My Harajuku moment - India's CAD and the Anker ultra-high density external battery charger

The Harajuku moment, as defined by Malcolm Gladwell, is a moment in time where you have a revelation that must happen. And must happen now. 

Now, I've never exactly been the most politically inclined guy around. I managed to scrape through school and college with minimal involvement in any of the electoral processes. Sure, on the run up to election day in 8th std, I distributed those "Vote for xyz" pamphlets.  But that was only because I actually did believe that xyz would fundamentally alter man's understanding of particle physics - And while at it, she'd also increase the lunch break by 15 minutes. 

But there comes a time when every well-meaning citizen must sit up and take notice of his/her nation's affairs. At some point, everyone needs to get aware of the direction in which his/her nation is heading. And this Harajuku moment can arise from a bunch of noble reasons. 

Or, in my case, the cost spike of Anker's ultra-high density external battery charger.

I'm talking, of course, about the 10000 mAh Lithium-Polymer beaut which is good enough to recharge your android twice (at least) on the go, can also charge your tablets and is cross-compatible across multiple devices. Its listed on Amazon for USD 54. 

Which means that on 1st May 2013, I would have paid INR 2906.28 (at an exchange rate of 53.82) for it. But I ordered it on 20th August 2013, and ended up paying INR 3440.88 (at an exchange rate of 63.72). 

Basically, I ended up paying 18.4% more in a matter of 1 quarter. 

For the same price of USD 54.

And I’m Marwadi.

It didn’t add up. 

So I decided to dig a little deeper into India's CAD  (Current Account Deficit) issues and understand why I was paying 18.4% more just because I thought Sachin Tendulkar was a bigger deal than Wayne Gretzky. That is, just because I was desi. 

India's rising CAD was to take significant blame for my financial misfortunes. CAD basically resulted in a surplus of INR floating around the world, which reduced its appeal to the point where the owner of the friendly, neighborhood American dollar-store said “53.82 rupye mein kaam nahi chalega, 63.72 aande”. 

You know how it is - you’re willing to sell off your kidney for your first Wimbledon Centre Court ticket, but after you’ve seen too many matches on Centre Court, you’re only willing to sell off 81.6% of your kidney for it.

Something like that.

CAD, as Investopedia explains, occurs when  a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers. That’s not always a bad thing, not for a growing country anyway. That is, not until your GDP stalls.

When it does, investors start noticing that there are better and safer places to park their funds than a nation which thinks it can retrospectively amend tax laws to levy penalties of over INR 20,000 crores on a telecom company. Or one whose Planning Commission truly believes that you’re not actually poor if you can spend over INR 26 per day. Or one where Chennai Express was a smash hit.

So why is the CAD rising? Let’s break it down further.

 

Now let’s examine the LHS elements of the equation.

·         Total inflows - This was a tough one to crack. It’s inexplicable why foreign investors aren’t tripping over each other to put their last penny on India. Ok, so as a country where 300 million citizens (or about a quarter of the total population) have no access to electricity (as on Dec 2011), we may still insist on 65 clearances to set up a coal-based power plant. And with over 58% of our workforce involved in Agriculture, we may have decided that the best way to prop our famers up against global competitors from Australia and America was to subject them to a 5 hectacre limit on land holdings. And we may juggle with the odd IAS officer who’s inconveniencing the sand mafia over some silly environmental norms. 

But what’s a little red-tape and corruption between friends? After all, we are still the world’s largest democracy, aren’t we? (Notwithstanding Didi’s run-ins with the odd, errant cartoonist)

So it just beats me why there’s been a sudden exodus of USD 16 bn in the first 5 months of 2013 (a 67% y-o-y increase in FDI exodus). Let’s just put this capital flight issue down as inscrutable and move on to the next item then.

·         Total outflows – Our biggest problem, of course, is the revival of the US economy and we can’t really be blamed for the US finally getting its act together, reducing its count of jobless fukras and generally boosting investor confidence enough to get them packing out of the emerging markets and back into Uncle-Sam-land without waiting for a toodle-oo.

Isme hamari kya galti hai ki unhe America zyaada pasand hai? As explained above, we toh gave them a ton of reasons to louuu India.

With a heavy heart and a philosophical “If you love something, set it free. If it comes back, it's yours. If it does not come back, it was never meant to be”, the Indian government has decided to overlook this blatant treachery of the foreign investors. 

And do nothing in terms of fundamental structural changes or other such pish posh. 

It has instead moved on to contain the CAD, largely, by regulating the elements of its Outflow. What, then, are the elements of the Outflow ie what are we importing?

Close to half of India’s import bill is accounted for by 2 elements: Oil and Gold.

1.    Oil = 30% of India's import bill

a.    The country produces only 25% of its domestic requirement. This, inspite of the Oilmin going out of its way to incentivize the private sector to make something out of our natural reserves. (Just dial Mukri's number and say 'KG D6' for more deets on this)

2.    Gold = 12% of India’s import bill

a.    We are responsible for anywhere between 25-33% of the annual global gold demand.

How, then, has the government gone about managing our CAD? In a couple of ways, but lets look at two of the brighter measures:-

1.    PC has asked investors to pump money in quasi-sovereign bonds by Indian Infrastructure entities - So he's basically encouraging you to buy a pass for the aforementioned Great-Indian-65-clearances ride

2.    Just as a check between friends, PC first banned gold imports and then raised duties on them, once imports were resumed – sort of a “Why won't you believe me and let me dictate your choice of asset classes for investment? After all, you have my fine track record to go by” (The NDA passed on an India with a Current Account Surplus to the UPA. Thereafter, PC and Pronobda have helmed the Finmin. India’s expected CAD in FY14 is USD 70 bln)

Now the UPA figured that some of the ignorant masses may question the wisdom of these perfectly logical moves. So as an add-on bonanza offer, it finally unleashed its finishing manoeuvre yesterday – Effective 26/8/13, it has decided to levy a 36% custom duty on flat panel TVs brought back from Thailand, Singapore and Dubai. This will discourage you and me from rationalizing our next Thai trip under the pretext of buying a cheap TV. And will keep our INR in the hands of Indian retailers. 

Surely, if that cant save our failing currency, nothing can.

All of which brings me to my key point – In view of these grand, wise moves from the UPA, can Anker just do the right thing and let me buy that portable charger at INR 54 to the USD?