The low-hanging fruit across the border

Immigration

May 11th 2011, 13:57 by R.A. | WASHINGTON

TYLER COWEN has everyone talking about the exhaustion of much of the rich world's easy sources of rapid growth—its low-hanging fruit. Yesterday, President Obama visited America's border with Mexico to remind us all that there are plenty of growth opportunities out there waiting to be plucked. The president is, at long last, renewing his call for immigration reform, including creation of a path to citizenship for the country's undocumented immigrants. It would be nice if he would pair that with a strong call to allow in more foreign workers. Unfortunately, that's a difficult case to make to the American people in the best of times, and these are not the best of economic times.

But the case is strong on the merits. Allegations that immigrants are a drain on the Treasury or contribute to increased crime or drag down wages are either wrong or significantly overstated. At a time when America is concerned about excess housing supply and anxious to boost its innovative capacity it is madness that so many willing immigrants, including high-skilled workers, including those educated in America, find it difficult to impossible to gain permission to work in the country on a stable, long-term basis. And if one takes into account the enormous welfare gains to the immigrants themselves (and, immigrants being people, one should) it becomes clear that there are huge potential utility gains to letting more willing workers enter rich economies.

And economics side, we should support free immigration to the greatest extent possible based on liberal principles alone. People should be free to move and choose their own destiny. Governments shouldn't interfere with the right to immigrate any more than is necessary and certainly not to satisfy the nativist demands of unhappy citizens.

Those demands are understandable if repugnant. The lump of labour fallacy is seductive, and in times of economic hardship it becomes very difficult to convince people that more competition for scarce jobs will make their lives better. Here again it is clear that weak labour markets are the enemy of liberalism, and those concerned for the future of free markets should do what they can to alleviate that weakness.

But immigrants are people and they deserve a chance to move to maximise the return to their skills. When an immigrant moves to a rich country, that increases his or her welfare and boosts the productive potential of that country, which is good for everyone. Historically, relatively open immigration rules have been both a sign of and a source of national strength. If America can return to a more open past, the prospects for its economy will be considerably enhanced.

Source: The Economist.

India vs China

MORGAN STANLEY thinks it could happen in 2013; the World Bank thinks it might happen next year. Many pundits have speculated about when India’s growth might outpace China’s. But the IMF’s World Economic Outlook says it’s already happened—without fuss, fanfare or felicitation. China grew by 10.3% last year; India by 10.4%. How can that be?

There are two idiosyncrasies in the way India typically reports its GDP figures. It calculates growth for the fiscal year, not the calendar year. More important, it reports its GDP “at factor cost”. That means it adds up all the income earned (by labour, capital and other “factors of production”) in the course of producing the country’s goods and services. By that measure, its GDP grew by 8.6% in 2010.

But other countries, including China, normally report their GDP “by expenditure”, adding up all the spending on domestically produced stuff. In principle, expenditure should equate to income. But taxes and subsidies get in the way.

Related topics

• China
• Asia
• India
• Business
• Chinese economy

A sales tax adds to the amount you have to spend on a good, boosting measures of GDP by expenditure. A subsidy has the opposite effect. In India net indirect taxes seem to have risen from 7.5% of output in 2009 to 9.2% in 2010. That was enough to lift India’s growth by expenditure to 10.36% in 2010, fully 0.06 percentage points faster than China’s.

Some bloggers have suggested the 10.4% figure is an artefact of inflation or exchange rates. Not so. GDP was measured in rupees, not dollars, at the prices prevailing in the 2004-05 fiscal year. Nor is the figure an IMF concoction. It drew its data from India’s Central Statistics Office (CSO), which estimates GDP using both methods. The country’s statisticians prefer GDP by factor cost because it is less prone to revision. The CSO still finds it easier to track production in farms, factories and offices than to track consumer spending or investment.

As India struggles to count its GDP the way most other countries do, China has begun to report its growth rate the way America does (comparing one quarter’s GDP with the previous quarter, rather than the same quarter of the previous year). So China grew by 9.7% in the year to the first quarter under its old method of reporting, but by just 2.1%, or 8.7% at an annualised rate, under the new methodology. That is the kind of pace India might well match or surpass, however you measure it.

Source: The Economist

Link to the article:http://www.economist.com/node/18586836

My Four Years in Stock Market

Oho. It has been hilarious, thrilling, enriching and shivering experience to be on bourses.

Today I realized that I am doing trading in shares since last 4 years. I started it in March 2007 by buying shares of the organization (Maruti Udyog Ltd.) with which I was working then and that was the beginning of exciting journey.

Most "Intelligent Investor" ever says "There is no wrong or right time to enter stock market, you can enter any time and start". These are the words of Warren Buffet. I agree with him in fact I feel that whenever you enter the market thats the best time to do so.

So, I entered in March 2007 and after four years I can say that my timing was perfect. I was lucky to see the peaks in January 2008 (SENSEX above 21000) and again lucky to see crash and bottoms of March 2009 (SENSEX below 9000). I feel that failure teaches you more than success and in a way I was fortunate to be a part of one of the worst recession in the history of mankind (other than great depression of 1930s and oil crisis of 1970s). I saw people buying at 21000, selling at 10000 and then again buying at 18000: A financial Suicide.

It is difficult to tell you how much my earnings were during those four years, because that was not my goal of entering the market. For all those four years I focussed on learnings only. All I can say is that I earned a decent return on my investments but I learned a lot. Here I would like to share few of my learnings.

1. Patience is the Key: You should have patience in the market. Set long term goals on all your investments and then keep yourself calm. Don't care about temporary things.

2. Be disciplined: You should always stick to your targets on your investments. If you want 20% return on one share and it reached there in 2 days, sell it. Dont be greedy.

3. Book losses: Never hesitate in booking losses. If your stock is not performing since last few years, sell it and buy the performer.

4. Dont be sentimental: Never feel sentimental for any particular stock because it gave you return in past. Stock market depends on future growth prospects, past is gone. I will buy Infosys because I like Narayan Murthy, is no reason to buy.

5. Be diversified: Its very obvious thing that all "Gurus" preach.

6. Dont trust every information and call: Dont buy anything just by looking on newspapers or websites, everybody reads this so its not valuable information. Create your own analysis.

7. Make a friend who invests: I have a very close friend, we discuss all this and we learn a lot this way.

8. Just read above 7 points carefully but create your own rules.

At last I would like to quote few more lines of Buffet- "I bought my first stock at the age of 13 years and I feel I was too late".

These lines still strike me becase I bought my first stock at the age of 24 and I too feel I was late.

Have you bought your first ??

Its getting late.

Corruption & Currency

(Written and compiled by Prem Ranjan Singh, MNNIT Allahabad)

Recently due to growing concern about black money and strong public opinion, some experts have advised the govt to withdraw all bigger denomination currency (say Rs 500, Rs 1000 etc) and replace it with lower denomination currency (say Rs 100).

And it was also proposed that people can be allowed to exchange such notes for a maximum amount of Rs 10,000 per individual. According to experts, this will help in solving the problem of corruption, as it will be difficult to hide smaller notes in big quantity. And also those who are holding lakhs and crores of these currencies, will be at the loosing end as their money will become redundant. (Since they will be able to convert only Rs 10,000) .

Incidentally, One of the religious guru Baba Ramdev was also demanding for such measures for a long time, and had even advised PM and President on this matter..

I have tried to put counter argument against the above view below...........

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Demonetization

Demonetization is desirable but very inconvenient exercise for many practical reasons.

1. It will give sudden shock to the economy because as per estimates, black money circulation is in our beloved country is around 40% of GDP. ( Means 40 % of $ 1.5 trillion)

1. Just think, what will happen when you would visit the ATM to withdraw money.( Count the notes of say Rs 50 for Rs 5000 withdrawal ;) )

2. Think about the size of your wallet especially when you live in costly cities like Mumbai/Pune/Blore and Delhi.

3. Poor and middle class people will be affected a lot due to inconvenience and lack of information. And also our population size is satirically very small.

4. Many people will take advantage of the situation by bribing others (say poor) for conversion of money. Money will simply be distributed among poor for conversion and then it will be regained after the conversion. And since we have large no of population living in poverty, it will be difficult to monitor such frauds, which will be very obvious and at a very large scale. This fraud will happen in a very organized manner through fraudulent NGOs.

you can't ask people that where the hell did you get (say rs 10,000) this money from..

We Indians are known for Jugad.....

In my view,it's better to look for better future rather than digging too much into the past.

Although it is an emotional issue, but I feel amnesty is a better and practical way of dealing with the past. Charge some taxes on these money and make them legal. And also make strong provisions for stringent punishment for future tax frauds.

2nd option is.. Government can stop printing higher denomination currency but they should not stop circulation of old stock. By this way, in the long run, we might be able to mitigate the impact....

Stopping it outright is an emotional rhetoric.