Eerie Economics

I was taught that economics combines both Art and Science. Over the last few weeks the horror that is unfolding in the Indian economy is posing a threat to The Conjuring at the box offices. Theatrical it has been, to say the least… ah! so it’s more of an art. The Sensex was running around like a headless chicken and the rupee staggered down the forex corridors singing a melancholic requiem, occasionally doing a rare celebratory jig. Economics turned eerie.

As a layman who was short changed by Lehman not so long ago I do not know if I should be sceptical at all the happenings around me. Domestic financial planning has become such a conundrum these days that make me miss those sparrows from the TNSC Bank ads of the past.

Fearing a nervous breakdown I tried to stay away from the idiot box where the ‘experts’ analyse the rise and fall of the rupee and diagnose the health of Indian economy. These experts keep referring to the fall out of the global financial crisis triggered by unregulated monetary policies that needs to be corrected by bringing about major changes in fiscal policies which in turn could call for injecting the much needed stimulus in the form of quantitative easing in countries the world over. I have no clue about the words in Italics above. But this was a set script of these analysts irrespective of the organisation they represented. And recently when the rupee touched 68 to a dollar they were wise enough to ‘predict’ it would touch 70. Wonder where they were when the rupee was at 50. You ask them that and they come up with a whole lot of stuff on market dynamics, current account deficits and blame it on Black Swans. Just that, these days the Black Swan events are so common that the time has come to change the colour or rename the metaphor for game changing events. I even refrained from pages devoted to Business, Finance and Economics in newspapers and stopped subscribing to business journals. The unfortunate fact is that Economic news is no longer confined to the inner pages of the newspaper or is a supplement that could be left untouched, but manages to DOLLAR its way to the front pages every other day.

Added to this are the rating agencies whose general ‘standards’ are pretty ‘poor’ keep ringing the downgrade / upgrade bells at regular intervals analogous to school periods. The rupee, stocks, bonds, GDP, funds and the King Khan were all in frenzy to head south. The only ones that ended up north were inflation and Khan’s earnings. Crashes, tumbles, tanks and bloodbaths were the words that did the rounds. You could play and win a depression bingo with these. The antonyms of these words did show up once in a while too but that was mostly during the intraday trading sessions. But what surprised me was the sensitivity of the Sensex, it was behaving like an adolescent with bad mood swings. One tweet from the Finance Minister propels it and almost immediately a moment of nothingness from the PM makes it nose dive, wonder why this happens though, by now the market must have also got used to his silence. The fundamentals that we are so proud of, are they really strong is what I wonder?

As in every story, there needs to be a Hero and so be it in our drama called Indian Economy. Enter the Messiah, Dr Raghuram Rajan, acclaimed of Nostradamical powers of predicting THE crash, now that’s a rare breed among the economist tribe. Most of them I know or heard are skilful in dissecting the cadaver. But I’m not sure if he has used up all his powers of prediction in 2008. He however safely acknowledged he is not a magician nor does he have a wand. What we need, is not a magician Dr. Rajan, but an exorcist who can put an end to this demon that played spoil sport in the India-growth-story fairy tale. Within 24 hours of assuming office and quoting from IF by Rudyard Kipling among other things that I did not understand, the stock market propels and the rupee stabilises….for a day. Communication is the key he said, wish I could communicate in a similar fashion to my bankers and ask them to waive a few EMI’s. Not sure what works in the market, Sentiments or Fundamentals. We keep harping on our strong fundamentals whenever we have an Economic crisis the same way we talk about resilience after each terrorist attack on Indian soil.

For the risk averse financially naïve common man these are hard times. Fixed deposit returns do not counter inflationary trends, aurum throws up tantrums, Equity markets are volatile, stocks are drunk, forex market is on marijuana, bonds are not bonding, real estate is a bubble, and the government is in a huddle, with such a bouquet of misbehaved, ill brought up financial instruments, Can someone out there tell me what to do? Demand daily wages from your employer spend for your food and clothing on a daily basis and get yourself a nice little piggy bank (not a swan shaped one) the ones made out of tin with little lock and key that the good old SBI distributed to school kids of yore and drop in whatever is left at the end of the day.