youth, when we prowled late at night looking to satisfy ravenous appetites after a night on the town. It was a place known then for its kebabs, biriyanis and the famous "chops"(broiled bone-in cuts of goat in gravy). The kebabs are still pretty decent, but the biriyani, wouldn't you know it, was also made with short-grain rice. Needless to say, I will not be buying biriyani from them again, nor will I recommend it to anyone. Most recently, on New Year's Eve, I got biriyani from a takeout place nearby, which was actually cheaper than the others, and was made from fragrant long-grain basmati. That'll be my go-to place for biriyani from now on. These days, pigskin is passed off as leather, but I refuse to consider anything made from other than cowhide to be leather. And I refuse to consider a rice dish made with anything other than basmati to be biriyani.

 Often, I have people tell me how close India is to surpassing the US in economic strength, how India is practically a superpower, how the US is dependent on India to prop up the American economy, and there have been comments in online fora calling for "sanctions" on the US in retaliation over the Khobragade issue. I'm not sure how they arrive at these conclusions, or even if they believe it themselves, but the reality is so disparate from their claims that it is really hard for me to accept their words as indicative of their belief. And yet they will argue with a passion that bespeaks belief, and I look out my window, walk the streets, read the news, study the statistics and wonder, "Do they ever actually see what they are looking at?". I'm all for ambition and striving toward goals, but what I hear is an encomium that is at dramatic variance with the truth. It's really no different than calling Bangalore today a "beautiful city", or "the air-conditioned city", which it clearly isn't any more, and hasn't been in decades. If people continue to delude themselves with these sewn-out-of-whole-cloth fables, it isn't very likely that any serious efforts will be made to improve the state of affairs, and indeed the complacency induced by this mindset could allow for further deterioration.

 Every day, almost, brings me more examples of this ubiquitous economy-with-truth habit, and I find I must anticipate it, and indeed assume it, or else become the proverbial patsy. I'm uncomfortable with that, because I am not a distrustful person by nature, and it feels like a violation of my self when I take on that role.  And it's unfortunate for the country as a whole, because bad habits feed on themselves, and become addictions. If a certain level of honesty isn't the norm, it becomes very difficult to strengthen the fabric of society, and to focus on progressive activities. A good part of this, I realize, is the fact that the rules and laws have always left room for both motive and opportunity for being less than honest. Re-discovering India has been a tortuous process for me so far, but I cling to the hope that sometime, sooner rather than later, a new breed of effective leadership will emerge to make the changes that will hopefully lift India to middle-income status at least. But in order for that to happen, people have to stop being flexible with the truth.