The Modi mould for Indian regulators

The news of the appointment of Subhash Chandra Khuntia as the insurance regulator on 1 May 2018 came as a surprise to most financial sector watchers. Of the eight people shortlisted for the final round of screening, Khuntia was the only bureaucrat, the rest were insurance industry insiders, including the serving Life Insurance Corp. of India chairman V.K. Sharma, New India Assurance chairman and managing director (CMD) G. Srinivasan, member Life at Insurance Regulatory and Development Authority of India (Irdai) Nilesh Sathe, and K. Sanath Kumar, CMD, National Insurance. The choice of a person with limited domain knowledge over others who have spent their entire careers working in this very technical industry was the surprise. Remember that it took an earlier outsider, J. Hari Narayan, the first three years of his five-year term to understand the sector. In fact, by the time he demitted office, he understood the sector so well that it went against the then government’s own agenda to allow him to continue. So what has gone into the decision to appoint an outsider as the head of a regulatory body that watches over Rs28 trillion of household savings and over Rs2.2 trillion of general insurance money?

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Two weeks of cashless in the country

Two weeks after the sudden death of a bulk of Indian currency notes, the most obvious panic seems to be over but the elephant of demonetisation is yet to work its way through the system. The entire process will take months before the python digests the elephant.

Arguments, edits, opeds, conversations, debates and social media are sharply divided on what the currency replacement will achieve. I remain in the ‘it’s good for the country’ side of the debate and want to address some of the arguments against demonetisation.

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Why is the currency ban causing markets to rise?

The sudden shock of the currency ban and an unexpected election result in the US caused markets to open 6% down on 9 November. But a day later, the story has changed—all markets are up. So why are stock markets surging? Why are bond markets happy? Why are real estate magnates walking like zombies? What lies ahead for your money?

Readers of this column are hopefully smug with their financial plans and asset allocation in place and are not wasting time wondering if stocks are a good ‘bet’. But let’s deconstruct why markets are up on Day 2 of the #currencyban. Day 0 was 8 November, when Prime Minister Modi made his #currencyban address to the nation.

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We did say we wanted less corruption

Some of us in India have paid, what I call, the ‘honesty tax’ for decades. Our money is salaried, there is nothing on top, we pay our taxes, keep our accounts clean, pay for large spends by card, do real estate deals in white and become the guys who obey traffic signals while others in bigger cars zoom away with a smirk. We pull out our cards and carry home our small shopping bag. The guy in the next aisle pulls out a brick of cash and thumbs out a lakh in notes to take home the high-value gadget. We drive our Maruti home with the EMI (equated monthly instalment) sitting in the backseat, the luxury SUV guy comes with a sack of cash and scrapes our car out of his way. We wait to buy a house with white money, don’t get the choice set, pay more and end up feeling like losers for being honest.

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