Weekend reading links

1. Fascinating work by Johnny Miller to highlight segregation in cities using birds-eye view photographs taken using drones.

Such photographs have a powerful way of shaking people out of their comfort zones and generating conversations on the issue of widening inequality and its manifestations.

2. On segregation, nice Citylab interview of Macarthur Prize winner Nikole Hannah-Jones about how racial preferences entrench de facto school segregation in the US. This is spot on,

What we see come immediately out of [Brown v. Board], when you can no longer explicitly use race to segregate schools, is a very adaptive strategy that white Americans have. Suddenly, you take up the banner of race-neutral language that you know will produce the same result. So it becomes about “local control”—saying “our tax dollars shouldn’t go to educate other children,” or “we want a small local school system that only serves our community.” Of course, that community is all white.

In a place like New York City, where you have a great deal of segregation, you have a neighborhood school system for elementary school, which means your kid will go to a neighborhood school. And since neighborhoods are highly segregated, that means your kid will likely go to a school that is also segregated. But then once you get to middle and high school, it is a “choice system” where white kids go to screened schools— schools that have these apparently race neutral screens, but where you have to have a portfolio, or where you have to take a test to get in. What remains the same is that white parents are going to get access to the best education in a public system. They’re going to get access to disproportionately white schools, and they will wield an array of tools to do that. So if the neighborhood that those white parents live in is white, they want neighborhood schools. If the neighborhood school that those parents are near is black, then they want choice. So people will say they don’t want bussing, if their neighborhood school is white. If the neighborhood school is not white, they’ll bus their kids an hour away to get to a white school.

At some level, the difference between Trump and the liberals are not as glaring as you think. Trump acts and does so with brazenness what most others secretly nurture inside or share across the dinner table.

3. I have blogged earlier about this, but worth repeating this time with Andy Mukherjee's graphic on the critical role of excise duty of petroleum products in India's fiscal consolidation.

The flip-side is that as global economy steams on, the only direction for oil prices may be upwards. This would set in motion the exact reverse dynamics - slowly roll-back the duties to absorb the price increases. With several elections round the corner in the lead-up to 2019, the political compulsions will be overwhelming.

One more reason to hold pause on any thoughts of a fiscal expansion.

4. Livemint editorial captures the wrinkles in India's mobile phone manufacturing surge,

India has also shown impressive growth in manufacturing smartphones, almost tripling the value of output from Rs18,900 crore in 2015-16 to Rs54,000 crore in 2016-17. This is expected to increase to Rs94,000 crore in 2016-17. But all these “Made In India” smartphones, including those from home-grown companies like Micromax and Karbonn, are only assembled in India. Smartphone companies import semi-knocked down (SKD) units, in which all the key high-value components are already soldered. The value addition happening in India was only 6.1% of the smartphone’s value in 2016... In the 2015-16 Union budget, the government increased the differential excise duty structure for mobile phones from the earlier 5% to 11%, which gave domestic manufacturers a benefit over imported phones. This move has managed to flip the share of imported mobile phones from 69% in 2015 to 33% in 2016.

5. FT points to an interesting October Curse with financial markets, captured by the graphic below.

6. I have never been a great admirer of corporate India's dynamism and claims that it can propel India to become an economic super-power. And it is not just because of the questionable corporate governance standards, but also because of its relative failure to produce truly world-class innovations despite numerous opportunities.

The telecoms sector always gets held up as the poster child of what unshackling India's corporate sector from the License Raj can yield. While the explosive growth of cellular telecoms over the past decade and half have been truly transformative, there is also a less gratifying side.

Here is Sundeep Khanna's lament in Livemint about the sorely deficient R&D spending of India's telecom companies,

It is safe to say that just as information technology (IT) services were the success story of the 1990s, telecom services have been the defining story of Indian business in the first decade of the 21st century. Sadly, for all its growth and penetration, the sector has thrown up little by way of research and development. Not a single breakthrough technology in telecom has come out of India, which should have served as the perfect crucible for experimentation... In the list of 50 top applicants that filed under the World Intellectual Property Organisation’s Patent Cooperation Treaty (PCT), a list dominated by telecom companies like ZTE Corp., Huawei Technologies and Qualcomm Inc., there isn’t a single Indian name. Even worse, a report by Thomson Reuters last year named Samsung, Huawei, LG, State Grid Corp. of China, ZTE, Qualcomm, Ericsson, Sony, NTT and Fujitsu as the top 10 global innovators in the telecommunications industry for 2015. No mention again of an Indian telco.

All the ingredients that experts say are needed to fuel research and development in the sector have been present in India, a large and rapidly growing market, demanding customers, profits aplenty, a phalanx of financing options and intense competition that should logically have spurred innovation. What’s more, it was evident to anyone who cared to look that in a business driven so much by technology, the barriers to entry could collapse overnight as it happened when Reliance Jio made its moves a year ago. The bloodbath that has ensued hardly comes as a surprise.

7. The use of satellite data on night lights in economic data analysis is on the rise. Two good articles - one on the use and limitations of the use of such data, and another on why the NASA data on India may not exactly represent what is being claimed.

8. FT documents the property market rebound in China,

Urged on by Beijing, 38 per cent of all bank loans issued in the 12 months to August were home mortgages, according to official data, and local governments purchased 18 per cent of all residential floor space sold last year as part of a drive to provide affordable housing, according to estimates by E-House China Research Institute. The result has been another heady boom in construction. Rome was not built in a day, but based on residential floor area completed last year, China built the equivalent of a new Rome about every six weeks... For China’s domestic economy, the world’s largest at purchasing-power parity, property investment directly contributed 10 per cent to GDP in 2016. When manufacturing sectors like steel, cement and glass and retail sectors like furniture and home appliances are included, the share is at least 20 per cent...

A survey by FT Confidential Research, an independent research service owned by the Financial Times, found that 32 per cent of families own at least one home that is vacant. An estimated 50m homes, or 22 per cent of the total urban housing stock, were vacant in 2013, according to the most recent data from the China Household Finance Survey led by Li Gan, economics professor at Texas A&M University.

9. Madhya Pradesh is experimenting with a new approach to Minimum Support Price (MSP). Instead, under the Bhavantar Bhugtan Yojana, of government itself making the purchases at the MSP, the farmers will be reimbursed the differential between the MSP and their sale price. The experiment is being tried out for a period of two months for eight crops. The sales will have to be done in registered agriculture markets and subsidy will be transferred to the farmer's bank account. To prevent traders from artificially suppressing the market, the government will determine an average sales prices, not only based on the prices in the State but also in two neighbouring states.

This is a likely more efficient approach. But like with all such reforms, given the several pathways to game the new system, the success lies in effective implementation.

10. Finally, the latest adventure in kritarchy comes by way of the Supreme Court's decision to ban the sale of fireworks in Delhi during the Diwali festival.

This is clearly grandstanding judicial activism since there is at least as much or more evidence that the important contributors to air pollution in Delhi lie elsewhere - burning of crop waste in Punjab and Haryana, construction activity and vehicle emissions.