politics – Page 9 – Pertinent Observations

Why The Congress Party is Pro Big Government

Back in 2009, just before the general elections, I had advised people to vote for the NDA. My argument there was that irrespective of the relative merits and demerits of the parties leading the two coalitions, the BJP was a more likely candidate to lead a reformist government for it was not the incumbent. Incumbent governments tend to get cozy with unelected people who are in power (for example, leaders of PSUs, unions, civil servants, etc.) because of which they are loathe to take up policies that cut the power of such people. In other words, they are loathe to take up reformist steps that decrease the size of government.

The same argument can be extended to argue why the Congress is inherently a pro-government party. The fact of the matter is that it is the party that has been in power at the Union government for most of our history. This means that a large part of the unelected government organization has its loyalties with the party. Consequently, the party too sees itself as being loyal to this cadre, and will not pursue policies that cut down their power.

This explains why the Congress-led UPA1 government decided to reverse the earlier NDA government’s decision to repeal the Essential Commodities Act. It explains why the Congress-led UPA1 government did not pursue the reforms in the APMC act that had been set in motion by the earlier NDA government. This also explains why the Congress-led UPA2 government is trying to push through the Food Security Bill, which seeks to increase the role of the government in the agricultural supply chain.

The reforms that the UPA governments have been trying to pursue are those that do not significantly impact its unelected-government-organization constituency. Foreign investment in retail, for example, will only affect the retail industry, and the government doesn’t have much skin in the game there. The Indo-US Civil Nuclear Agreement again doesn’t trample on government feet. Conversely, nuclear energy is a field where a compelling argument can be made in favour of a government monopoly, so that agreement will only increase government participation in the energy sector (note that I’m not against the deal. I’m only trying to explain why it is acceptable reform for the Congress). The MGNREGA again brings in several thousand more people into the government folds. The only exception in the list of UPA-led reforms that might challenge big government is the Right to Information, but that act was passed in the infancy of the UPA1 government when it was much more beholden to the National Advisory Council (NAC) than it is today.

So what explains 1991? Two things. Firstly, it was a whole bunch of low hanging fruit. Though government was reduced, the resulting incremental growth increased the size of the pie so much that the proportion of the enhanced pie that the unelected-government-organization had access to was enhanced. So from a rational tradeoff perspective, it was the right thing to do. Secondly, and more importantly, the reforms were inevitable. The Indian economy was in such bad shape that there was no way out but to do those reforms. So holding up 1991 as proof of the Congress Party’s reformist credentials is wrong.

But what is the guarantee that a non-Congress government will pursue reforms that could reduce the size of the government? They fully recognize the fact that large parts of the unelected-government-organization cadre are beholden to the Congress party, and they will want to cut this constituency down to size. Hence, they will work towards reforms that will reduce the size of government. Yes, there is no guarantee that they will not open up other fronts that will increase the government’s footprint, but they are unlikely to do worse than a government involving the Congress.

Time for bragging

So the Karnataka polls are done and dusted. The Congress will form the next government here and hopefully they won’t mess up. This post, however, is not about that. This is to stake claim on some personal bragging rights.

1. Back in March, after the results of the Urban Local Body polls came out, I had predicted a victory for the Congress in the assembly elections.

2. Then, a couple of weeks back, I used the logic that people like to vote for the winner, and this winner-chasing will result in a self-fulfilling prophecy that will lead to a comfortable Congress victory.

These two predictions were on the “Resident Quant” blog that I run for the Takshashila Institution. It was a classic prediction strategy – put out your predictions in a slightly obscure place, so that you can quickly bury it in case it doesn’t turn out to be right, but showcase it in case you are indeed correct! After that, however, things went slightly wrong (or right?). Looking at my election coverage Mint asked me to start writing for them.

As it happened I didn’t venture to make further predictions till the elections, apart from building a DIY model where people could input swings in favour of or against parties, and get a seat projection. Watching the exit polls on Sunday, however, compelled me to plug in the exit poll numbers into my DIY model, and come up with my own prediction. I quickly wrote up a short piece.

3. As it happened, Mint decided to publish my predictions on its front page, and now I had nowhere to hide. I had taken a more extreme position compared to most other pollsters. While they had taken care to include some numbers that didn’t mean an absolute majority in the range the predicted for the Congress (so as to shield themselves in that eventuality), I found my model compelling enough to predict an outright victory for the Congress. “A comfortable majority of at least 125 seats”, I wrote.

I had a fairly stressful day today, as the counting took place. Initial times were good, as the early leads went according to my predictions. Even when the BJP had more leads than the Congress, I knew those were in seats that I had anyway tipped them to win, so I felt smug. Things started going bad, however, when the wins of the independents started coming out. The model I had used was unable to take care of them, so I had completely left them out of my analysis. And now I was staring at the possibility that the Congress may not even hit the magic figure of 113 (for an absolute majority), let alone reach my prediction of 125. I prepared myself to eat the humble pie.

Things started turning then, however. It turned out that counting had begun late in the hyderabad karnataka seats – a region that the Congress virtually swept. As I left my seat to get myself some lunch, the Congress number tipped past 113. And soon it was at 119. And then five minutes again back at 113. And so it continued to see-saw for a while, as I sat at the edge of my office chair which I had transplanted to in front of my television.

And then it ticked up again, and stayed at 119 for a while. And soon it was ticking past 120. All results have now been declared, with the Congress clocking up 121 seats. It falls short of the majority I had predicted, but it is a comfortable majority nevertheless. I know I got the BJP number horribly wrong, but so did most other pollsters, for nobody expected them to get only 20% of the popular vote. I also admit to have missed the surge in Independents and “Others”.

Nevertheless, I think I’ve consistently got the results of the elections broadly right, and so I can stake claim to some bragging rights. Do you think I’m being unreasonable?

Political Parties in Karnataka

General consensus among pundits is that the Janata Dal (Secular) (JDS) is going to struggle to cross 50 seats in the forthcoming assembly elections. The general discourse is that they lack a presence outside of the Old Mysore region. However, you might remember that not so long ago, in 1994, the Janata Dal (which broke up in 1999, one of whose offshoots was the JDS) had an absolutely majority in the state assembly. So I thought it might be interesting to see where the JD was strong in 1994.

I decided to go back another decade, to the 1983 elections, and for all elections from 1983 to 2004 I’ve mapped out how each of the 3 principal parties in Karnataka performed. I’ve grouped all the Janata Parivar parties (Janata Party, Janata Dal, and their offshoots) and coloured them green. The Congress has been coloured blue while the BJP is saffron. Seats won by independents/others have been coloured in black.

Notice:

1. Before the Janata Dal split in 1999, the JD had a significant presence even in Bombay Karnataka, where it is now supposed to have absolutely no presence.
2. The growth of the BJP has been outward from the Mangalore-Udupi area. One needs to remember that the Dakshina Kannada and Udupi districts are extremely diverse in terms of religion, so perhaps the Hindutva card works better there than elsewhere? Also, the coastal districts are where the RSS first set up its roots in Karnataka.
3. In 1999 and 2004, the BJP actually won some seats in the old Mysore region outside of Bangalore. In 2008, though, the BJP was decimated in this region. It is unlikely it will regain some base in this area in the coming election
4. The Congress won a whopping 178 seats in 1989. And what happened? Intense jockeying for the post of CM. Three CMs over the course of five years (Veerendra Patil, S Bangarappa and Veerappa Moily) followed by a humiliating loss in 1994 when the Congress came third!
5. The JD split in 1999 hit it badly. In most constituencies both the JD (U) and the JD(S) contested. That probably played into the hands of the Congress which won a simple majority. By 2004, the JD (U) was virtually non-existent in Karnataka, and the JD (S) managed to consolidate all the Janata votes and did well.
6. Even in 2004, you might notice that the BJP was virtually confined to the western half of Karnataka. In 2008, thanks to the efforts of the Reddy brothers, in addition to Western Karnataka they swept the regions in and around Bellary, which pushed them past the target. With the Reddys in jail and their right-hand-man B Sriramulu having formed his own party, the BJP won’t come close to a majority this time.

Unfortunately I haven’t been able to get my hands on the shapefiles of the delimited constituencies (2008 and later), so I’m unable to include the 2008 results in this chart. If any of you can supply me the shapefiles, or at least the constituency map of the new assembly constituencies, I’d be most grateful.

KJP split is going to hurt the BJP hard

Most of you might remember that in 2008 the BJP didn’t actually get an absolute majority in the assembly, and had to rely on independents to form the government. This led to the now infamous Operation Lotus where the BJP got opposition MLAs to resign their seats and contest again on a BJP ticket. Successive rebellions kept the government on tenterhooks, and some say it is indeed fortuitous that it lasted its full term, but it must not be forgotten that the BJP’s “victory” was an extremely narrow one to begin with.

While the BJP ended up as the single largest party with 110 seats (with the Congress second with 79), the Congress actually had a larger share of the popular vote compared to the BJP (34% versus 33% respectively). However, it can be said that the BJP “picked its battles” concentrating on its strongholds in North Karnataka, Bangalore and the coastal areas, and thus managed to surge ahead of the Congress in terms of seats.

However, analysis shows that even this surge in terms of seats was rather shaky. It was a result of coming together of a number of forces – a united BJP under Yeddyurappa’s leadership, the support of the Lingayat Mutts and Reddy brothers, and good candidate selection. Today, we will analyze how the 2008 Elections would have gone if Yeddyurappa’s KJP and B Sriramulu’s BSR congress had split from the BJP ahead of those elections.

The KJP and BSR Congress played key roles in the recent urban local body elections. Based on the local body elections, we project in each parliamentary constituency how much of what might have been the undivided BJP’s votes have gone to these breakaways. We assume that all the vote that the KJP or BSR congress got came from what the united BJP would have otherwise got. Next, we look at the 2008 Assembly election numbers and for each constituency, allocate the BJP’s votes among the BJP, KJP and BSR Congress proportional to their performance in the urban local body elections in that area.

The results, given below are rather surprising. While the KJP itself would have won not more than a handful of seats and the BSR Congress would have won nothing, our analysis shows that the BJP’s seats would have almost come down by half, with the Congress getting the lion’s share of what the BJP lost!

Red bars show actual performance in 2008. Blue bars show what the seat distribution might have been had the BJP been without the KJP and BSR Congress

It would be interesting to see where the BJP lost the seats. The following graph shows, by Parliamentary constituency the number of Assembly constituencies that the BJP lost thanks to the parting with the KJP and BSR Congress.

This graph shows the number of seats the BJP would have lost in each parliamentary constituency had it been separate from the KJP in 2008

So what are the implications? The big insight is that it is indeed bad tidings for the BJP. Even if the party were to have the same public sympathy that it did in 2008 (highly unlikely, given its government’s performance), it is going to struggle to get anywhere close to a majority. Currently the Congress is in as much of a mess as it was in in 2008, with rampant infighting and a battle between Parameshwar and Siddaramaiah for control of ticket distribution. Our analysis shows that even if the Congress does as well as it did in 2008 (remember that our ULB-based analysis showed it would do better), it stands to gain an absolute majority. There is no surprise why there is so much clamour for tickets within the Congress.

Foreign Policy Should Be National

So we might have this weird situation in the forthcoming IPL where Sri Lankan players are not allowed to play in Chennai. While the merits of whether India should continue to have diplomatic relations with Sri Lanka in view of the alleged genocide is debatable (I personally think we should continue to have these relations), I think the “solution” of giving visa to Sri Lankan players and then not allowing them to play in a particular city shows India in bad light.

Regional leaders are entitled to, and should, have their opinions when it comes to foreign policy. However, these opinions should be discussed in Parliament or Cabinet or some similar forum, and as far as the outside world is concerned, India should have a single foreign policy. It might be in the Tamil Nadu politicians’ own political interests to take a hard stand on this Sri Lanka issue, but it is the job of the Union Government (and the Prime Minister) to hear these voices, debate them and make a decision which the regional leaders are bound to obey.

It is well known that Tamil Nadu politicians don’t want the Sri Lankans to participate in the IPL, and this might be a corollary of their stand that the Indian government should not engage with the current political establishment in Sri Lanka. Taking that into consideration, the Union Government should do one of two things – accept the stand of the TN politicians and deny work permits to the Sri Lankan cricketers, or allow the Sri Lankans to participate in the entire tournament, including in Chennai.

It is important that India presents a coherent face when it comes to foreign policy. We have already seen one international deal (on the Farakka barrage, with Bangladesh) being scuttled at the last minute because of last-minute reservations expressed by regional politicians. If we present a divided stance on this IPL issue, it could send out a signal that Indian foreign policy is hostage to regional leaders, and that it is difficult to do business with India (since that entails doing deals with regional leaders also).

At a time when doing business with other countries is paramount (given our energy security concerns) , it is important that we send a signal that we are easy to do business with. And for that, we need to signal that we have one foreign policy.

Tailpiece: I wonder whether under their current stance the TN politicians will allow Muthiah Muralitharan, a Tamil Sri Lankan who is married to a Madrasi, to play in Chennai.

Marriage

“I love you”, I told her over three years back.

“If you love me so much give me half your assets”, she replied, probably in jest.

“I’ll give you but in exchange for half your assets”.

“You know I’ve just started working so I don’t have too many assets. So I’ll happily exchange half my assets for half yours”.

A few months later we got married. And yes, this is a true and serious story. While it might be devoid of all the romance that one associates with love and marriage, it illustrates what marriage is all about – it is a commercial contract where you pledge to share half your assets to the counterparty, and bequeath all your assets to him/her in case of your “unfortunate demise”.

One of the major points in the BJP’s manifesto over the years has been for a Uniform Civil Code. Currently, in India, people belonging to each religion have their own “civil codes” which governs their personal lives. According to the current Indian laws, a Christian girl has to wait until she is 21 years old to get married, while a Muslim girl can get married at 16. A Hindu man can have a maximum of one legally wedded wife, while a Muslim man can have four.

Now you can see why the BJP’s clamour for a Uniform Civil Code appears controversial – Muslims believe that this move will deprive them of the additional three wives that they are currently entitled to. However, I argue that by stripping marriage off all the emotional context and just sticking to its core commercial values, we can have a Uniform Civil Code without any controversy.

The basic argument is this: the Government of India (or any other government) has no business telling people who they should live with, sleep with or have children with. As long as two adults consent to stay together or share a bed , there should be no legal hassles to them doing so. If three adults consent to live with each other and agree on a conjugal arrangement, the government should have no problem with that either. So why do we need a civil code at all?

The only interest a Government has in the institution of marriage is in terms of property rights. Because of the basic principle that a person’s “next of kin” inherits its property, the government needs to know who a person’s next of kin is. For that purpose, you need a legal document – a purpose that is today served by a marriage certificate. Beyond this realm of property rights and inheritance, a secular government has no right to dictate who I’m sleeping with – as long as it’s consensual.

So I propose the following segment of the Uniform Civil Code: “any adult, at a particular point of time, can have exactly one legally wedded spouse” (notice that the gender neutral wording takes care of LGBTs also). Notice also that this code only talks about legally wedded spouses. What it doesn’t mention, or care to mention, that one can have as many “illegal” spouses as they want. With the caveat that because these people are not legally wedded to you they don’t have a claim on your property.

Currently there is too much drama in the courts about the “basic structure of the Indian family” and “family values” and more often than not they are being used to pass rather illiberal judgments. The multiple civil code structure that we have, which is based on a supposedly divine and romantic institution of marriage, is doing more harm than good to the citizens. Once the state (and all its arms) realizes that marriage is at the core a commercial contract a lot of social wrongs can be easily set right.

I didn’t need to marry the person who is now my wife only if I wanted to move in with her. As two consenting adults, no one could have prevented us. It was, however, a measure of mutual trust and love, that we decided that we should share assets also. And hence decided to get married (our marriage was registered according to the “Hindu Marriages Act”, for the record).

Helmets, Tinted Glasses and Low Hanging Fruit

I’m opposed to the law that makes wearing of helmets and seatbelts mandatory for two wheeler and four wheeler drivers (respectively). I might have argued earlier that they cause perverse incentives (a driver wearing a seatbelt is likely to feel “safer” and thus drive more rashly, causing more collateral damage). There is another important reason I add now – these provide too much low hanging fruit for cops to provide them enough incentive to go after real crime. Let me explain.

Cops are an overworked and underpaid lot. So they try to improve their lot by extracting rents wherever possible. So you have random traffic cops flagging you down to “check your documents” so that some deficiency can be pointed out and a fast buck can be made. Or you have (non-traffic) cops “inspecting” bars to ensure that excise rules are being followed – once again to make a fast buck. What Inspector Dhoble and co in Mumbai are doing is to similarly go after low hanging fruit – easy targets who they can “catch” and hopefully make a fast buck of.

While rules such as compulsory helmets, not having tinted glasses and drinking permits might be desirable from the social perspective (even that is highly debatable), the bigger damage such rules do is to over-stress an already overworked police force. Policemen have a choice between doing “real” police work which could actually lead to reduction of crime, but which may not pay in terms of “rents”; and the “low-hanging fruit” work which may not go that far in controlling crime but allows the policeman to make a fast buck. Given the general stress that goes with being a policeman, it is no surprise if most policemen would opt to do the latter kind of work.

One obvious solution is to expand the police force, provide better training and better pay so that policemen spend more of their time spending real crime. But that involves strategic changes which might take a long time to put in place. Police reforms are important and the sooner we start them the better. However, it needs to be recognized that it’s a long-term project and has a long gestation period.

So what needs to be done to increase police efficiency in the short run? Cut opportunities for policemen to pick the low hanging fruit. Repeal the helmet and seatbelt laws, stop summary stopping of vehicles and document checking (except for drunken driving) and shift to a notice-and-voucher system, repeal archaic laws that allow policemen to disturb business, legalize prostitution and the like.

We already have an over-stretched police force. We don’t need further stretching by means of increasing their workload. Simplify the rules and make it easier for policemen to implement them, and crime is more likely to drop that way.

Penny wise pound foolish at PSUs

A couple of months back, an uncle who works for a PSU in a reasonably senior engineering role, had to go to Calcutta on work. Thanks to his late arrival from Calcutta, we had to postpone a party that had been planned for a weekend. When I asked about his late arrival, I was told that his train had been delayed. It was then that it struck me – that a lot of PSU officers still do business trips by train!

The logic completely defies me. An airconditioned train ticket (at my uncle’s grade, I don’t think they would send him by cattle class) from Bangalore to Calcutta costs around Rs. 2000, and it takes about thirty six hours. A flight, on the other hand, costs not more than Rs. 7000 (assuming you’re not booking at the last minute), and takes about three hours. What amazes me is that the PSU that employs my uncle values his time at less than (7000-2000)/(36-3) ~= Rs. 150 per hour! Ok even if you assume that the train journey had two nights when he would have been unproductive (and assuming that he’s a superman and so doesn’t need to rest and recover from a long journey), his employer values his one full day of work at Rs. 5000!

While this valuation might be consistent with my uncle’s salary (I’m only guessing given his experience and position; I haven’t asked), I think it’s still a stupid choice to make on behalf of the PSU. I was reading an op-ed by Mihir S Sharma in this morning’s Business Standard, where he talks about our warped sense of “austerity”, and was wondering if this decision to send my uncle to Calcutta by train was a measure in a similar direction!

Austerity means cutting down or limiting wasteful expenditure. It does NOT mean cutting down tangible expenditure in favour of the intangible (my uncle’s lost working time is an intangible, since he gets paid monthly; so is his reduced efficiency on the day immediately after his journey). Unfortunately some of the PSUs have not recognized this and still stick to some age-old “policies” regarding travel and expenditures.

My wife, who works for Toyota, informs me that a certain number of cars produced every day are “specially made for the government”. When I ask her what is so special about a sarkari car (apart from that rhino-horn like thing on the bonnet) she tells me that they are not supposed to have air conditioning! Given that air conditioning is a default in most cars nowadays, this “no air conditioning” is a special request that the government has to make to the manufacturers, so I don’t think it makes any tangible difference in the cost of the car. From my experience with my Zen, driving with and without air conditioning (I live in Bangalore, so I don’t need it at all times), I know that air conditioning hardly makes much of a difference to the mileage of the car. So overall in terms of cost, there is little the government saves by not having air conditioning in the car.

Now think of the babu in Delhi, where summer temperatures go well into the forties, and which is so dusty at all times of the year. Think of the possible increase in his efficiency if he were to travel in an air conditioned car. That is an intangible and the government will have none of it. It is all about austerity, you know. Penny wise, pound foolish.

PS: The recent focus on corruption has done more harm than good. Afraid of “being pulled up” by the CAG or any similar authority, a number of PSUs have gone into policy paralysis, and are simply not taking decisions, lest they are accused of being corrupt. The economic loss (again intangible) is humongous compared to the amounts these people might have possible swindled had they made the decisions! We never learn.

Towards liberalism

I was raised in a fairly conservative family; my father’s atheism not preventing him from being socially conservative. Until I went to college, I never blew candles for my birthday, for they were deemed to be “against Indian culture” at home. I went to RSS Shakhas, my seniors at RSS stuck BJP posters on my door, and except for the 1989 Assembly elections when BJP didn’t put up a candidate in Kanakapura, my parents always voted for that party.

My wife comes from a different kind of family. They are religious but can be described as being more “secular” (her name (Priyanka) might suggest to you their political leanings). So she grew up doing poojas and keeping vratas on all sorts of random Hindu festivals, but also blowing candles on her birthday and calling up “Santa” and getting Christmas presents also. Yeah, you look for compatibility on several axes when you’re searching for a long-term gene-propagating partner, but political leanings are usually low down on that compatibility list.

Last year, I totally and completely failed to appreciate her celebration of Christmas, instead treating it as yet another random holiday, before and after which nobody did anything at work. I failed to give her any gifts, or organize any “christmas events” for her. Yeah, the in-laws came over, we had set up this little crib based on dolls we’d purchased in Sri Lanka on our honeymoon and all that (unfortunately we misplaced that set, else we’d’ve displayed it as part of Dasara too, this year), but I must admit I’d failed to “celebrate” the festival. And in my defence, it was never a festival that I had celebrated, so “forgot” was actually a valid excuse.

So this year we decided to have a Christmas party at home. Basically called a few friends over, most of whom responded with astonishment (thanks to my RSS legacy), but were kind enough to land up. And once again we searched hard and found that “crib set” and set it up. And started playing Christmas carols, until I got bored and switched the music to Black Sabbath, which nobody really minded. Much alcohol was consumed (especially wine, given the Christmas spirit), plum cake was had and Chinese food ordered in.

In the intervening years I’ve found myself becoming more and more socially liberal. It probably started when I moved to IIMB; I think that was the time I stopped being judgmental of people based on their backgrounds, and stuff. That was the time when I started respecting individual rights, and those leanings got stronger as I slowly opened up, joined a libertarian-leaning mailing list, and realized that this was actually what I (as a person, irrespective of my background) was about.

On a foreign vacation earlier this year, thanks in part both to the lack of interesting vegetarian options and the availability of fairly succulent-looking meat, I stopped being vegetarian. A few months after that I participated in a “Ramzan meat walk” (though I didn’t consume much meat during the walk, since a lot of it was ‘hardcore’). I find it silly now that I’d actually joined a group of hostel-mates that campaigned for a “vegetarian table” at the hostel mess because the non-veg food “looked too gross”. But when someone starts singing “Silent Night”, I only remember that variation that a chaddi dost and I had come up which changes the song’s lyrics in a way that it ends with “and two souls become three”.

Given a chance, if I were to register as a voter and there were elections tomorrow, I might still vote for the BJP, following family tradition, but that would be more in line with economic thought and lack of options rather than my conservative background. I oppose the forced 11pm shutdown of Bangalore pubs, but don’t care about it enough to join protests on that front. If the government subsidizes Haj and Kailas Mansarovar Yatras, I demand that I get funding to attend the Pastafarian conference in Texas. And I still intend to open my autobiography (whenever I write it) with the lines “As Babri Masjid came crashing down, I celebrated. It was my tenth birthday and we had a party at home … “.

Free float and rupee volatility

Following a brief discussion on twitter with @deepakshenoy I’m wondering what’s preventing the RBI from making the rupee fully convertible. The usual argument for full convertibility is that it will make the exchange rates volatile. My argument is that exchange rates are already so volatile that the additional volatility that could stem out of a free float is marginal, and a small price to pay.

The wise men at RBI, though, might argue the precise opposite. They will claim that in terms of already high volatility they wouldn’t want to do anything that might add to volatility, however marginally. This is a constant battle I faced in my last job, of delta improvements. I would frequently argued that when something was already high, making it delta higher was not so bad. I would argue in terms of making systemic changes that would reduce drastically the already high number, rather than focusing on the deltas.

Coming back to the rupee, you can also imagine the wise men talking about some stuff about black money and hawala money and all that. The thing with making the rupee fully convertible would be that hawala would be fully legal now, and the illegal practice would cease to exist. And when something becomes legalized it comes back to the mainstream rather than remaining on the margins, and that is always a good thing.

Then you can expect some strategic affairs experts to bring some national sovereignty and national security argument there. There will be people who will talk about the increase in counterfeit money (since it’ll become easier to “smuggle” rupees into India then), and about how foreign governments might pose a threat to India’s security by manipulating the rupee (who says that threat doesn’t already exist?)!

I don’t know. I don’t find any of these anti-full-convertibility arguments compelling. If we do adopt full convertibility, though, we can at least pay Iran for the oil we get from them, and that might for all you know help tackle inflation. I don’t, however, expect the RBI to act on this.