An update to fixed income markets, courtesy Vipul Singh Chouhan

Vipul Singh Chouhan, who I had the privilege of teaching about six years ago or so, has forgotten more about fixed income securities than I’ll ever know. Immediately after posting the previous post, I messaged asking if he would like to add to the list.

What follows are his recommendations, lightly edited for the sake of clarity. Thanks a ton, Vipul!

  1. Factsheets of all the Mutual Funds released on a monthly basis. I’ve linked to the Morningstar website, but I believe this is available through multiple sources. Here’s an actual factsheet, pulled out completely at random.
  2. Vipul recommends that you keep a close eye on the commentary of the Debt CIO on the current situation of the fixed income markets. See this, for one example.
    Specifically, Vipul recommends you try and get answers to the following questions:

    1. What are they holding?
    2. In what proportion?
    3. In what maturity bucket?
    4. What is the credit rating?
  3.  It doesn’t end there! After getting to know about the credit rating of a structure, read it.  For example, let’s say a particular CMBS (Commercial Mortgage Backed Security) is rated AA+ by India Ratings, go to the website and read the entire two page rationale. Then go and read rationales for similar CMBS structures – peer review, if you will. Poke around! Compare and contrast! Find faults!
    This next paragraph is quoted verbatim:

    “Pester someone like Ashish sir and tell him “Sir in my view this should be AA and not AA+, pls correct me if I’m wrong”. Take feedback from him and improve your analysis on a continuous basis. “

    Well, please don’t take up Vipul on this suggestion quite literally, but don’t ignore the larger point, which is that you must find for yourself a mentor in the subject area you are trying to learn more about, and bug that mentor about learning more. I assure you, this is a vastly under-rated, and under-exploited skill. By me as well, to be clear.

  4. Learn to look for patterns, and learn to connect the dots. This is easier said than done, and you need to bury your nose in these reports for weeks on end, but eventually, you’ll “get a feel” for what you’re looking for. Here’s an example from Vipul:

    In the fact sheet, find patterns, let’s say investment grade AUM has increased in the last few months, while the credit risk AUM has nose dived. Explore the internet for reasons.

    Maybe that didn’t make sense to you. Well, look up the terms and phrases, try to make sense of them, and then ask your mentor the question. The question should never be, “What is XYZ?”. It should be, “I didn’t understand this term, so I looked it up, and here is what I specifically don’t understand about XYZ.” Asking the right question is a great skill!

  5. Again, a straight quote, unedited:

    Among the various structures, which MFs buy what: LAS, CMBS, Corporate guarantee, Letter of Comfort, DSRA guarantee. Understand each in detail. Which structure is preferred by which issuer and for what reasons. Pros and cons of each structure.

  6. With regard to that last point, if you want to really be a part of the industry,  learn each of those terms, once again with a weighted average of research online and follow-up questions with your mentor. The internet will tell you what the terms mean, and your mentor will tell you why it matters. Both are important, and in that sequence.
  7. Vipul recommends that you browse RBI site regularly. Specifically, whether you understand the reports or not, look out for data on the following:
    1. Outstanding G-Secs
    2. Primary auctions of CMBs (s is small, not to be confused with the CMBS mentioned above)
    3. SDLs,
    4. T-Bills. 
  8. Government Securities Market for Beginners: A Primer, which I myself hadn’t read until now (Thanks Vipul!)
  9. And finally, FIMMDA for corporate bond spreads and base yield curve.

Akash (and anybody else interested in this topic), this should keep you busy for days on end. My thanks to Vipul for taking the time to respond so quickly, and for sharing a most excellent set of links 🙂

Notes from an excellent blogpost by V Ananta Nageswaran

I mean, the simplest thing to do would be to go read the post in its entirety. The notes that follow are my way of reinforcing the key messages for myself, but perhaps they will help you as well.

This piece has five messages. One is that the best way to attract businesses is not to repel them explicitly. Second, it makes the case for a bold but transparent fiscal support. Third, it offers suggestions on how that money could be spent and four, it reminds experts that doomsday scenarios for India are not pre-ordained. Finally, it is important that the government channels the Covid crisis to usher in a decade of better growth than the previous one.

With regard to the first point, about not repelling businesses:

  • The blog post emphasizes the need to facilitate clear instructions for businesses. The key message is that clear communication is always important, but it is literally a life-saver in these times. If you need to issue a clarification, you failed. It is that simple.
  • A related point in this regard comes from an excellent newsletter that is equally worth reading in its own right. Facilitating business also means not throwing out the baby with the bathwater:
    ..
    ..
    “Now let’s look at why this is a policyWTF. India’s economy is facing a severe demand + supply shock. Of particular concern is the unavailability of domestic capital for long-term projects such as infrastructure (one of the reasons for this is covered in the India Policy Watch section below). Without long-term investment, India cannot achieve sustained economic growth. And without sustained economic growth, India’s geopolitical options get majorly constrained. An economically strong India becomes an ideal counterweight to China for the US and also an ideal market for excess Chinese capital. In contrast, a weak economy will eventually be forced to throw its economy open to the highest bidder at any point of time (ask Pakistan). Given this key national interest, making it difficult for Chinese investments to find their way into India is extremely counterproductive.”
    ..
    ..
    To be clear, this is not the point Ananta Nageswaran was making, but the point that Pranay and A.N. make stems from the root principle that in these times, we need to facilitate business, not hamper it. It can be hampered by a variety of things: unclear communication, blanket bans, or something else.

Now, on to the second point:

However, for a country with a young demographic and a potential for economic growth to exceed the cost of capital in the medium to long-term, the cost of excessive caution and prudence would be higher than the cost of excess action now. This would be so in the medium to long-term even if the short–term costs of excessive fiscal activism appear higher. One such fear is the fear of credit-rating downgrade. That reputational risk must be accepted and ignored, if it materializes. Rakesh Mohan, the former Deputy Governor of the Reserve Bank of India, had the right attitude towards them. In an interview for CNBC TV-18, he is reported to have observed that the credit rating agencies should have been the first ones to be put on the lockdown globally. He is right.

There is a time to worry about rating agencies, rising rates of borrowing, crowding out and profligacy. This, however, is not that time. We can err on the side of doing too little, or too much. There will be errors, we just need to choose which. I agree with A.N. – more is infinitely more preferable.

Suggestions on how money can be spent, which is the third point:

  • Asset sales, by Andy Mukherjee (link gotten from within A.N.’s post)
  • Building out health infrastructure, by the same author (and the same source for the link as above too)
  • Shankkar Aiyyar has an article on BQ that finds mention in A.N’s post, and also has this excellent, excellent analogy:
    ..
    ..
    “Epidemiology tells us vulnerability to Covid-19 rises with pre-existing conditions. This is true for economies too. India’s economy, frail from co-morbidity, tripped from slowdown to lockdown.”
  • And Vikram Chandra on Twitter has some suggestions:
    ..
    ..


    ..
    ..
    Note that the list isn’t (and can’t be) exhaustive. But these are all extremely good suggestions!

Fourth, we need to keep reminding ourselves that it’s not all doom and gloom, health-wise and economy-wise, or as A.N. puts its, “experts are poor at predicting”. (Ahem)

And fifth, the bottomline from his blog-post, which I quote in its entirety:

“Finally, that persuades me to throw the ball to the government to play. In times of crises, society looks for guidance and leadership from the rulers. This is time-tested. Therefore, the onus is on the government to demonstrate clarity in thought and purpose in action. India began the last decade badly and ended it with more questions than answers. An encore will be a tragedy. India should do whatever it takes to avoid it.”

 

 

Talking Macro With Prof. Parchure

Dr. Parchure is the officiating director at the Gokhale Institute of Politics and Economics, where I work. He was also my guide during my PhD saga (there is no other word for it), and has forgotten more macroeconomics than I will ever learn.

Tomorrow, at some point of time, I and Dr. Parchure will be sitting down – at our respective homes, of course – for a chat about what India can do when it comes to macroeconomic policy after the worst of the corona virus lock-down is over.

First things first: health comes first, and that’s a non-negotiable. There’s no version of this story in which we can discuss trade-offs about “getting things back to normal” so that “the economy isn’t destroyed”.

As Russ Roberts puts it:

So we’ll be talking tomorrow about an as yet unspecified date in the future, where India might not be as mobile and social as she was before, but not as locked-down as she is right now. But when that day comes, what should macroeconomic policy look like?

Here are two articles that I will be basing this discussion on:

  1. Ira Dugal’s take on India’s monetary policy.
  2. Ananth Narayan’s take on India’s fiscal policy.

Please read both, and don’t worry if you don’t get some details. Just power through both write-ups regardless.

Here are some aspects that I will definitely be asking questions about tomorrow:

  • The advisability of giving a monetary and fiscal stimulus: everybody seems to be taking it as a given (myself included). But is there a case to be made for limiting it, if at all?
  • That out of the way, should both fiscal and monetary policy be wheeled out simultaneously? Either ways, why?
  • What are the major tools in the monetary policy toolbox? Which of them will give the most bang for the buck? Which should we be holding back for later, and why? What mistakes should we be guarding against?
  • Ditto for fiscal policy.
  • What would Keynes have advised? I have this book in mind when I ask this question.
  • What episodes, in 20th century macroeconomic history, have parallels we can learn from? If there are none, are current macroeconomic models good enough to handle such scenario? If not, how might they be updated?
  • If you, Dr. Parchure, were in charge of things – interpret that as you being given carte blanche to handle India’s economy, no questions asked – what would you do? What are the political realities that in reality will stop some of these solutions from being implemented?

I’ll be sharing this blog post with Dr. Parchure, but in the meantime, if you have any questions that I have missed, please let me know in the comments, or email me.

The conversation will be up on YouTube tomorrow at some point of time.

Stay home, stay safe!

Mental health amid these times

A student of mine from Gokhale Institute sent me this email (lightly edited for clarity):

Hello Sir,

I just watched your videos related to Coronavirus.

They are great and helpful, somehow they leave the viewer feeling a bit optimistic.

However, I’d also suggest you to (I’m not sure if it’s actually needed or it’s something which you haven’t talked about implicitly) talk about the psychological drainage that this situation is creating. This situation actually looks like a flickering bulb, a very scary prospect indeed.

Amidst all this, people are panicking some loudly like my mother and some internally like me. And, it looks like a weird situation.

I mean I presume that even if we control the virus just like China has flattened its curve, we can only rest if the last case is eliminated of the virus which is closer to an impossibility. Sorry for sounding pessimistic but that’s how my mind is working at the  moment.

I also am allowing myself to think that maybe the virus will spread everywhere and act like an elimination round. It sounds brutal but looks like a possibility and the prospect of that happening does make me sad. I think humans will have to naturally cope up with this phenomenon and artificial measures would only aim at minimizing misery but do we actually look like we stand a chance at minimizing this loss?

What’s your take on the mentally distorting effects of the virus? Because, it’s not even slow poison it looks like an apocalyptic situation right now. And, if you could give some sense of hope to people like me – viewers and readers of your works.

Regards
Ayushi Baloni
Gokhale Institute of Politics and Economics

It’s a question that other people will also have, I’m guessing, which is why the reply is here, rather than directly to Ayushi.

This is from Nature Asia:

A mental health institute at the Second Xiangya Hospital in Hunan, China followed a protocol for ensuring the quality of life of those in isolation. The steps were simple – daily digital communication with their closed ones, group counselling, catering to individual dietary needs, comfort and leisure, continuation of job-related activities and updates on the outbreak condition. Weekly supportive psychotherapy sessions and periodic hygienic measures were ensured for healthy living. These helped preserve the dignity of those in isolation and their compliance to restrictive protocols. In the absence of such care giving, we often see people defy isolation or abscond for the fear of getting ‘stranded’, which is a larger menace to public health.

Setting up a goal for yourself: creating a list of tasks which should be completed has been helpful for some folks, myself included. That, along with making sure that I call at least one friend on a daily basis, usually more.

But speaking of tasks, as my friend Girish says here, don’t beat yourself up if you can’t complete the task. Half the fun is in drawing up the list! Read the rest of the post as well: great advice in there.

Do not be overly self-critical or disappointed if you make a list of things you can achieve in lockdown and end up completing none. Making lists is a soothing exercise and our mind’s way of trying to make sense and seek order in the surrounding chaos. We are also in the initial phases of the isolation so the need to change our habits and tackle self-improvement lists will not kick in without enormous struggle and discipline. The longer our lives are affected by the virus, the better the chances we’ll actually get around to the simple full-body workout, the basic cooking hacks, cleaning up behind the fridge or heck, showering every day.

The WHO has a video up about this issue as well:

Some advice from the NYT:

When he feels anxiety seep in, Dr. Hanson, who creates guided meditations for the digital platform Simple Habit, said he takes a few slow, deep breaths and reminds himself of what is true in this exact moment. Then he takes stock, telling himself, “In this moment, your heart is beating. You’re breathing in this moment. No saber-tooth tiger is coming after you in this moment.”

“Our fear is about the future. It’s what we anticipate,” he said. “But if you stop and say, ‘I am healthy in this moment,’ it pulls you out of rumination and anxious, helpless preoccupation. Your brain will come to this moment of quiet realization. ‘Things are not great, but they’re basically OK. I am still surviving.’ It gives you more of a sense of agency.”

Calm is an app available on both Android and iOS, designed to help you meditate, and headspace is another. There are plenty more, of course – no reason for you to stick to just these two! Tara Brach has guided meditations that are free, if that helps. Feel free to add more sources in the comments below, of course. Help others!

Speaking of helping others, I cannot recommend this strongly enough. Become a mentor to somebody. Teach a kid the alphabet, teach somebody how to cook, teach somebody something that you are good at. Personally, I find this very helpful indeed.

Read this, from BrainPickings – and read as much as you can of BrainPickings!

Hope — and the wise, effective action that can spring from it — is the counterweight to the heavy sense of our own fragility. It is a continual negotiation between optimism and despair, a continual negation of cynicism and naïveté. We hope precisely because we are aware that terrible outcomes are always possible and often probable, but that the choices we make can impact the outcomes.

Who can you follow on Twitter?

My recommendations would be Dr. Bhooshan Shukla, and Dr. Soumitra Pathare. I’m sure there are others, please provide references in the comments, or email me. I’ll update this post.

India Today says switching off is important:

According to author and mental health advocate Shuchi Singh, it is important that one does not give in to the hysteria that may be created by constant updates about the disease.

“The panic around novel coronavirus is primarily because of the bombardment of news everywhere, you can’t escape it. You don’t need to stay in touch constantly, need to know what’s a good balance between staying connected and not. You should follow precautions in your own way,” she says.

And finally, The Guardian channels its inner Douglas Adams, and tells us not to panic:

Yes, this virus is obviously a massive challenge: medical, political and – perhaps most strikingly at present – social and economic. But it is worth remembering the world has never had better tools to fight it, and that if we are infected, we are unlikely to die from it.

Thanks for reading, and please keep your questions coming!

Ayushi, thank you for your question! 🙂

India’s National Disaster Management Planning

Sharing some links that I have been able to find online. If anybody has better resources, more up to date information, please let me know, I will update this page.

  1. NDMP, as of May 2016. Pages 96-97 especially relevant.
  2. The document about India that is available with the UNDP. Pages 49, 97 and 112. Almost certainly out of date, please help with the latest link if you have it.

 

Clear communication matters, and we need to know the details of the top down approach.

For those of you who wish to study this in greater detail, chapters 7,9 and 10 of this document might be worthy of a more in-depth read.

Econ101: Policy Responses to a Pandemic

If you haven’t played it already, go ahead and give this game a try: The Fed Chairman Game. I have a lot of fun playing this game in class, especially with students who have been taught monetary policy. It usually turns out to be the case that they haven’t understood it quite as well as they think the have! (To be clear, that’s the fault of our educational system, not the students.)

But the reason I started with that is because the game always throws up a scenario that mimics a crisis, and asks you what you would do if you were the Chair of the Fed.

In this case, policymakers the world over are now staring at a very real crisis, and they need to be asking themselves: what should we do?


 

There are two broad answers, of course: monetary policy, and fiscal policy.

The Federal Reserve has cut interest rates to zero, and while it has other tools to stimulate the economy, a crisis like this requires fiscal as well as monetary responses. The legislation passed thus far has been important, but another round of fiscal policy will be required immediately to fully address this crisis.

A robust fiscal response can provide income support to households, ensure broad and continuous access to safety net programs, provide incentives for employers to avoid layoffs, provide loans to small businesses, give liquidity cushions to households and firms, and otherwise stimulate the economy.

That’s a write-up from Brookings. The specifics follow in that article, but the article makes the point that more of the lifting will need to  be done by fiscal, rather than monetary policy. And that is true for a variety of reasons,  which the article does not get into, but long story short – fiscal, more than monetary.

But, ok, fiscal policy of what kind? Should we give money to firms or to workers? Here’s Paul Krugman with his take…

And here’s Alex Tabarrok with his response:

So what’s the correct answer? Well, as we’ve learnt before, and will learn again, macro is hard! In an ideal world, all of the above, but as is manifestly clear, we are not in an ideal world. If we must choose between giving money to firms or to people, to whom should we give it? My opinion? People first, businesses second. This is, of course, a US centric discussion, what’s up with India?


 

Here’s, to begin with, a round-up from around the world – you can search within it for India’s response thus far.

Calls are getting louder for governments to support people and businesses until the new coronavirus is contained. The only questions are how much money to shovel into the economy, how to go about doing it, and whether it will be enough.

Already, officials from Paris to Washington DC are pulling out the playbook used in Asia for slowing the spread of Covid-19: they’re restricting travel and cracking down on public gatherings. While those measures have the potential to reduce deaths and infections, they will also damage business prospects for many companies and cause a synchronized worldwide disruption.

Here’s the FT from two weeks ago about the impending slow down:

Venu Srinivasan, whose company TVS is one of India’s largest makers of motorcycles and scooters, said the business had lost about 10 per cent of production in February owing to a lack of Chinese-made parts for the vehicles’ fuel injection system. He added that TVS has now managed to find a new supplier.

But Mr Srinivasan said he was bracing for India’s recovery to take longer than anticipated. “One would have expected a V-shaped recovery, but instead you have an L shaped recovery,” he said. “It’s been the long haul.”

R Jagannathan in the LiveMint suggests this:

This is how it could be designed. Any unemployed urban youth in the 20-30 age group could be promised 100 days of employment and/or skilling options paid for by the government at a fixed daily rate of ₹300 (or thereabouts, depending on city). At an outlay of ₹30,000 per person annually, the unemployed can be put to work in municipal conservancy services, healthcare support, traffic management, and other duties, with the money also being made available for any skill-acquiring activity chosen by the beneficiary (driver training for Ola-Uber, logistics operations, etc). All companies could be given an opportunity to use the provisions of the Apprentices Act to take on more trainees, with the apprenticeship period subsidized to the limit of ₹30,000 per person in 2020-21. If the pilot works, it could be rolled out as a regular annual scheme for jobs and skills. Skilling works best in an actual jobs environment.

 

He also mentions making the GST simpler, which the Business Standard agrees with:

Certainly, the rationalisation of GST will also affect government revenues. However, a simpler and more transparent system would allow greater collection and reduce evasion. The government will receive a windfall this year from lower crude oil prices. The moment to move on the structural reform agenda is now. The GST Council has done well to address the inverted duty structure in mobile phones. Further rationalisation will give confidence to the market that the government is serious about reforms. It was promised that GST would remain a work in progress, and that the GST Council would act often to improve it. So far, however, the changes have been marginal and haphazard. A more structured and rational approach, which outlines a quick path to a single rate, would pay dividends for the economy in the longer run. It would also be an effective way to manage the immediate effects of a supply shock such as is being caused by the pandemic.

Also from the Business Standard, a report on the government now considering (not happened yet) relaxing bad loan classification rules for sectors hit by the corona virus. That’s pretty soon going to be every sector!


 

Assorted Links about the topic – there’s more to read than usual, please note.

Here is Tyler Cowen on mitigating the economic impacts from the coronavirus crisis.

Here’s Bill Dupor, via MR, about the topic:

First, incentivize behavior to align with recognized public health objectives during the outbreak.

Second, avoid concentrating the individual financial burden of the outbreak or the policy response to the outbreak.

Third, implement these fiscal policies as quickly as possible, subject to some efficiency considerations.

Again, via MR, New Zealand’s macro response.

Arnold Kling is running a series on the macro response to the crisis.

Claudia Sahm proposes direct payment to individuals:

This chapter proposes a direct payment to individuals that would
automatically be paid out early in a recession and then continue annually
when the recession is severe. Research shows that stimulus payments that
were broadly disbursed on an ad hoc (or discretionary) basis in the 2001 and
2008–9 recessions raised consumer spending and helped counteract weak
demand. Making the payments automatic by tying their disbursement to
recent changes in the unemployment rate would ensure that the stimulus
reaches the economy as quickly as possible. A rapid, vigorous response to
the next recession in the form of direct payments to individuals would help
limit employment losses and the economic damage from the recession.

Here are the concrete proposals, the entire paper is worth a read:

Automatic lump-sum stimulus payments would be made to individuals
when the three-month average national unemployment rate rises by
at least 0.50 percentage points relative to its low in the previous 12
months.
• The total amount of stimulus payments in the first year is set to
0.7 percent of GDP.
• After the first year, any second (or subsequent) year payments would
depend on the path of the unemployment rate.

 

Macroeconomics IS HARD!

Economics in the times of COVID-19, there is already a book. I learnt about it from Tim Taylor’s blogpost. I have not read the book, but will soon.

The NYT, two weeks ago, on the scale of the problem facing policymakers.

 

Information about the Coronavirus in India

What is the corona virus?

There isn’t one specific coronvirus.

Coronaviruses are a large family of viruses which may cause illness in animals or humans. In humans, several coronaviruses are known to cause respiratory infections ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS).

By the way, the’re called corona viruses because they look like coronas, or crowns.

Coronaviruses are named for their appearance: Under the microscope, the viruses look like they are covered with pointed structures that surround them like a corona, or crown.

The most recently discovered virus causes the disease COVID-19.

How does it spread?

People can catch COVID-19 from others who have the virus. The disease can spread from person to person through small droplets from the nose or mouth which are spread when a person with COVID-19 coughs or exhales. These droplets land on objects and surfaces around the person. Other people then catch COVID-19 by touching these objects or surfaces, then touching their eyes, nose or mouth. People can also catch COVID-19 if they breathe in droplets from a person with COVID-19 who coughs out or exhales droplets. This is why it is important to stay more than 1 meter (3 feet) away from a person who is sick.

WHO is assessing ongoing research on the ways COVID-19 is spread and will continue to share updated findings.

 


 

When and how did it reach India?

As best we can tell, 30th January, 2020. This chart below shows you the spread since then.

Data and visualization can be tricky, and later on in this post, keep an eye out for another visualization about the corona virus.

Where does one get official data from in India?

The Ministry of Health and Family Welfare (MoHFW) is the official source that you should begin with. This is their website, this is their Twitter ID. At the moment of writing, the website reports 110 confirmed cases in India.

How is testing being done in India?

On the MoHFW website, there is a link about when to get tested for the corona virus in India. Shown below is a screen grab of that link.

Two things stand out:

  1. The second bullet point uses the word “and“. Having the symptoms is not enough, you must necessarily have traveled to any of the countries listed above. Other than whatever has been said in the previous sentence, you qualify for testing if you are a contact of a laboratory confirmed positive case. Unfortunately, “contact” isn’t clearly defined, at least on this page.
  2. Testing will currently be done by government laboratories only.

Which immediately leads to the next question:

What is our capacity to test for the coronavirus?

India has activated 67 laboratories for conducting the first test, and 51 of those are equipped to conduct confirmatory tests, which is not even one lab per district. India has 732 districts.

At present, cases are being reported from 13 States and Union Territories. In a country with a population of 1.3 billion, till now, only 6,500 throat swab samples from 5,900 individuals have been sent to these labs; at least 107 have tested positive.

That is from the Hindu Business Line, in a report that came out yesterday.

This is the COVID-19 page on the ICMR website. These are the locations of the testing laboratories in India. These are the locations of the sample collection laboratories.

 


 

OK, but 110 cases, how bad can that be?

Exponentials are hard. Anybody who has taught math or statistics will tell you that. Look at the graph(s) below:

A golden rule that I always teach my students in statistics: first look at the axes! On the horizontal axes here, we have the lag in days behind Italy. But the vertical axis is the more important thing to look at, because it is not linear. We go from 1 to 10, from 10 to 100, and from a 100 to a 1000 (and so on). Each tick on the vertical axis is a 10x increase.

In English? Every country where the virus has spread has seen a 10x increase. If you ask a data scientist to take a look at these data points, and then ask the about the trajectory in India, there’s only one possible answer: we probably go from a 100 to a 1000, and from a 1000 to 10,000. I hope not, of course, and mitigation is possible – social distancing is key!

By the way, if you want to play around with the data, click here to go to the Github page.

OK, so the numbers will go up rapidly, maybe. But the fatality rates are low, right?

Two important things to note:

Two numbers that you need to keep in mind when you think about the corona virus. The R0 and the fatality rate. The R0 for the coronavirus seems to be about two, although of course that number can vary because of a lot of factors. But a baseline R0 of 2 seems to be a reasonable estimate.

In English? If you get it, you will on average spread it to two other people. That’s why the quarantine and the social distancing measures are so very important. It’s not just because you shouldn’t get it yourself – it is more because you shouldn’t be giving it to others.

Now, the answer to the question itself: are the fatality rates low?

The Case Fatality Rate (CFR) for COVID-19 is 3.48 percent.

But as an statistician, it is important to state that the correct answer is it depends!

Unfortunately, it is common to report the CFR as a single value. But the CFR is not a biological constant. The CFR is not a value which is tied to the given disease, but is instead reflective of the severity of the disease in a particular context, at a particular time, in a particular population.

The probability that someone dies from a disease is not only dependent on the disease itself, but also the social and individual response to it: the level and timing of treatment they receive, and the ability of the given individual to recover from it.

This means that the CFR can decrease or increase over time, and that it can vary by location and by the characteristics of the infected population (age, sex, pre-existing conditions).

The real problem is rapidly overwhelmed medical facilities

Read the entire thread, not just the tweet quoted above. The point of sharing that tweet is to help you realize that opportunity costs will come into play very, very quickly at medical centers in India. Whom do I treat – patients with the coronvirus or other patients? And soon enough, it’ll be whom do I treat, this coronavirus patient or that one?

Worst of all, there is no treatment per se, yet. There’s encouraging news on the front from all over the world, India included, but there’s time for a recognized cure to be acknowledged and made widely available. Best to proceed on the assumption that there won’t be one, and prepare accordingly. That’s just good strategy in times like these: budget for the worst case scenario.

OK, so what can we do?

Follow government instructions! We’re all in this together, so whatever your local/state/national government is telling you ought to be followed, no questions asked.

Social distancing is key, and that’s fancy English for avoiding going out. Stay at home as much as possible over the coming days, and cooperate with local authorities. Classes, colleges, schools, clubs, restaurants, malls, gyms – anything in the nature of a public gathering ought to be avoided as much as possible.

Panic is not going to solve anything, but precautions will go a long way towards helping.

Stay home, stay safe!

Where can I learn more?

Here’s a list of resources:

Myth-busters from the WHO.

WHO’s advice for the public.

The Situation Update Report from the WHO (I have posted the latest update at the time of writing, but keep checking for more up to date ones as the days go by)

The WHO dashboard.

Read the Wikipedia article on the Epidemic Diseases Act.

A useful article about the how to think about exponentials.

A request: please email me at ashish at econforeverybody dot com with any resources that you think may prove useful. I’ll do my best to share the more useful ones with everybody.


 

Coming up tomorrow: technology in the times of COVID-19.

 

 

 

 

Afghanistan Today

After Poland and Germany, let’s pick an Asian country to understand better for the month of March. And given the recent deal that has been signed, about which more below, let’s begin with Afghanistan.

As always, begin with the basics. The gift that is Wikipedia, on Afghanistan:

“Afghanistan is a unitary presidential Islamic republic. The country has high levels of terrorism, poverty, child malnutrition, and corruption. It is a member of the United Nations, the Organisation of Islamic Cooperation, the Group of 77, the Economic Cooperation Organization, and the Non-Aligned Movement. Afghanistan’s economy is the world’s 96th largest, with a gross domestic product (GDP) of $72.9 billion by purchasing power parity; the country fares much worse in terms of per-capita GDP (PPP), ranking 169th out of 186 countries as of 2018.”

And from the same article…

The country has three rail links: one, a 75-kilometer (47 mi) line from Mazar-i-Sharif to the Uzbekistan border; a 10-kilometer (6.2 mi) long line from Toraghundi to the Turkmenistan border (where it continues as part of Turkmen Railways); and a short link from Aqina across the Turkmen border to Kerki, which is planned to be extended further across Afghanistan. These lines are used for freight only and there is no passenger service.

Now, as opposed to how I structured the essays on Poland and Germany, I intent to begin with the now and work my way backwards. This is primarily because of what Afghanistan is in the news for:

The joint declaration is a symbolic commitment to the Afghanistan government that the US is not abandoning it. The Taliban have got what they wanted: troops withdrawal, removal of sanctions, release of prisoners. This has also strengthened Pakistan, Taliban’s benefactor, and the Pakistan Army and the ISI’s influence appears to be on the rise. It has made it unambiguous that it wants an Islamic regime.

The Afghan government has been completely sidelined during the talks between the US and Taliban. The future for the people of Afghanistan is uncertain, and will depend on how Taliban honours its commitments and whether it goes back to the mediaeval practices of its 1996-2001 regime.

Doesn’t bode well for India, obviously, but doesn’t bode well for the United States of America either, says Pranay Kotasthane.

And the New York Times says a complete withdrawal of troops, even over the period currently specified, may not be a great idea. Ongoing support is, according to that newspaper, necessary:

More important than troops, potentially, is the willingness of the international community to continue to finance the Afghan government after a peace deal.

“The real key to whether Afghanistan avoids falling into an even longer civil war is the degree to which the United States and NATO are willing to fund and train the Afghan security forces over the long term,” Mr. Stavridis said. “When Vietnam collapsed and the helicopters were lifting off the roof of the U.S. Embassy, it was the result of funding being stopped.”

But it’s not just military funding! Afghanistan needs a lot of the world’s support in the years to come. Water, for example, will be a contentious issue in the years to come, and that’s putting it mildly.

Afghanistan doesn’t face a water shortage – it’s unable to get water to where it’s needed. The nation loses about two thirds of its water to Iran, Pakistan, Turkmenistan, and other neighbors because doesn’t harness its rivers. The government estimates that more than $2 billion is needed to rehabilitate the country’s most important irrigation systems.

And water, of course, is just one of many issues. Health, education, reforming agriculture, roads – it’s an endless list, and it will need all kinds of ongoing and sustained help.

So, amid all of this, what should India be doing?

Meanwhile, India’s interests in Afghanistan haven’t changed. India hopes to build up Afghanistan’s state capacity so that Pakistan’s desires of extending control can be thwarted. Given this core interest in a changed political situation, what’s needed in the long-term in the security domain is to build the strength of the Afghan National Defense and Security Forces (ANDSF). Without a strong ANDSF — which comprises the army, police, air force, and special security forces — peace and stability in Afghanistan will remain elusive. India’s aim should be to help the Islamic Republic of Afghanistan and ANDSF claim monopoly over the legitimate use of physical force.

But, the article presciently warns us of the same what/how problem we first encountered in studying the Indian budget:

In short, the budget might itself not be the biggest issue. The US has pumped nearly $3.6bn on average every year for the last 19 years solely on reconstruction of the ANDSF, a support that is likely to continue even if the US withdraws its soldiers. The bigger problems are insufficient processes to plan and execute budgets resulting in unused funds and lack of infrastructure leading to pay shortfalls.

Now, to unpack all of this, we need to study the following: the Soviet invasion and its aftermath, American involvement in the region, the rise of the Taliban, leading up to Operation Enduring Freedom, 2002. That’s next Wednesday!

On The State of Higher Education in India (#1 of n)

Quite unexpectedly, I have ended up writing what will be an ongoing series about discovering more about the Indian Constitution. It began because I wanted to answer for myself questions about how the Indian Constitution came to be, and reading more about it has become a rather engaging rabbit hole.

Increasingly, it looks as if Mondays (which is when I write about India here) will now alternate between essays on the Indian Constitution and the topic of today’s essay: the state of (higher) education in India.

The series about the Constitution is serendipity; the series about education is an overwhelming passion.

I’ve been teaching at post-graduate institutions for the past decade now, and higher education in India is problematic on many, many counts. I’ll get into all of them in painstaking detail in the weeks to come, today is just about five articles you might want to read to give yourself an overview of where we are.

In the last 30 years, higher education in India has witnessed rapid and impressive growth. The increase in the number of institutions is, however, disproportionate to the quality of education that is being dispersed.

That is from the “Challenges” section of the Wikipedia article on higher education in India. The section highlights financing, enrollment, accreditation and politics as major challenges. To which I will add (and elaborate upon in the weeks to come) signaling, pedagogy, evaluation, overemphasis on classroom teaching, the return on investment – (time and money both), relevance, linkages to the real world, out-of-date syllabi, and finally under-emphasis on critical thinking and writing.

“Educational attainment in present-day India is also not directly correlated to employment prospects—a fact that raises doubts about the quality and relevance of Indian education. Although estimates vary, there is little doubt that unemployment is high among university graduates—Indian authorities noted in 2017 that 60 percent of engineering graduates remain unemployed, while a 2013 study of 60,000 university graduates in different disciplines found that 47 percent of them were unemployable in any skilled occupation. India’s overall youth unemployment rate, meanwhile, has remained stuck above 10 percent for the past decade.”

That is from an excellent summary of higher education in India. It is a very, very long read, but I have not been able to find a better in-one-place summary of education in India.

A series of charts detailing some statistics about higher education in India, by the Hindu. For reasons I’ll get into in the weeks to come, the statistics are somewhat misleading.

Overall, it seems from this survey, which shows impressive strides on enrollment, college density and pupil-teacher ratio, that we have finally managed to fix the supply problem. Now, we need to focus on the quality.

Swarajyamag reports on the All India Survey on Higher Education (AISHE) in India, 2016-17. As the report mentions, we have come a long way in terms of fixing the supply problem in higher education – we now need to focus on the much more important (and alas, much more difficult) problem of quality.

“Strange as it might look, the quality of statistics available for our higher education institutes has been much poorer than our statistics on school education. Sensing this gap, the central government instituted AISHE in 2011-12. We now have official (self-reported and unverified) statistics on the number and nature of higher education institutions, student enrolment, and pass-out figures along with the numbers for teaching and non-teaching staff. Sadly, this official survey does not tell us much about the quality of teaching, learning or research. There is no equivalent of Pratham’s ASER survey or the NCERT’s All India School Education Survey.”

That is from The Print ,and it takes a rather dimmer view than does Swarajyamag. With reference to the last two links especially, read both of them without bias for or against, beware of mood affiliation!

Education needs to become much, much, much more relevant than it currently is in India, and half of the Mondays to come in 2020 will be about teaching myself more about this topic. I can’t wait!

What do Income Tax Returns, Demonetization, and Fast Tag have in common?

It may help to read last Thursday’s post before you start reading this one.

Why are there such long lines at all the toll plazas across India at the moment? You may give  a lot of answers, and if you have recently passed through a toll plaza yourself, your answer may well be unprintable.

Here’s mine though: you are, currently, assumed guilty until proven innocent.

All cars must wait in line, pay cash/have the RFID tag scanned, and for each car, once the payment is done, the barrier is raised, and you may pass through. The barrier stays put until the verification is done: that’s another way of saying guilty until proven innocent.

But the cool thing, to me, about implementing Fast Tag, is that once a certain percentage of vehicles in India is equipped with Fast Tags, the barriers can stay up. We will transition to a regime in which all vehicles are assumed to be innocent.

Now, as we learnt the previous week, with a large sample, there will  be problems. In the new systems, in which vehicles just pass through because we assume all of them have Fast Tag implemented, there will be exceptions. There will be vehicles that don’t, in fact, have Fast Tag implemented, and so they may end up not paying the toll.

But the vast majority will have Fast Tag, and don’t have to pay with money and waiting time. The government will miss out on catching a few bad apples, but a lot of Indians will save a lot of time. On balance, everybody wins.

And of course, given technology, it should be possible to have notifications sent to those vehicles that pass through without paying. Yes, I know it seems a long way off right now, but the point is that as a statistician, we move to a world where we assume all vehicles are innocent until proven guilty, rather than the other way around.

Fast Tag implementation, when fully functional, will get the null hypothesis right.

And pre-filled income tax returns, sent to us by the government, with minimum of audits and notices, is exactly the same story. The government assumes innocence until proven otherwise, leading to a system in which every tax-paying Indian is assumed to be an honest tax-payer until proven otherwise. We already have a system that is closer to this ideal than was the case earlier, and hopefully, it will become better still with time.

And now that we’re on a roll, that’s the problem with demonetization, if you were to ask a statistician! All notes were presumed guilty, until proven innocent.

Here’s the point: if you are a student of statistics, struggling with the formation of the null, and wondering what the point is anyways*, the example from last Thursday and the three noted above should help make the topic more relatable.

And to the extent that it does, statistics becomes more relatable, more understandable and – dare I say it – fun!

 

*Trust me, we’ve all been there