Monthly Archives: March 2017

Gangasrotagati, Kurmagati and Mandeikagati

It often seems as if Prime Minister Modi thinks and lives gangasrotogati, among followers and opponents who only think and live kurmagati or at best mandeikagati.  

An example of this can be seen in the reaction to the results of the recent elections. While many of his followers were reveling in short-term triumphalism, and some of his opponents gave in to an equally myopic despondency, Mr. Modi appeared to draw the right conclusion, that the results revealed a gaping vulnerability for the BJP, and he moved decisively to address it.

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India’s Economic Divergence Problem

In a very innovative study carried out at the IDFC Institute, Praveen Chakravarty and Vivek Dehejia have found that there is significant economic divergence not only among Indian states, but also among regions inside states. This suggests that this divergence is caused not by variations in the quality of governance, but by agglomeration effects arising out of scale economies. A briefing report is available here, and a summary of their findings is available in a newspaper article.

The same researchers had determined in a previous study that there was considerable divergence among Gross State Domestic Products among the 12 largest states of India in the 1991-2015 period. They write

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BJP’s Decision To Field No Muslim Candidates: A Statistical Analysis

The decision of the BJP not to field any Muslim candidate in the recent Uttar Pradesh election has been criticised by some as biased and “communal”, and hailed by others as a courageous rejection of identity politics in favour of merit based selection. We carry out a statistical test to discriminate between these two hypotheses.

The BJP fought the 2017 Uttar Pradesh assembly elections as part of the National Democratic Alliance, putting up candidates in 384 seats, while the Apna Dal (Sonelal) contested 12 seats, and the Suheldev Bharatiya Samaj Party contested the remaining 7 seats. Below we consider the candidate selection process for the BJP alone, rather than the entire NDA coalition.

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What Has Harvard Ever Done For Us?

Social media in India seems to be full of people who feel that Harvard University in Cambridge, Mass. is full of empty suits and emptier heads who have never contributed anything but fancy words to the welfare of humankind. Since much of this ire is probably directed at Harvard Business School, it would be important to point out that Harvard is not just a trade school, but they also teach and carry on research in the pure sciences and in applied sciences and engineering. It also has a fairly well known Medical School.

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Society Needs Diversity, But Too Much Of It Can Hurt

Recent research suggests that economies perform best when their social diversity is in an intermediate range, not so high as to undermine social trust and cohesion, and not so low as to inhibit innovation and complementarity of skills.

Although this effect has been known for some time, a new confirmation of it has come from studies of genetic diversity within human populations and its relationship to economic development.

Recent quantitative studies in human population genetics have shown that human genetic evolution did not stop in prehistory, but has continued at a rapid pace throughout history. For instance, in a study published in the Proceedings of the National Academy of Sciences of the USA, John Hawkes of the University of Wisconsin and others concluded, based on the 3.9 million HapMap SNP dataset, that human adaptive evolution has not only continued, but has actually accelerated in the last 40,000 years.

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Weekend Reading: Oxytocin, Trust, and Ethnocentrism

The role of the chemical oxytocin in promoting social trust has been highlighted in many popular books and articles. Recent research suggests however that oxytocin also has a “dark” side. Its effect is not only to promote trust and cooperation among in-group members but also to engender betrayal and derogation towards out-group individuals. The two effects seem to be inextricably intertwined and depend on each other. This finding, that the mechanism of trust requires the exclusion of an other, is very important for understanding the current global political climate.

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Does the Stock Market Rally Suggest a BJP Election Victory?

The stock market has been on a tear recently. It is tempting to conclude that this is based on the market’s expectation of a BJP victory in the current State elections. However, the evidence is not as clear cut as it seems at first sight. Although market participants probably do expect a BJP victory, much of the recent rally can be attributed to global factors, and not to expectations about the election outcome..

The NSE Nifty 50 Index fell to a low in late Dec, and since then it has recovered sharply and gained more than 1000 points, i.e. almost 13%, in about 10 weeks. This could be due to expectations of a victory for PM Modi and the BJP in the current State elections, which would be a market positive event, since it would strengthen the government’s hand and probably allow it to follow a reform agenda. An electoral defeat here will weaken the government substantially, since it would be interpreted as a popular repudiation of major government policies such as the note ban.  The 13% run up in the Nifty seems to suggest an expectation that there will be a stock market friendly election outcome on Mar 11.

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Seasonally Adjusted Indian GDP Growth Declined Sharply In Q3

The Perils of Using Seasonally Unadjusted Data

Many observers have used a flawed reading of the recent GDP figures to jump to the unwarranted conclusion that the Indian economy was unaffected by the note ban. While the government reveled at this unexpected positive spin, opponents apparently have been reduced to gnashing their teeth and muttering darkly about statistical skulduggery.

The true situation is a bit different. As we have already reported, seasonal adjustment would have shown that the quarterly growth rate has actually declined substantially in Q3, Seasonal adjustment is a commonly used statistical procedure and it has been considered essential practice for more than 50 years by most government statistical agencies around the world.

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The Curious “Strength” of Q3 GDP

Although the quarterly estimate of the Oct-Dec quarter Indian GDP released this week appeared to be positive, a more careful statistical analysis of the data shows that the Q3 figure was actually quite weak and did show negative effects of the note ban.

Most economists expected a significant slowing in Q3, followed perhaps by a rebound in Q4 of 2016-17 and also in Q1 of 2017-18. Instead, it appears as if the Indian economy has suffered almost no negative consequences from the note ban and continued to grow strongly in Q3. This data release has been met with skepticism, even outright disbelief in certain quarters. This is often the reaction of people on both sides of the political spectrum when they are surprised by the data. However, we will see below there is no reason to suspect statistical malfeasance, and the key to this riddle lies in some technical details of the GDP growth rate calculation.

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