On Valuing Zomato, But Don’t Stop There

If you are a student of economics, you should be able to understand the basics of valuation. It is up to each one of us to determine our level of expertise, but at the very least, we should be able to understand valuations that others have arrived at.

And a great way to learn this is to devour, as greedily as possible, every single blog post written by Professor Aswath Damodaran.

Here’s an excerpt from his blogpost on valuing Zomato:

Eating out and prosperity don’t always go hand in hand, but you are more likely to eat out, as your discretionary income rises. Thus, it should come as no surprise that the number of restaurants increases with per capita GDP, and that one reason for the paucity of restaurants(and food delivery) in India is its low GDP, less than a fifth of per capital GDP in China and a fraction of per capital GDP in the US & EU.

http://aswathdamodaran.blogspot.com/2021/07/the-zomato-ipo-bet-on-big-markets-and.html

Read the whole thing, and if it is your first time reading about this topic, read it three times. I’m quite serious! Also download the spreadsheets, and play around with the assumptions in them. It is a great way to teach yourself Excel and valuations at the same time. Excel and valuations is also a great way to understand the concept of complementary goods, and I’m only half joking.


So, ok, you have now got a little bit of a grip on valuation. That’s great, but you shouldn’t stop there. Valuing a company is fine, but how does one think about the valuation of this company (Zomato) in the context of this sector (online food delivery)?

Here are some facts. Zomato raised $1.3 bn through an IPO which was oversubscribed 38 times and which valued it at $14.2 bn. At about the same time, its competitor Swiggy raised $1.25 bn in a Series J fund raise which gave it a post-money valuation of $5.5 bn.
The post-IPO public market price discovery of Zomato shows that Swiggy is 2.6 times under-valued.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

Also from that post, a great way to understand how to start to think about the price one can get in the market. That is, you can learn all the theory you want about valuation, and pricing and what not. At the end of the day, the price you command in the market is about so much more than that:

4. But, if markets stay as frothy as it’s now, Swiggy’s promoters and investors need not worry. Unlike Zomato’s promoters who, judging from the first day pop left huge money on the table, Swiggy’s promoters could rake in much more by pricing its IPO closer to the comparator market price. Swiggy and other could benefit from the later mover advantage.
5. There appears to have been a first mover disadvantage for Zomato in leaving money at the table and not maximising its IPO takings. Conversely there may have been a first mover advantage for its investors in maximising their returns.

https://gulzar05.blogspot.com/2021/07/some-observations-on-zomato-and-swiggy.html

And you shouldn’t stop there either! Valuing a company is fine. Thinking about that company in the context of its competitors is great. Thinking about the IPO rush in the start-up world, and what it means in the context of the overall economy is fantastic.

The Indian startup scene has been set ablaze by the spectacular IPO of Zomato. In a largely conservative market this constitutes a huge collective leap of faith since the company has consistently made increasing losses and several questions hang on its profitability. With some more blockbuster IPOs lined up, the party is likely to go on for some time. Some high-profile boosters even think of it as a new dawn in risk capital raising. The problem is with those left standing when the party ends, as it must. And it’s most likely to be not pretty.

https://gulzar05.blogspot.com/2021/07/the-startup-ipo-bubble-reaches-india.html

The world’s unicorn herd is multiplying at a clip that is more rabbit-like. The number of such firms has grown from a dozen eight years ago to more than 750, worth a combined $2.4trn. In the first six months of 2021 technology startups raised nearly $300bn globally, almost as much as in the whole of 2020. That money helped add 136 new unicorns between April and June alone, a quarterly record, according to cb Insights, a data provider. Compared with the same period last year the number of funding rounds above $100m tripled, to 390. A lot of this helped fatten older members of the herd: all but four of the 34 that now boast valuations of $10bn or more have received new investments since the start of 2020.

https://www.economist.com/business/2021/07/19/technology-unicorns-are-growing-at-a-record-clip

Why is this happening now? Is it because of loose monetary policy the world over? Is it because of optimism about what the world will look like post-covid? Neither, and something else altogether? Or both and something else also? What might the ramifications be? How should that influence your thinking about the next three to five years in your life – when it comes to going abroad to study, or starting an MBA, or being in the job market?

Note the chain of thought in this blogpost: valuing a company, thinking about that specific sector, thinking about IPO’s in general, thinking about the overall economy… and getting all of that back to your life. Apply this to all of the news you read, everyday, and you’ll soon start to build your own little picture of the world. That is, you’ll start to see the world like an economist. And trust me, that is a superpower. 🙂

Arbitrage and Writing

Here are excerpts from two newsletters that you should consider signing up for if you are a student of economics:

In late June, the Reserve Bank of India (RBI), India’s central bank and the banker to the banks, released the household financial debt figures based on select financial indicators. Household financial debt is basically loans that you and I have taken from the formal financial system of the banks (both commercial and cooperative) and the non-banking finance companies (NBFCs).
Of course, there are other ways to borrow as well. One can borrow against gold as a collateral from a local jeweller or simply borrow from a local money lender or borrow money from friends and family, which is why, the RBI calls it household financial debt based on select indicators.
It needs to be kept in mind here that borrowing from the informal sources is perhaps easier but at the same time more expensive, given that the risk for those lending money is higher.
So, what does the RBI data tell us? In absolute terms, the total household financial debt based on select indicators has gone up from Rs 55.38 lakh crore to Rs 73.13 lakh crore, between June 2018 and December 2020.

https://www.livemint.com/mint-top-newsletter/easynomics09072021.html

That is from Vivek Kaul’s (relatively) new newsletter, Easynomics. It is written in Vivek’s trademark style: easy to read, gloriously simple sentences (which is hard to do!), and sprinkled with just enough additional information to keep you engaged as you read through his main points. In short, really, really well done.

Here’s an excerpt from the second newsletter:

Despite this, it is unreasonable to expect that the government will reduce tax on these two fuels. Why? Sample this: excise duties on petrol and diesel accounted for a whopping 28 per cent of the central government’s tax revenue last year. Which government would let such a bounty slip by, especially when the country’s economic recovery is fragile? Think about it.
And, unlike income tax and goods and services tax, which entail a collection cost, oil marketing companies just have to do a simple RTGS transaction to pay the fuel tax they collect from us to the government! The government then uses the money for a range of welfare schemes.

https://businessstandard.substack.com/p/a-litre-of-petrol-takes-up-30-of

You and I may have our own personal opinions about which of these are better to read, but that’s not the point of this blogpost. The point of this blogpost is to point out that both writers have created simple, easy to understand posts about aspects of the Indian economy that matter to the common Indian citizen.

And they have done this by taking data from government websites. This data, as I have discussed here before, is not always easy to acquire. But those of us who have done the hard work of understanding how it is captured, where it is stored, when it is released, and how to go about making it analyzable1, have an advantage over those of us who remain blissfully unaware of all this.

But those of us who are blissfully unaware wouldn’t mind reading about the implications of this data, only if somebody were to take the time and effort to acquire that data and write simple, useful takeaways about it.

In finance, this is called arbitrage:

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices at which the unit is traded. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit after transaction costs. For example, an arbitrage opportunity is present when there is the possibility to instantaneously buy something for a low price and sell it for a higher price. (Emphasis added)

https://en.wikipedia.org/wiki/Arbitrage

If you are an economics student, and you know where all this data hides, and you know enough about how this data impacts the daily lives of citizens, and you want to get better at communication, there is riskless profit to be made. Get the data, analyze it, write about it, and give it away for free.

You learn the art and skill of of acquiring this data, you learn the art and skill of analyzing it, you learn the art and skill of writing about it (and you only get better over time, so don’t worry if the first few pieces aren’t “great”). You get to publish stuff that you can put on your CV – in fact, as I am fond of saying, it has the power to quite literally become your CV. Folks get to read what you’ve written, and they therefore understand our field and its implications in their lives a little bit better.

Nobody loses out, and we all win!

And when that great and glorious day arrives, and governments in India acknowledge that the way they make data available to its citizens is crappy, you have the ability to write a series of posts about exactly how the government could do a better job in this regard.

Learn how to work with data if you are a student of economics in India, and then write about it.

It’s a great form of arbitrage.

  1. what an utterly horrible word![]

Professor Nigam’s Twitter Thread on the AIU

Professor Nigam is the registrar at NLSIU, and he was kind enough to read my series of posts on the Almost Ideal University. What’s more, he took the time to respond with a very thoughtful series of tweets, as a part of his excellent series that is freely available on Twitter. I don’t know if he has a name for it, I think of it as the “My Dear Law Students” series.

If you are a student of law, the series ought to be mandatory reading. If you are a student of writing, the series ought to be mandatory reading. I’m quite serious, please do read all of them!

In this post, I’m going to cite some of his tweets, and add my two penn’orth.


And nor will students of economics be able to demonstrate real world potential unless assisted by real economists. You learn best when taught by folks with skin in the game. In my Almost Ideal University, you can’t become a teacher without having worked in the field first. And that’s a non-negotiable requirement.

Yes, of course there are problems with this. Why will folks want to leave a corporate job? Won’t the pay be lesser in academia? Why would firms be ok with having folks just “go away” for six months to teach? All great questions, and valid ones. But that’s exactly what we need to figure out if we’re going to ever get around to building out the AIU.

These problems arise, of course, only because I am in complete agreement with Professor Nigam when he says that you need people with skin in the game.

And I’d much rather solve these (much harder) problems than solve the problem of how to make three hour long in-class theoretical exams more relevant.


The equitable access problem is a real one, and I’ll state upfront that I do not really know how to solve it. Technology can help to an extent, but the AIU won’t be equitable to begin with. Yes, replicability, if it works out, will help. But it won’t ever be a perfectly equitable system. My sole defense is that the system I seek to replace is, if anything, even more inequitable.

Not, I hasten to add, that this should mean that we stop worrying about equitable access in the case of the AIU!

And regarding the second tweet in this section, yes, bureaucracy is inevitable. But if gamified well, there is a chance that the system (again, while not being perfect) will be better than the status quo.

My point is this: if we can get students to view assignments as something to work on cooperatively rather than combatively, the need to monitor is that much lesser. Of course, the need to mentor is that much higher, but isn’t that the point of education in the first place?

But yes, those of us in academia will need to figure out how to make this happen, and as Professor Nigam has pointed out, that with the help of working professionals.

There’s a great deal of detailing to be worked out here, and apprenticeships, mentorships and professionals in residence on campus will all have a role to play. Again: a hard problem to solve, but attempting to solve for this is a worthy mission as an academician.


I wish I could do a better job of writing more clearly, and the fault is mine over here. In my AIU, the onus isn’t on the student to attend. The onus is on the professor to make the class interesting enough to attend. The student is always free to not attend, but the professor should be good enough to make the student feel regret at not being present in class. Specifically:

  1. The professor should have the ability to not just explain a particular student’s doubt, but also in the process enrich everybody else’s understanding of that issue.
  2. The professor (or their assistant, perhaps) should allow the most non-intuitive doubts to filter up in class. That is, study groups, whether offline or on (say) Discord servers will allow the students themselves to resolve the relatively easier doubts. Those that prove resilient will be handled by the professor. Will it work perfectly right from the get-go? Of course not. Is it worth trying? I vote yes – but of course, as they say, your mileage may vary.
  3. So, no, not a diminishing role for physical classroom instruction at all. Au contraire, a role of paramount importance for the physical classroom, for synthesis will happen there. And perhaps can only happen there, but that takes us into deep waters for a blogpost. And on a related note, the more you agree with me over here, the more you should worry about inequities across the entire system. For obviously, physical classroom sessions can’t scale.

A rare area of disagreement for me in this Twitter thread, for I do have a lot of confidence in the motivational levels of undergraduates. Not all undergraduates, I should be clear. As with everything else in life, so also with motivational levels of undergrads: there will be a distribution. Some will be very motivated, and will remain so no matter how bad college is. At the other end of the distribution, some will remain very unmotivated, no matter what how good college is.

But that being said, it is true that I prefer to award the benefit of the doubt to the student. This is in good humor, Professor Nigam, and please do forgive me my impertinence, but innocent until proven guilty! Or in this case (and is it the same thing?) motivated until proven otherwise. 🙂

But quite honestly, and I’m no longer joking around, I very strongly believe that the enthusiasm to learn is systematically sucked out of a student with every passing year in academia. The more years you spend in the system, the more likely it is that you will want to not learn. This is not a universal law, but in my experience, it has been a fairly accurate heuristic.

Will there be students who will abuse the system I propose? Absolutely. That is the nature of a distribution.

Do more students suffer today for being made to mandatorily sit through classes that just aren’t good enough? Absolutely, and I would rather avoid this than the former.


Completely agreed!

I could get into one of my classes, as a hypothetical, a retired bureaucrat who has impeccable knowledge of how the Union Budget takes shape over the course of the financial year in India. This hypothetical bureaucrat has forgotten more about the budgetary process than any of us will ever know. Unfortunately, watching paint dry is more entertaining than listening to this person speak.

We’ve all met folks like these: really, really good experts, but really, really bad communicators. And that’s fine! Their job wasn’t to be good communicators. It then becomes my job as the teacher in that class to make it more interesting. Maybe I interview the bureaucrat, rather than have him speak? Maybe I record the interview and play snippets? Maybe I speak offline with him, and then conduct I class based on that conversation?

But yes, we absolutely need great teachers to make the subjects accessible and enjoyable.


It’s a great question, and I wish I had an answer, but I don’t. As I said in my first post on the AIU:

I’m a big believer in the fact that students should have skin in the game, and therefore I think that a price should be paid for acquiring an education. But I’m also all too aware of the fact that some students simply cannot pay, and therefore think that some amount of subsidization is inevitable.
It gets trickier still, because you will almost certainly have to spend more resources on those students who will need subsidization. They are, other things held constant, likelier to need more intensive training in getting the quality of their writing up to the same level as that of other students, simply because they are likelier to not have had the same exposure to quality education in school. And this will apply to other dimensions as well: quantitative skills, the luxury of having time to practice their skills and so on.

https://econforeverybody.com/2021/07/09/the-almost-ideal-university/

That is, the economist in me is saying that students from poor or underprivileged families will need more intensive training and help, educating them in the AIU will be more expensive. But that still doesn’t explain the how of it. Sure, it’ll cost more, but for doing what, exactly, and how?

There are some potential answers (bridge programs, extra assignments, more mentorships) but I’m hazy on the details right now.

Would I be correct in saying, however, that if we don’t solve this problem within the university itself, the student will face an ever tougher challenge out of it? That is, an underprivileged student who doesn’t get the kind of education we are speaking about right now will find it even more difficult to succeed out in the real world – is that a reasonable hypothesis? And if yes, then it becomes even more imperative to ensure that we work towards ensuring that these students get the kind of learning that we are speaking about?

Food for thought, for sure, and I’ll be feeding at this trough for a while. 🙂


Thank you, to Professor Nigam, for an excellent set of thought-provoking questions!

And a request to all of you – please help by letting me know what makes sense, and what doesn’t when it comes to the Almost Ideal University.

And What Will *They* Do?

NYT Cooking taught me how to make cake this past year. Ranveer Brar taught me how to make palak paneer. Sahil taught me how to make a bacon bomb. Kenji Alt-Lopez taught me how to make pizza. Smita Deo taught me how to make mutton. Krish Ashok opened up entire worlds of possibilities. I can go on and on.

The proof of the pudding is in the eating. I didn’t make all of the dishes up there, but I did make some, and I think they turned out fairly well. You should try my butter chicken sometime. But the point is, I upped my cooking game a fair bit during these pandemic times. Most of us did, I think.

And one of the major reasons we became better is because we all carry around some of the best instructors in our pocket, and that for free. Your culinary school is in your pocket, as is your theatre, your sound studio, your music room, your karaoke bar, your art museum and your sports arena.

So why not your classroom?

Watching Chapter 3 of the series on Linear Algebra from 3Blue1Brown was a life-changing experience for me (and I’m not exaggerating), because I finally understood the visual intuition behind linear transformations. Ditto with Bayes Theorem. As I often tell my students in classes on behavioral finance, it is one thing to read a paper written by Fama by attempting to check out a book from the college library. It is quite another to sit and listen to Fama talk with Thaler. Or listen to Dani Rodrik talk to Tyler Cowen. Or just stroll into a “room” where some of the most interesting folks in the world are chatting with each other, as Clubhouse and it’s clones have made possible.

YouTube (and just YouTube alone, forget everything else) has taught more, across all dimensions, to most students in the past eighteen months than most universities could have managed in twice the time. That’s rhetoric, not data, but I really do think we’ll be quibbling about the magnitude, not the direction if we argue about that estimate.

Learning has had its dynamo moment.


So whenever the pandemic recedes, those of us in academia need to address questions that will (and should) increasingly be asked by students. Why the classroom? Why mandatory attendance? Why only these notes and not those videos? Can I honestly do a better job than this when it comes to teaching the Solow model? Is SC Gupta really better than Seeing Theory?

Without the internet, the cheapest and the most efficient way to deliver learning to a student was via the classroom. If I am, say, to teach a course on the Indian economy post 1991, then I can put together a bunch of slides and deliver them in a classroom where students listen to what I have to say, debate and discuss the topics I bring up in class, and then go ahead and read more stuff on their own.

With the internet, the cheapest and most efficient way to conduct the same class is to come up with a reading/viewing/listening list, and spend the class discussing the doubts and questions that students may have. This can happen in a class or online. Those who don’t have any doubts, or don’t want their doubts resolved by me are free to not attend.

But can I go one better? Can I ask the author of Half Lion to came talk with our students? Can the folks who worked on Indiabefore91.in come and speak to us about why (and how) they developed the website? Can the author of the paper that highlighted how being rich and “good” was a trend that Bollywood started to become popular after Hum Aapke Hai Kaun be invited for a talk? James Crabtree to talk about inequality in India? Or maybe Stanley Pignal? Mihir Sharma, to talk about Restart? Bibek Debroy or Ashley Trellis, maybe, to talk about what else needs to be done now? Vijay Joshi? TN Ninan? Arvind Panagariya? Arvind Subramanian? Samanth Subramanian to talk about the tanker mafia in Bangalore (and indeed, elsewhere in the country)? Hansda Sowvendra Shekhar? Gilles Verniers? Cristophe Jaffrelot? Nitin Pai?

This might seem like name dropping, but it isn’t. I haven’t met, in real life, even one of the people I have mentioned above. Nor is that list anywhere close to being comprehensive. But imagine a world in which students in my class are tasked with reading the works of these people, and they then go and reach out to these experts, asking for a talk. It is quite likely that some, maybe all, of these people will say no. But the students will have that conversation, they’ll learn the art of making the ask, and they’ll learn the art of asking for alternatives. They’ll network with some of the best people in the business. And if either the person, or the suggested alternative says yes, the student (or that group of students) is responsible for moderating that discussion. They are responsible for taking notes, creating a summary, preparing a reading list and sending all of this to the guest speaker at the end of the session. That is their assignment, and it counts as being done if all of this happens. And the “semester end” examination is a reflective essay on what they learnt through all of these guest lectures: the organization of these lectures, and what they learnt from it.

I could finish the entire semester without having “taught” a class. But there would be a lot of mentoring, networking, discussion and planning in this entire semester. My role as a teacher for this course is to be the guy who decides on the broad contours of the course, facilitates introductions, figures out Plan B’s if the original choice of speakers doesn’t work out, and overall, act as a mentor for the course.

Without the internet, I had to substitute for all this. With the internet, I complement all this. I put this altogether, on the fly, during the semester, and make sure that all of it comes together by the end. The work will actually be more, much more, than regular old teaching – but this would be, in my eyes, a significant improvement.

You don’t provide a negative incentive to have students attend class. You reward them with incredible networks for having attended class. You don’t teach a class. You harness the power of the internet to conduct a class. You don’t check if students have learnt enough by having them write an exam. You make sure that students earn the right to learn from the best, by having them read and digest the works of the best in the business. Will you learn more by mugging up notes the night before the exam, or will you learn more when you know that you have to personally speak with the author of a book, and request them to come speak to your class about it?


Teachers in my Almost Ideal University will mentor students, and help them build out their networks by connecting them with the best in the business. The learning is the process, the network is the outcome. All talks to be recorded and put up for consumption by everybody in the world. Ditto for the documentation. And the challenge in the next semester is to improve upon the one that went by.


Who exactly are these professors, though, the ones who mentor the students in these courses? Full time employees? Well, sure, in some cases. But imagine a 36 year old manager in some analytics firm who is given six months off by her firm to come and teach Introductory Statistics at a university. Imagine the kind of folks she could invite for talks at her classes. Imagine the case studies she could build. Imagine the kind of problems she could speak to students about.

I could go and teach principle of economics at a law university for one semester. A former secretary of health and could come and teach a course on public health. Maybe a PhD student of, say, Professor Ashok Gulati could conduct a course in agri-business marketing. None of us need physically be on campus! This last year and a half has taught us that this work happens just as easily remotely. We just happen to be in charge, that’s all. And sure, if you can be present physically, even better!


It’s been three essays and counting in this series, but I think we need at least one more before we can call it a day. What are the societal incentives that we need to change or chip away at before my Almost Ideal University has even a chance at existing, let alone succeeding? That’s the topic of tomorrow’s essay.

The Indian FRED

So from yesterday’s post, this is where you need to go to get the data about India’s agricultural exports. There may be more than one correct answer, of course, but the Excel file that I generated came from here. The DGCIS website also offered to give me the data, but after telling me that I would need to pay the princely amount of Rs. 169 for it. Why Rs. 169? They charge Rs. 1 for each row of data in MS Excel. Nope, I’m not making this up.

A dummy query that I ran on http://ftddp.dgciskol.gov.in/

I can go on and on about the theme of working with data in India. Anybody who works with, or has worked with data published by the Indian government for the last twenty years can go on and on about this. We make it really difficult to access data easily in India, and that in the following ways:

  • It is not clear which site to access to get the data that you want
  • That data may not have been updated for a while
  • That data will probably only be available in PDF format (which is a whole separate level of hell)
  • The website may often be down (looking at you, dbie!)

To give you just one, already painfully familiar example: to download CPI data, should one go to the RBI website or the MOSPI website? If the MOSPI website (which is the correct answer), which MOSPI website? There have been two for a while now: this one, and this one.

And when you eventually do reach what may be the correct page, this is what you get:

http://164.100.34.62:8080/TimeSeries_2012.aspx

For the record, I know you can get CPI data from the old MOSPI website. But the point I am trying to make here is this: surely we can get (and surely we deserve) better data portals? For a country with the kind of software talent that India possesses, surely this is not the best way to design a UI?

I’ve written about this before here on EFE, but every time I write a post about data in India, I get frustrated enough to write about it all over again.

Appoint an educational institute to be the nodal agency, and get them to work on a report about what needs to change, and why and how, for the DBIE website to become better than it is right now. That doesn’t mean (at all) a blind copy of FRED, awesome though FRED definitely is.

https://econforeverybody.com/2021/03/16/playing-around-with-data/

Is there anybody in India working on trying to figure out ways to get Indian data to be more easily accessible? On documenting what data sources are needed, and how to arrange for their capture, their storage, and to make it easy to retrieve it? And this across all three levels of government1? And not for private profit, but so that data is open to all?

If there is such a project, I would be most grateful if you could point me towards it. And if there isn’t one, why are those of us in Indian academia not working towards figuring out how to get this done? This is India, and this is 2021. Surely we can do a better job of making data more accessible to ourselves?

  1. state level data is a whole different problem. And data below that level of government is, well, let’s leave it be for the moment[]

Agri-Exports in India in 2021

Ashok Gulati and Ritika Juneja had an excellent write-up in the Indian Express last week, and if you are a student of Indian agriculture, it is an absolute must read.

  1. “Agri-exports touched $41.8 billion in FY 2020-21, registering a growth of 18 per cent over the previous year.”
    ..
    ..
    Here’s a fun1 exercise. Figure out where the authors got the data from?
    There’s a very good reason I ask this question. We don’t (yet) have something like FRED available in India. When you read an article such as the one we’re going through today, it is one thing to take a look at the statistics and think about them – and quite another to try and dig out the data yourself. It is a skill that most of us pick up out of necessity when we start work – you’d do well to start practicing right now.
    You’ve won if you can see this on your screen:
Source: An Excel file NOT from DGCIS

2. We need to grow exports, and we need to increase agricultural production. These are, even at an introductory level, obvious statements2. But as the article points out, we therefore need to dig deeper into the data to be able to answer this question in its entirety. Which products can we export more of? Why? At what cost?
Think of it this way: in what ways can the Indian cricket team get better? That’s like asking which specific Indian players can get better, in a way. So if we say that the team will get better if Kohli bats better and Bumrah bats better, is that a correct answer or just lazy thinking? Because they’re already pretty good, no?3.

3. As the article points out, rice accounts for about 21% of the $41 billion. Note that the statistics split this out by basmati and non-basmati rice, we’re adding these up. After that it is marine products (14.46%), spices (9.66%), buffalo meat (7.69%) and sugar (6.77%). That is, the top five categories together account for about 60% of all our agricultural exports. (Get familiar with the power law, if you aren’t already)

4. The rest of the article focusses on rice and sugar, and points out that exporting these two crops is akin to exporting water – and it is not as if we have a lot of it to go around.

India is a water-stressed country with per capita water availability of 1,544 cubic metres in 2011, down from 5,178 cubic metres in 1951. This is likely to go down further to 1,140 cubic metres by 2050. It is well known that a kg of sugar has a virtual water intake of about 2,000 litres. In 2020-21, India exported 7.5 million tonnes of sugar, implying that at least 15 billion cubic metres of water was exported through sugar alone. Another water guzzler, rice, needs around 3,000 to 5,000 litres of water for irrigating a kg, depending upon topography. Taking an average of about 4,000 litres of water per kg of rice, and assuming that half of this gets recycled back to groundwater, exporting 17.7 million tonnes of rice means that India has virtually exported 35.4 billion cubic metres of water just through rice.

https://indianexpress.com/article/opinion/columns/how-green-are-indias-agri-exports-7368002/

5. Related to that last point, here is an old EFE link fest about water and India.

6. “Moreover, the export subsidy given by the government to clear excessive domestic stocks of sugar has led many other sugar-exporting countries like Australia, Brazil and Thailand to register a case against India at the WTO, which India may find difficult to defend.”
..
..
As a student, here are the questions you should be asking (in my opinion). Where can I find details about this case? How do these things work? They have a whole course about it, and you really should sign up for it. If you even think about asking if you get a certificate for this course, you end up killing a little kitten. Yes, really.

7. “Farming practices such as alternate wetting drying (AWD), direct-seeded rice (DSR) and micro-irrigation will have to be taken up on a war footing.”
..
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What is AWD? What is DSR? What is micro-irrigation? Better questions: which countries do this extensively? To what effect? What stops India from doing this? What can be done about it? I haven’t hyperlinked to the last five questions, and that is deliberate. Try searching for the answers yourself, and tell us what you learnt! 🙂

8. “Closer evaluation of non-basmati exports exposes another interesting fact: These exports are actually sourced not only below-MSP but also below the average domestic mandi prices prevailing in the country after one adjusts for freight from mandi to port and loading charges at the port. How does that happen? One possibility is that a substantial part of supplies through the PDS and the PM Garib Kalyan Yojana are leaking out and swelling rice exports.”
..
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This really takes us into the weeds of agricultural economics, but here’s an article to get you started.

9. And finally, the authors’ proposed solutions:

“It is high time that policymakers revisit the entire gamut of rice and sugar systems from their MSP/FRP to their production in an environmentally sustainable manner. We must ensure that we produce more from every drop of water. Also, at least in the case of rice, procurement will have to be limited to the needs of PDS, and within PDS, it is high time to introduce the option of direct cash transfers. All these will go a long way to promote better diversification of our agri-systems and better use of our scarce water supplies and lesser GHG emissions. We could save on the unproductive use of financial resources locked up in burgeoning grains stocks with the FCI. These savings can be used for doubling investments in agri R&D to improve productivity on a sustainable basis and improve farming practices for minimising carbon emissions. An export-led strategy also needs to minimise logistics costs by investing in better infrastructure and logistics. Only then one can ensure sharing the returns of these investments with farmers to give them a better deal in terms of higher and more stable incomes.”


I’ve been writing posts like these for a while now. Here’s one about fiscal policy in India, here’s one about footwear in India, here’s one about a Marques Brownlee interview, and if you dig through the archives, you’ll find plenty more. The reason I bring this up is that I think there is genuine value to taking notes as you read anything, and publishing these notes online. Plus, as a student, there is genuine merit in asking a simple question repeatedly: where did the authors get the data from? Especially in India, the answers often aren’t simple, and the exercise is therefore worth your time.

Another reason I bring this up is that if you do this long enough, you end up making a very helpful mental map of whatever it is that you’re studying. And trust me, over time, learning compounds.

So I hope that this helped you learn a little bit more about agriculture in India, but I also hope that you learnt how simple, and powerful, it is to take notes regularly. Please do! 🙂

  1. I use the term in a very, very loose sense[]
  2. ought to be, at any rate[]
  3. Yes, yes, I know. My point is to ask if we should be focusing on the star performers, generally speaking, or the relative laggards. And yes, I agree that both were not at peak performance in the WTC final[]

India’s Demographics in One Tweet

Well, ok, not India’s demographics in one tweet, maybe. But it is such telling and thought-provoking trivia, this.

If you’re looking for a frame of reference, Belgium’s total population is 12 million. We will add 12 million 18 year olds alone.

By the way, please don’t misconstrue my stance on the issue: I’m very much on Team Simon.

Meanwhile, In India…

Yesterday’s post was about taxation (or the lack of it) in the United States of America. Today’s post is about the composition of tax revenues in India (along with some questions to which I would love some answers).

So the Hindu came up with a very interesting analysis on the composition of India’s taxation revenues over the past couple of years:

In FY21, despite a stringent lockdown and a raging COVID-19 first wave, the gross tax revenue collected by the Centre increased over FY20. However, the increase was made possible by a sharp rise in contributions from union excise duties. This compensated for the sharp drop in the share of corporate tax collection. The shift in tax burden from the corporates to the masses has come at a time when the pandemic has led to many job losses and reduced income levels thereby pushing more people into poverty.

https://www.thehindu.com/data/data-centres-tax-revenues-grew-despite-stringent-lockdown-on-the-back-of-excise-duties/article34850754.ece

This is the first chart in their article:

Source: https://www.thehindu.com/data/data-centres-tax-revenues-grew-despite-stringent-lockdown-on-the-back-of-excise-duties/article34850754.ece

I tend to take chart design a little seriously, so before we proceed, a laundry list of ways in which I wish this chart was better:

  • Source! What is the source of your data? As we will see later on in this blogpost, that really matters
  • Dump the y-axes (or at least one of them) and label the series instead. I’d prefer to do this for both series
  • This is especially important because you’ve got “base” numbers on the LHS y-axis and percentage change on the right, and visually, it is very non-intuitive. Especially because the RHS y-axis has zero at a different level when compared to the LHS.
  • A horizontal line next to 0% on the RHS would help provide clarity.
  • Any charting ninjas out there, please let me know where I’m wrong, and what you would do instead 🙂

Now, about the source of the data:

The article mentions that about “about 20.24 lakh crore was collected in FY21”. Since I don’t know which source was used, I’ve gone with the receipts statement from the Budget at a Glance section of the Union Budget website.

https://www.indiabudget.gov.in/doc/Budget_at_Glance/bag5.pdf

Gross tax revenue for 2020-21 (Revised Estimates) is Rs. 1900280. That’s… close enough, I suppose, to 20.24 lakh crores? Not really, if you ask me, but we’ll make do. By the way, to be clear, none of this is intended as a “hah, gotcha!” exercise. If there is a better data source that I should be using, please do let me know.

The excerpt above notes that gross tax revenue went up in FY 21 compared to FY 20. That’s not what this table shows, and I would love to learn more about which data source was used by The Hindu’s data team. That being said, their larger point is valid, and worth thinking about: in a year in which India’s GDP contracted, by around 7% or so, tax collections have been remarkably resilient. Going by the dataset I am using, they haven’t actually increased, but it is a close run thing, and that is remarkable.

[Professor Sabyasachi Kar was kind enough to point out a rather elementary error on my part: what matters is nominal GDP growth rate, not the real GDP growth rate. And nominal GDP contracted by around 3%, not 7% – that does explain a lot about the change in gross tax revenue we are seeing in this blogpost. Thank you, Professor 🙂 ]


Which means, of course, that we should be taking a look at which specific line items are responsible for this increase. And even a cursory glance at the table tells us that the impressive performance is almost single-handedly due to excise taxes. They’ve gone up from a base of Rs. 240615 crores in 2019-2020 to Rs. 361000 crores in 2020-21. That’s some growth!

If you are a student of the Indian economy, you might want to read this article, an excerpt from which is below:

The interesting thing is that the excise duty earned from the petroleum sector has jumped from Rs 99,068 crore in 2014-15 to Rs 2.23 lakh crore in 2019-20. The government has become addicted to easy revenue from taxing petrol and diesel. This year its earnings will be even higher than in 2019-20.

https://vivekkaul.com/2021/02/22/why-the-price-of-petrol-is-racing-towards-rs-100-per-litre/

As a student, never take numbers you read in an article as given. Not, to be clear, because you don’t trust the author, but because you should always go to the source of the data. Here’s one potential answer:

Source: https://www.indiabudget.gov.in/receipt_budget.php

I personally want to learn more about 5.02, 5.03, 5.05, 5.07.10 and the “total” row. That’d be a great masterclass, if you ask me


The bottomline: it is a great time to be a student of the Indian economy. All of what your textbooks tell you, both in terms of theory and in terms of data, is being stress-tested in ways that really test your knowledge of the Indian economy – so long as you look hard enough, and don’t stop asking the right questions.

So please: look, and ask. 🙂

On The Optimal Incentivization of Bureaucracy

Incentives matter. That is how I (and every other economics professor lucky enough to teach principles of economics) begin my classes every year.

Consider these sentences:

The central tasks of a modern state can be placed in three broad categories — maintaining the rule of law, providing public goods to citizens and using fiscal tools to redistribute income.


An efficient bureaucracy is essential for a successful state.


The efficacy of a bureaucracy is dependent on the incentives or disincentives that individual civil servants face when they take decisions.

https://www.idfcinstitute.org/knowledge/publications/working-and-briefing-papers/bureaucratic-indecision-and-risk-aversion-in-india/

Bureaucrats, policymakers, students of public policy and us professors should read this excellent paper. But if you are a student of economics, just beginning your journey in the Dark Arts, you should definitely read this paper.

Why? Three main reasons:

  1. It is a wonderful way to understand why incentives matter
  2. It helps you understand why government offices (and their cousins) function the way they do
  3. Trying to understand the Indian economy without understanding this aspect of it is an impossible task.

The paper is titled “Bureaucratic Indecision and Risk Aversion in India”, and is freely available here. The authors are Sneha P, Neha Sinha, Avanti Durani, Ayush Patel and Ashwin Varghese. It is an extremely accessible paper, in the sense that there are hardly any pre-requisites for you to read it in its entirety, and if you take notes, the paper is guaranteed to leave you with a ton of reading material. All those are the cherries on top: the biggest advantage is that you get a much better understanding of why the Indian bureaucracy is the way it is, and what could be done about it.

Here are my quick reflections after having read the paper:

  1. If you are a student reading this paper, you might enjoy encountering prospect theory at the outset. Again, it is a great way to connect the dots between what you learn in a classroom and its real life application. (There’s further reading, if you are so inclined)
  2. The second section is (to me) the meat of the paper. The title is “The Causes of Bureaucratic Risk Aversion”, and the authors list out 12 in all. These are grouped under three separate headings. As a mnemonic for myself, I think of them as Structure, Culture and Nurture
    1. Structure is Organizational Design: whether through over-monitoring, not enough discretion being given, an overload of bureaucratic responsibilities, the typical bureaucrat simply doesn’t get the time, the bandwidth or the incentive to not be risk averse. In plain simple English, the authors are saying this: if you or I had been a bureaucrat, we would have done exactly the same things that our bureaucrats have been doing for years. And this is so because like our bureaucrats, we too would have responded rationally to the operating structure we are a part of. It is not the bureaucrats that need to be changed, in other words, it is the organization design of bureaucracy that needs to change. Or that is my understanding of the first half of this section.
      But when it comes to structure, the latter half of this section speaks about the way candidates are selected, about how they are trained and mentored and about how they are (under)paid. Each of these are important to understand, and I especially liked how benchmarking and comparisons were made using examples from Singapore, Malaysia and Indonesia. Speaking of which, please read Gulzar Natarajan on entrepreneurship as a desirable trait in a bureaucrat, and please see this website from Malaysia.
    2. Culture is Institutional Norms and Culture: Please (pretty please!) read the whole section. It is an eye-opener. Plus, it is full of delightful nuggets. For example, I learnt by reading this section that the Official Secrets Act doesn’t define what a secret is, but forbids government employees from revealing them.
      The authors say that accountability to process, rather than outcomes is a problem. Now that gives me a delightful problem to mull over for a long time to come. How to reconcile this point (which is, I think, fair and valid) with this post (which also, I think, is fair and valid? Thoughts and suggestions welcome!
      Shleifer and Vishny (1993) and Becker and Stigler (1974) are two papers cited in the last part of this section, and as a student, they are absolute must-reads.
    3. Finally, Nurture is Political Pressure: This section is about your political boss (or bosses, in some unfortunate cases). Anybody from the corporate world will immediately draw the link between this and the dreaded “dotted line manager”. Similar problem, and similar outcomes.
  3. What can (and should) change is what this concluding section is about.
    1. I loved the idea of linking public sector salaries to private sector wage levels (although as statistician I can’t help but think about how that might actually work in India)
    2. The Committees timeline is wonderful for students, in the sense that gives you a quick way to understand what has happened in this space since independence, and the enthu-cutlets can dramatically expand their “To Read” list.

As additional reading, should you have the appetite for it, here is what I would recommend:

  1. All posts tagged “Bureaucracy” from Gulzar Natarajan’s excellent, excellent blog.
  2. An old, tangential but delightful read: English August
  3. Ch06 of this year’s Economic Survey

On The History of Public Health in India

The responses will keep you busy for days, if not weeks. This tweet, and the responses to it, are an excellent argument for why Twitter is such a valuable resource for all of us.