From sugar to eggs: what our food basket says about our income

Expense Account, Mint

The house-help is on leave and I’m in the market for six eggs, making an infrequent visit to buy the EBE (everyone buys everyday) goods. How much? I ask. Paanch kam tees. 25 bucks? I need six and not a dozen, I correct; your numbers are wrong, you mean half that, right? The little boys on the makeshift wooden plank that doubles as a shop counter at the corner of the Mother Dairy booth break into giggles. Abhi bahar se aiye hai (she’s come from out of town), they joke. The joke is on me in more ways than they mean. The most obvious one is that the price of eggs has more than doubled in the last year and I’m oblivious of it. The deeper irony is that I forgot all that I learnt in postgraduate economics while living my everyday life. I know that per capita income in India is up about three times over the last 15 years, but I forgot that as incomes grow, two things happen. The proportion of food in the overall consumption basket shifts to non-food goods. And within the food basket, sugar and cereal get replaced by proteins in a low per-capita country such as India that is still grappling with mass poverty.

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From sugar to eggs: what our food basket says about our income

Expense Account, Mint

The house-help is on leave and I’m in the market for six eggs, making an infrequent visit to buy the EBE (everyone buys everyday) goods. How much? I ask. Paanch kam tees. 25 bucks? I need six and not a dozen, I correct; your numbers are wrong, you mean half that, right? The little boys on the makeshift wooden plank that doubles as a shop counter at the corner of the Mother Dairy booth break into giggles. Abhi bahar se aiye hai (she’s come from out of town), they joke. The joke is on me in more ways than they mean. The most obvious one is that the price of eggs has more than doubled in the last year and I’m oblivious of it. The deeper irony is that I forgot all that I learnt in postgraduate economics while living my everyday life. I know that per capita income in India is up about three times over the last 15 years, but I forgot that as incomes grow, two things happen. The proportion of food in the overall consumption basket shifts to non-food goods. And within the food basket, sugar and cereal get replaced by proteins in a low per-capita country such as India that is still grappling with mass poverty.

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Is it okay for top universities to auction seats and other questions

Expense Account, Mint

What is your first reaction if you come to know that 10% of seats in the Indian Institutes of Technology will be auctioned to the highest bidder from this year? What if a rich privately funded foreign university like Harvard does the same? Is it okay to pay children to read to incentivise them? Should prisons be turned over to private corporations to run? Should mercenaries be allowed to fight a country’s wars? These questions and more in the same vein were asked by the world famous Harvard guru of justice Michael Sandel at a public lecture in Delhi last week on the topic “What money can’t buy: The moral limits of markets”. The topic was provocative enough to get a packed hall Wednesday evening and for all those who weren’t there, 12 lectures that are part of Sandel’s justice course are here: http://www.justiceharvard.org/watch/.

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Focus shifts from income to expenditure

Expense Account, Mint

The world hit the Millennium Development Goal (set in 1990) of halving poverty five years ahead of time in 2010, but delve deeper into the numbers and it is clear that India has reason to worry. It has been China’s ability to take 660 million people out of poverty that has powered the achievement. India has been the drag on this number with Indian poor, who live on less than $1.25 a day, making up about half of the 1.3 billion poor in the world. Poverty persists in India though per capita income has quadrupled in the 15-year period to 2010. Direct reflections of persistent poverty are poor social indicators. Life expectancy at birth in India has improved from 58 to 64 over the 15 years, but we’re behind our immediate neighbours—China is at 73, even Bangladesh and Pakistan are ahead at 67—not to speak of global peers. India’s access to improved sanitation more than doubled to 31% of the population, but China is at 55%, Bangladesh at 53% and Pakistan at 45%. The persistence of poverty and the sluggishness of social indicators suggest that something is wrong with the Indian model of growth.

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Should the ONGC issue bailout by LIC worry you, the policyholder?

Expense Account, Mint

Last week’s bailout of the ONGC stake sale by Life Insurance Corp. of India (LIC) has turned the spotlight on an institution that is a household name in India and now finds itself being publicly questioned over its investment decisions. Should you be worried about your money in government-owned LIC that was set up by an Act of Parliament and carries a sovereign guarantee? The guarantee gives policyholders the safety net they need in terms of a promised return of their money, but to contemplate a government payback of just over Rs 25 trillion (the sum assured on almost 300 million policies), in a situation where such a bailout is needed, would be quite a disaster. But let’s not think about that. It’s safer to stay with worrying about returns rather than the risk of a sovereign default.

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Should banks sell insurance at all?

Expense Account, Mint

Because much of policymaking in India is about lobbying power, we see some strange outcomes. Take the draft bancassurance guidelines, for example, that lay down the rules of bank tie-ups for insurance companies. The weird spectrum-like allocation of banks to insurance companies is a classic example of a compromise that benefits no one and will actually harm the market. Recent events in the bancassurance space that point to some companies tripping over regulatory boundaries corroborate this. The evolution of the November 2011 bancassurance draft guidelines (you can read them here) is the story of a face-off between two evenly matched lobbies. On one side is the insurance industry, with its flagship government-owned default sovereign wealth fund, the Life Insurance Corp. of India (LIC). And on the other is the banking sector whose lobbying power kept our money earning nothing because of a rigged formula to calculate interest rates on savings deposits that were fixed at 3.5% for years. The story of how the draft bancassurance guidelines came to be have enough masala to run a full Bollywood trilogy. But as of now, the banks are ahead.

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