My investment journey and learnings!

With almost 10 years of investment experience now, it's a good time to look back on my investment journey. I can't claim to have made any out-of-the-ordinary gains so there will be no extraordinary advice here. As they say, most investment stories are boring! However, there might be a lesson or two hidden somewhere :)

Phase 1 - the beginnings

Having luckily bypassed the 2008 recession, my investment journey began in 2010 with my first job after engineering. I took investment advice mostly from personal finance articles in newspapers back then and from http://www.subramoney.com/ (it was a much simpler blog at that time). A good job, no responsibilities, and an innate lack of imagination for spending ensured that I was able to invest the recommended 20% of my salary. While it amounted to only a few thousand rupees per month of SIP in mutual funds, I am thankful to my past me for at least starting to invest which taught me some important lessons:

• Keep aside money for investment and then spend the rest - no amount is enough for spending
• Like anything else, saving is also a habit
• Purchase from savings rather than borrowings
• Know inflation - money decreases in value with time
• Stay away from LIC policies!
• Read a lot, research, make sense of risk & reward, debt & equity, mutual funds & stocks etc.
• Know the difference between saving & investing

Phase 2 - getting serious

1st phase ended with me leaving my job for Mba and withdrawing all my investments and my epf proceeds for paying fees. 2nd phase started with my 2nd job after completing mba with more money to invest, a greater pinch of taxes, learnings from phase 1, some more knowledge from finance lectures, a longer investment horizon, and more spending goals.  Lessons learned have been:

• Importance of health and term life insurance! (with a reminder from a more than minor injury - entirely paid by my health insurance)
• Importance of saving for retirement - dynamics are very different due to very long term horizon
• Investment type must match investment horizon - learnt this the hard way when I had to withdraw my MF units at almost 10% loss because I had no fixed return investments!
• Take advantage of tax saving for investment rather than invest for tax saving
• Lost capital in stock & bitcoin trading - money takes a lot of time to grow!

Phase 3 - coming of age

Some more learnings over the past couple of years, accelerated by COVID times:

• Balancing investments for the long term with spending in short term - it's important to spend on good things!
• Efficient investing - low cost of investments can make a big difference e.g. Direct Funds, Index Funds, NPS, FDs with no foreclosure charges
• Explore more investment avenues - NPS for retirement; online FDs for emergency funds; Gold ETFs/Foreign ETFs, Debt MFs for asset allocation
• Take adequate insurance - not too much, not too less - insurance mitigates risk, it's not an investment strategy
• Invest in building physical + mental health and good habits - money saved is money invested!
• Keep partner informed of total investment, investment platforms, basic investment terminologies

Phase 4 - to be updated after 10 more years! :) 

SUPER BUDGET 2015

The first full budget of the Modi govt was presented by FM Arun Jaitely on 28th Feb.As usual there was huge expectations from the budget .More so because this was the first full budget of Modi govt which has won a landslide victory last year on the plank of development and they have a clear majority in the lower house, a privilege which none of the previous govts had.

So was it a SUPER BUDGET ?? Were there BIG BANG REFORMS ?? Was it something that would propel India to a new growth path??

Well the answer to these question may not be a thumping yes. But a lot of steps has been taken which will make India investor friendly country. Currently India ranks above 150 in the index of ease of doing business in a country. But steps taken in this budget will definitely improve the investor sentiments and bring down India's rank to around 100 -110 in the index

  Lets understand one thing first , that budgets are mere allocation of funds and all policy decision does not necessarily be taken in the Budget statement only. But be as it may, the budgets in India is still given way too much attention and we will take a look at this year budget.

One thing that is very much clear about this year Budget is the thrust on Infrastructure.The very fact that INFRASTRUCTURE found as many as 15 mentions in the budget speech so did MAKE IN INDIA as many as 10 times.We all know that with around 9 lakh crore of investment in infra sector is stuck due to various reasons,there is an urgent need to look at the PPP model itself.This model has not yield the result which was expected . So there seems to be an pressing need to invest public money in to the sector. The budget allocates $11 billion more this year for this very purpose.Also pushing the fiscal deficit target by 1 year (they were to achieve fiscal deficit target of 3%  by 2016-17) the govt has got the elbow room to increase its public spending which they intend to use on infrastructure building. It also intends to create a NATIONAL INVESTMENT AND INFRASTRUCTURE FUND(NIIF) which will enable to raise the debt .They also intend to set up 5 UMPP(ultra mega power projects) which will augment the power generation in the country. Making roads of 1 lakh km in a year in addition to the already sanctioned 1 lakh km has been announced.Also custom duty was reduced on 22 items which will make it cheaper for indian companies to imports parts to manufacture .

These measures are definitely commendable. But the problem lies in the execution.All these measures are not new. UMPP were announced earlier also but they have stuck due to land allocation issues or financial issue . NHAI has already sanctioned creation of many thousand km of roads but they have not been created . So the problem lies in the execution of these budgetary allocation.Simplification in PPP policy is also something that was very much required.I have read somewhere that the govt now intends to adopt a new model called PLUG n PLAY where all the clearances will now be done by govt and the parties can straight away start developing the port,road,etc .Thats a good policy to start with.

Another great expectation from the economists was on the front of fiscal prudence.Well this year govt decided that they will let go the fiscal target mainly for the spending on infrastructure.Though  the fiscal condition is much better than lets say 12 to 15 months ago thanks to decreasing crude prices, a $50 Billion gift for the govt as famously said by Raghuram Rajan ,RBI Gov .Still fiscal responsibility is something the govt can not ignore. Moodys has already confirmed that they are not going to change India's status in near future and will wait for the implementation of the policies.RBI has also stated the same thing in their last policy update.Raghuram Rajan is not going to decrease the Repo rate in near future thats for sure.

The budget document is so huge that its impossible to analyse it one blog without making it boring. So remaining analysis will soon follow in the next blog.

Indian general elections battle: capitalist BJP vs socialist Congress?

capitalism

The basic premise of capitalism is 'Invisible Hand': people pursuing their own interest frequently promote the interest of the society more effectually than when they really intend to promote it. Capitalism promotes competition because everybody is working for his/her own good. But the problem with laissez-fare economy(with no government intervention) based on capitalism is that it frequently leads to short term pains. A capitalist will probably not care for the environment,he will think of pains caused by unemployment before shutting down an unprofitable factory and he will not care for alleviation of education levels and poverty because he is there for profit not charity. But in the long term, the same drive for profits will lead to better technologies which are good for environment, more employment opportunities under better working conditions, better education facilities being setup because trained human resources are required for positions requiring skill and knowledge and all these factors will lead to alleviation of poverty.

The problem is nobody knows what short term is. it could be 10 years, 20 years, 30 years or more. If capitalists are given free reign, who cares for the worker who became unemployed because the factory in which he worked became unprofitable? Sure, the closing of factory led to free capital which was invested in say, a technology firm. But the unemployed worker doesn't know what's a computer and since he is uneducated and 50 years old, it's probably not possible for him to "up-skill" in computer technology. By the time capitalism completes a short-term cycle(of 20-30 years) he will probably die of starvation.

welfare

And here enters the Government. It "taxes" the capitalists for things that they don't care about such as environment, education, poverty and uses the tax proceeds for the betterment of the section of society "affected" by capitalism; leading to a welfare sate, a balance between capitalism and socialism. India is a welfare sate. As my friend explains in this post, we have had a historical inclination towards socialism(first stage of communism) with much of the economy controlled by and belonging to the state, almost tripped into it under Indira Gandhi but then embraced capitalism under Rajiv Gandhi after events of 1991(still remaining a welfare state).

Interestingly, as a nation, we continue to imagine a black-and-white difference capitalism and welfare. Because BJP continued "capitalisation" of the economy when it was at the center during 1998-2004, it's viewed as pro capitalist. Because Congress ruled the country for most of the time before 1991 and then formed a coalition government with left in 2004 and took other pro-social steps during 2004-2013, it's viewed as pro-socialist. But India cannot afford to be either a capitalist or a socialist nation. We must promote capitalism as well as we can, then tax the capitalists and use the money from taxes for social welfare.

So, India must provide facilitate and support capitalist entrepreneurs and then use the money from taxes to educate, nourish and care for less fortunate citizens trying to make them a part of the capitalist system.  Neglecting either capitalism or welfare would hurt the political party which does that(BJP was overthrown after 2004 and there is huge ant-incumbency sentiment in the country against present Congress government) but the bigger damage is done to the social fabric of the country.

Due to whatever historic policies and situations, there are two Indias: one would be better served by capitalism and the other by socialism. Whichever political party wins the coming general elections, it must balance the needs of two Indias unlike what has happened in the past.  

Sen vs Bhagwati? Who is right?

It has been sometime now since the debate between the two eminent Indian economists about the growth model India should pursue has been going on (Bhagwati argues for growth purely through deregulation whereas Sen has put his weight behind a simultaneous push to education and health). But the larger question remains about the underlying theme of the debate.

Both Jagdish Bhagwati and Amartya Sen are very eminent economist who became famous in the 1970s .Sen is well known for his work in development and public choice where as  Bhagwati is famous for his work on trade. Sen has won a noble prize for his work in development economics and Bhagwati is a well renowned economics professor at Columbia University famous for his trade theories (Paul Krugmen is one of his protege).

Although the argument between them is nothing new. Bhagwati has always attacked Sen and his economic theories but Sen has avoided  attacking Bhagwati personally.But this time when ECONOMIST did the review of his book "India: An Uncertain Future " (Bhagwati whereas has praised Gujrat Growth model in his new book); Sen hit back with a letter to Economist stating his point of view about growth .
Also  recently, Sen has praised Bihar's inclusive growth model and maintained  that Narendra Modi should not become the PM.  The media rumor wheels have it that Sen is pro Congress and Bhagwati is pro BJP. 

So what exactly is this debate about or is there any debate?

Is growth of paramount importance or its  just a means to achieve the larger goal of human development ? Should state be more involved in health care, education, nutrition, housing and other benefits? The  answer of these questions is the topic of the debate.

According to Sen growth is important but not as end result but as the means of  better education ,better health care for the citizens of the country. Sen in his book has compared India with other poor countries(Sri Lanka, Bangladesh...) who are better than India in many human development indicator such as life expectancy at birth ,infant mortality, access to improved sanitation,female literacy rate etc . This is despite the fact that India has better income per capita than those poor countries. Sen prescribes that India should invest more in health and education even if the wealth generation i.e GDP growth is low. Sen argues that the type of GDP growth that India has pursued, has not led to improvement in health and education because of the quality of growth is not broad based.His theories have of late  resonated with government evident from enactment of MNREGA and FSB. He gives example of Kerela in health care where all the figures of human development indicator  are better than the rest of the country as the state has actively taken part in the healthcare sector and education.According to Sen, India should give importance to development of its people and not just headline growth rate.If the people are healthy and more educated, they will further contribute to GDP.

Bhagwati on other hand believes that growth is of paramount importance. According to him a country should have a healthy GDP growth which would generate enough funds which can further be redistributed. India should remove trade barriers and a rising tide would lift all boats. He also professes that govt should remove trade barriers and get back on track its reform agenda.He has undertaken many studies which confirm that with increase in growth, there is decrease in poverty.According to Bhagwati, growth makes redistribution possible; not the other way round. He maintains that ever since the reforms of 1991, there has been substantial decrease in the poverty in the country. He doesn't support of state playing a larger role in country's economics. Bhagwati believes that govt should remove the regressive subsidies and instead use direct cash transfer. He is a proponent of Gujarat model of growth  .

So who is right and who is wrong?

Neither. They both are complementary rather. But Bhagwati is more correct when he says that growth is necessary which will create resources . Investment in health and education can be made with those resources. Since 2003 -04 there has been rapid decrease in poverty as a result of rapid increase in growth rate of GDP.Nobody can deny the importance of dealing with the poverty. But the ways of doing it is equally important. One of the main reason of current macroeconomic slump i.e low growth , high inflation is the fact that govt spending per capita has increase by almost about 75% . The spending has led to more demand but the supply side is still languishing leading to inflation which effects aam aadmi more than anybody else. 
We  need to get away from regressive subsidies and start targeted cash transfer. We also need these kind of debates on economy in election year and people to take part in these debates. Its high time economic issues became political issues!

- Abhishek Ranjan

Where did India go wrong in her economic policies after independence?

Every time we talk of India's GDP ,we inevitably compare it with China's and China outnumbers India by a long shot. Both the countries or for that matter all the Asian countries became independent around the same time. All of these countries were torn apart by the foreign rule at the time of independence .Since then they all followed different economic models and now they are either reaping the benefits or paying for the policies that their founders choose to pursue. In this blog i will be looking into the economic policies followed by India since independence: what were they? what went wrong? when did it go wrong? could we have done anything different? 

India became independent from 200 years of British rule on 15th Aug 1947. At the time of independence India was plagued by a vicious circle of poverty characterized by the lowest levels of per capita income and consumption levels in the world.The economy was dominantly rural and around 85% people lived in the villages.Illiteracy was as high as 84%. India at the time of independence was truly an underdeveloped country. 

Immediately after independence, our leaders had to choose the economic model that our country would pursue.Jawahar Lal Nehru ,India's first PM, was impressed with the Soviet Union's style of command and control economy ever since his first visit there. Soviet style central planning model(a task assigned to the Central Planning Commission) and import substitution model(aiming to be self sufficient in producing whatever we need rather than paying foreigners for our needs) to run the economy was adopted. Public Sector Units(PSUs) were set up; several dams ,steel mills and other industries were constructed and premier institutes including the IITs were started, all built and operated by the government. Nehru aptly dubbed our factories, research laboratories, irrigation dams and power stations as the “temples of modern India”. However, Nehru also sought active participation of private entrepreneurs (though working within the purview of Planning Commission) in the country's development

Did we got it wrong right at the outset? No. Socialism was the order of the day and was very much in vogue at that time  . Also, we had got independence from British and hence were afraid of imperialism of any kind including economic. So government took control of the commanding heights of the economy . This model served well for India at least for the 1st two plan period. The GDP growth for the 1st and 2nd plan period is 3.6% and 4% respectively which was quite an achievement given the condition of the economy which we had inherited from the British. The initial economic model served India well in the 1st decade since independence. 

In the beginning of the 1960s India had to face a war with China which was a big drain on the exchequer .Then there was a war with Pakistan which further exposed the economic problems. With Indira Gandhi at the helm after Nehru's death in 1964, began the true socialist era of Indian economy. At this stage, our democracy had stood the test of time and economy was in a much better shape. This was the time to switch gears of the Indian economy by encouraging private entrepreneurship and reducing the role of government in economy. But what happened was exactly opposite. Several private enterprises including Banks, Insurance, Oil companies were nationalized. Although Nehru was a socialist at heart, he never prevented private companies from growing. But Indira Gandhi (after her initial years in politics) became a socialist to the core. At a time when the entire world was accepting export led policies, India continued with import substitution model. 


It was from here India started to flounder. Indo-Pak-Bangladesh war happened in 1971 and then came the oil shock in 1973 which were a huge drain on the exchequer. Despite repetitive reminders in form of high inflation ,India did not mend her economic policies. Indira Gandhi's economic policies were very much leftist and that left India in a lurch at a time when East Asian economies has started their very sensational growth story. 
 Instead of investing into capital formation, India under Indira pursued populist policies under her slogan of "garibi hatao" which only worsened the economic indicators. Her other policies like strengthening the labor laws(which made it almost impossible for an industrial enterprise with more than 300 employees to either retrench its workforce or even close down without government permission, which was rarely given) are still  haunting Indian economy. Instead of opening up of economy, she made the economy more inward looking by Small Scale Industry(SSI) reservation which  prevented the entry of medium and large scale Indian industries into segments like garments, shoes, toys, sporting goods, small electrical appliances etc . It was precisely in these segments that East Asian countries started their manufacturing led growth.  India became a laggard in manufacturing because the SSIs were neither efficient nor could they take advantage of large scale manufacturing to reduce costs.

So, inspite of the Writing on the Wall, why did India stick to her import substitution model? Answer to this question  is more political than economic. Indira Gandhi, with time, became more and more socialist. Even when the writing  was on the wall, she stuck to her populist measures. It was not as if she did not have political support; after breaking "the syndicate"and  Indo-Pak-Bangladesh war, she had became a towering political figure and had all the political power to pursue whatever economic policy she wanted. But her political outlook passed onto her economic policies.
The results were devastating: per capita income rose from 775 per month in 1969-70 to just 815 in 1976-77 at 1999-2000 prices. The average per capita income growth during the period was just 0.8% with no reduction in poverty achieved. India had lost almost an entire decade!

Whatever economic reforms were undertaken, they were taken because India was pushed to the wall and had no other option. However these  measures were simply not enough.There was definitely a spurt of growth in GDP in the 1980s  but the investment was made using our foreign capital reserves which led to the much known Balance of Payment crisis of 1991 which i will deal with in the next post.

But Indian economy would indeed have been in a much better stat; had the leaders after Nehru  given due importance to progressive economic policies and opened the economy at  sometime in the 1970s. Then, we could have been at par with China and our ASEAN neighbors today.

- Abhishek Ranjan

Demystifying the BIHAR growth model

Ever since Nitish Kumar became chief minister of Bihar after 15 long years of Laloo Prasad's rule, there was a sense of optimism in Bihar . There has been a lot of talk about development in Bihar and its growth model . In this post i will be talking about Bihar and its new found growth model . Has it actually worked? Or is it just a media fanfare?

Bihar accounts for 3% of the total area of the country and 8% of the population.This adverse land-man ratio is reflected in the high density of population, at 880 per sq. km .The decal growth of population for 1991-2001 was 28.43%, the highest in the country. According to 2001 census, the literacy rate in the state was 47.53%, again the lowest in the country. The economy of the state is characterized by high incidence of poverty, low literacy rate, unemployment and low per-capita income. The human development indicators too were very poor as per 2001 census.

So what has changed since Nitish Kumar came to power ? For starters, there has been a very substantial increase in the growth rates of GSDP (Gross State Domestic Product):

YEAR	GSDP growth rate
2006-07	17.7%
2007-08	7.6%
2008-09	14.5%
2009-10	10.4%
2010-11	14.7%
2011-12	13.1%

The growth rate has been phenomenal to say the least. A state put in the league of BIMARU(Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) states, these figures are astounding by any standards. GSDP of Bihar was highest in the country in the last plan years.  If we compare Bihar to peers states (BIMARU) Bihar has outpaced all of them:

Year	Bihar	Orissa	Madhya Pradesh	Rajasthan
2005-06	0.9	5.6	5.3	6.6
2006-07	17.7	12.8	9.2	11.6
2007-08	7.6	10.9	4.6	5.1
2008-09	14.5	7.7	12.3	9.0
2009-10	10.4	6.6	10.5	5.5
2010-11	14.7	8.6	8.1	10.9
2011-12	13.1	7.1	N.A	N.A
Average Growth over 2005-12	11.3	8.5	8.3	8.1
Average Growth over1994-02	4.9	3.9	4.7	7.3

*source: RBI data

Now the question arises, what has fueled this unprecedented growth?

The growth has been fueled by the twin engine of construction activities and services sector.A lot of roads, bridges and other infrastructure have been built, a fact corroborated by looking at the amount of cement consumed over the last few years; Bihar has consistently consumed highest cement in the last 5 years.

Even when we compare each sector individually; the figures are very impressing :

Growth in the constituents of SGDP
	2005-06	2006-07	2007-08	2008-09	2009-10	2010-11	2011-12
GSDP (2004-05 Prices)	0.17	15.69	5.72	12.16	7.09	11.29	13.26
Agriculture and Allied	-5.61	22.34	-6.39	10.20	-7.76	9.08	15.67
Agriculture	-6.64	27.51	-7.48	11.71	-8.66	10.89	17.16
Industry	9.65	16.16	19.48	15.84	14.11	17.01	18.27
Mining and Quarrying	66.24	-17.14	-1.72	121.05	-26.98	15.22	0.00
Manufacturing	-6.24	6.41	24.70	19.95	-4.04	8.52	8.95
Services	1.12	11.97	8.95	12.02	12.26	14.45	16.59

If we split up growth rates across sectors – agriculture and industry; we find that not only has Bihar demonstrated the fastest agricultural growth in the country, it also managed to reverse its industrial fortunes!

Bihar’s average agricultural growth rate over the period 2004-09 was 8.1%, the highest in the country. Bihar was closely followed by Gujarat, with a figure of 7.4%. The corresponding figures for Orissa, Rajasthan and Madhya Pradesh were 2.9%, 1.1% and 0.8% respectively. Even though the average growth rates over the 5-year period masks wide yearly fluctuations, the figure of 8.1% is quite high.

In Industry too there was a huge jump in the last 5 years. Although rest states fared better than Bihar, still the industrial growth of Bihar is phenomenal given that it had hardly any industries to start with!

In the next part we will ask the very important question that whether these phenomenal GSDP numbers have actually lead to betterment of Biharis? Stay tuned!

- Abhishek Ranjan

RBI has a new Governer. Has anything changed?

In the past few days or rather weeks almost everything has gone wrong for the Indian economy . GDP growth rate touching lowest levels in last 10 years , rupee touching all time lows almost every day , high CAD etc. 

Amidst all this gloom Raghuram Rajan was made the new RBI governor .An IIT DELHI + IIM A +MIT(Ph.D) pass out, the best pedigree one can ask for a RBI Governor.  The market gave a thumbs up to the decision of making him the governor as he is seen as one who is more growth oriented (his predecessor D Subbarao was seen as anti growth Governor though not entirely true).

One of the first thing Mr. Rajan did was to postpone the date of mid-quarter policy review after the announcement of FOMC meeting , which was quite pragmatic as a very important decision was to be taken by federal reserve about Quantative Easing(QE) tapering. From the moment Ben Bernake said that Fed would start QE tapering sooner than expected ,all the emerging economies' currencies went for a tailspin with Indian and Brazil among the worst performers . Due to all this there was huge expectation from Mr. Rajan, though during his maiden interaction with the press, he had made it clear that he wields no magic wand to solve all the economic problems of the country. Then came his maiden policy decision . He gave a rude shock to the market by increasing the repo rate, though other decisions of scaling back the emergency measures taken to control the fluctuation in the currency markets were on expected lines.

But the question remains that has anything changed at RBI? Decision making at RBI is still not based on data science . There is absolutely no reason to explain the increase in the repo rate . How can repo rate affect retail inflation? The rise in inflation is mainly on account of increase in prices of vegetable and fuel. These prices can only be controlled by removing the supply bottlenecks and constraints and not by increasing the repo rate. An increase in repo rate at a time when GDP growth rate is at its lowest will further dampen the mood of the investor. Although other decisions will positively impact the cost of borrowing funds of the banks but what is more important is to give correct signal to the market . An increase in repo rate is not one of them. 

The most recent policy announcements suggest that nothing has changed at RBI . It still considers Inflation targeting as its main aim and not growth. Mr. Chidambram once said that he is walking alone on the path to put India back on growth path . It seems he is still walking alone  even after making Mr Rajan the RBI Governor.

- Abhishek Ranjan

A quick overview of financial services(through TV commercials)

By providing on-demand deposit/withdrawal facility(typically our savings account), banks facilitate movement of money in the economy (called liquidity). It's an important function for economic activity as all of us remember the times of 2008 when "liquidity" in US economy dried up because people were skeptical of doing anything with their money. This TVC from Axis bank nicely summarizes the role of banks in providing liquidity in the economy:

Besides plain banking, there are several other financial provided by banks or other non-banking financial companies:
  Insurance, Loans, Mutual Funds
  Investment Banking: savings account for corporate
  Wealth management: savings accounts for very rich people
  Broking: facilitating trade by bringing interested parties with complementary needs together(much like the house broker)

This TVC from Religare gives a good overview of these activities:

- Abhishek Kumar

Why do we spend irrationaly?

Recently I took this course on Behavioral Economics on Coursera by Dan Ariely. It had some common sensical but good analyses of  the irrationality in our economic behavior. Over next few blogs I would present some of the analyses. See if you can make use of them(at worse, this exercise will at least help me revise ;)

Psychology of money (or rather spending it)

We are bad at considering opportunity costs(especially across time and across categories) when making spending decisions. Instead of considering opportunity costs which would be the right thing to do, we use other things like relativity in prices, discounts, mode of payment etc to justify our decision.
As an example consider the last time you went to buy a Shirt. What did you consider while deciding in favour of the particular shirt you bought? It's price and quality relative to other shirts? Did you consider that, with the same amount you could buy coffee for next 200 days or with the same amount put in bank, you could buy a mobile phone 10 years down the line!

We see our expenses in relative terms when it actually doesn't matter! When we spend 2000, we spend 2000! it doesn't matter whether it was spent relative to an another expense of 20000 or 200.
For example, you would happily go to the other end of city for cheap movie tickets( for saving say Rs 100 ) Would you do the same if a shop is offering 0.5% discount on the Rs.20k mobile phone you want to buy? However, in both cases money saved is 100 Rs! Money doesn't know whether you bought a movie ticket or a phone.

Pain of paying is important- more the pain, lesser we spend. Pain of paying is the most when we pay for something directly in cash and decreases as the mode of payment moves further away from cash.
Ever wondered why expenses tend to increase when you make all payments through card? So, the next time when you want to control your expenses, increase the pain of paying! Some of the ways to do that is to keep less money in your wallet, always pay through cash and keep a record of expenditures.

We believe in being fair to others. Our willingness to pay for a service depends on our perception of the cost we incur to the service provider in terms of time/effort/expense and we want to pay an amount which would adequately compensate the provider( Classical economics says that we should be willing to pay more/less for a service according to the pleasure we derive from the service).
Consider this, scenario one: you call a mechanic who takes a long time to fix things, it vlearly seems from his actions and expressions that he os putting in a lot of effort. Scenario 2: You call a mechanic for the same work; only this time he is very skilled in the work, he does it in minutes and apparently without much effort. Whom would you be willing to pay more? (IT friends, does it ring a bell? My colleague stays late in office without doing any productive work, but gets a better rating...)
Moral of the story: it's important that you work hard but it's also important to show that you work hard!

Other similar posts:
Why do we spend irrationaly?
Who is in control of your decisions?

Follow Dan Ariely at: http://danariely.com

- Abhishek Kumar

Motion Chart to visualize how the components of India's GDP changed over the years

The Motion Chart is at: http://goo.gl/cYtmOz

Data for the chart was taken from rbi.org (once again! rbi.org is a good source for statistical data on India's growth parameters) and plotted through Google Motion Chart API.
Google Motion Chart API is in JavaScript and it expects data in a particular format. The best way to understand the API would be to look at the source code of the chart web-page and the documentation of the API.
Oh! and the html page for the chart needs to be on a web server, I used the free web hosting service from 000webhost.com (thanks to them!)

Some technical details:
The final html file loaded into the browser looked like this.
Data from rbi.org, after some cleaning looked something like this.
I used this Python script to make things easy and generate some part of the code for JavaScript for the data for chart(manually, it would really be a pain). It took the cleaned data file as input and generated this, a representation of data in a format understood by API.
Though, looks like it is possible to create json string from data and pass it to API, that would perhaps be a better way to do it.

- Abhishek Kumar