Month: October 2008

India’s telecommunications infrastructure story is remarkable in many respects. It used to be a public sector monopoly not too long ago. Waiting time was measured in years and the service was as poor as the price was high. Things changed rapidly after the sector was liberalized and the private sector was allowed to provide telephone services. As there was practically no wire-line phone system to speak of in the early 90s — around 20 million phone lines for a population close to a billion — the legacy burden was entirely missing. Cellular technology effectively allowed India to leapfrog the older twisted wire landline system. Vigorous competition brought prices that are among the cheapest in the world.
Continue reading “Telecommunications and Rural India”

[This is a repost of a January 2008 post. Even if you have seen the video before, I am sure that you will appreciate it even more now since it rings so true.}

The other day, a BBC producer from London called me up and asked me if I would care to comment on the recent big sell-off in the Indian stock markets. I confessed that I am not fully qualified to do so but added that in all honesty that my guess would be as good as any one else’s. Still I declined. The best we can do is pull out Keynes’s “animal spirits,” which unfortunately is not amenable to rigorous scientific or economic analysis. The essential story of the stock market is well told in this cartoon.

That pretty much sums up how the stock market swings between fear and greed, the abrupt change from panic to irrational exuberance. And here are The Long Johns (John Bird and John Fortune) on turbulence in the financial markets. As one of the Johns so astutely observes, “You have to remember two things about the markets. One is, they are made up of very sharp and sophisticated people. These are the greatest brains in the world. The second thing you have to remember is that financial markets — to use the common word — are driven by sentiment.” I won’t spoil the fun for you. Just watch the video and fall off the chair laughing.

That’s why I don’t mess around in the stock market. 🙂

Mr Ahmadinejad is a nut-case. Unfortunately, he is also very powerful and his nuttiness can harm a lot of people, not just Iranians. He’ll come to a sticky end, undoubtedly, but he will also lead a lot of his compatriots to misery and doom.

This is the only economy in the world – indeed possibly in world history – in which you can borrow money from the bank and then receive a higher rate of interest by depositing it in the same bank.

Mr Ahmadinejad, who says he is proud of his ignorance of economics, also seems to believe the laws of supply and demand do not apply to the Islamic republic. [BBC]

Iran has the largest combined natural gas and oil reserves in the world, and is the third largest exporter of oil. One would have expected Iran to be a wonderfully developed economy. But it isn’t. It is well recognized that natural resource wealth, if mismanaged, can be a curse rather than a boon. Add theocracy to oil and you have the makings of a powerful bomb — a suicide bomb.

Two broad generalizations. First, economic development requires good policies, not just a wealth of natural resources. That implies good leadership. Good leadership depends on a dynamic, forward-looking, and scientific culture. Second, mixing religion with affairs of state is a bad idea.

India has yet to learn those two lessons. Its economic policies continue to be socialistic — meaning, it is static, regressive, and harmful. This is understandable as the policy makers are neither smart nor good. Most disastrously, the Congress led UPA government is mixing theology with state policy. It sits in judgment and privileges one religion over another.

I look at Iran and just hope that India does not go that way.