God, Light and Money

At a recent Discourse I attended on Bhagavad Gita, the Swamini from Chinmaya Mission took the topic of Real vs. Unreal as outlined in the Bhagavad Gita (Chapter 2 Verse 16). The verse for the benefit of readers is reproduced as follows:

nāsato vidyate bhāvo nābhāvo vidyate sataḥ
ubhayorapi dṛiṣhṭo ’nta stvanayos tattva-darśhibhiḥ

Translated by her, it means that the supreme reality always remains real and the materialistic unreality will always remain unreal. Real can never be unreal and unreal can never be real.

To help the audience understand this statement, she drew the example of a tree which starts its life as a seed beneath the earth, grows as a plant, becomes a tree, serves as wood, converted into a table, thrown away as scrap, recycled as pulp, used as paper and finally settles back to earth. In all its shapes and forms during this journey, the unreality is the temporary form it assumed and the reality is its existence as a being. In summary, the one that is real is the changeless characteristic of its existence and the unreality is the form and shape it takes in due course. In the context of human life, so she concluded, that the materialistic decomposition of life (into pancha boothaas) is unreal, its supreme form – the Brahman remains real.

My thoughts went suddenly around my recent blog post where I discussed the Raman Effect (that occurs when a light spectrum is passed through a transient medium). The real vs. unreal dilemma explained by Swaminiji, in my understanding, is also perfectly explainable with the light as an example, and that is what I argued with her during the course of the lecture.

The light (not the ones we see from generation of electricity but the natural light that brightens the day) is also, similar to the tree, starts from an unknown eternal source. Hinduism treats this eternal source as the SUN God and so do the physics to a certain limited extent agree. From a scientific point of view, the light (wave or particle – depending upon the scientific study we want to base upon our argument) from this unknown source (say as lightlessness – absence of any color) moves towards infinity (again the state of lightlessness or eternity or infinity).

During the time it encounters with the atmosphere, light passes through the transient medium (which for understanding purpose – consider as a prism). In the process, it generates different wave-lengths, the reflections of which on our eyes are considered as colors (seven of them to be crude – VIBGYOR). So going back to the Gita verse, while the existence of light is reality, the shape it takes (through bulbs, or electronic gadgets) and the reflections it generates (through a spectrum of colors) is unreal – since it is temporary. And to that extent this light phenomenon, similar to the existence of life, is also somewhat linked to God (You may ponder upon why the Chariot of Sun God has seven horses exactly the number of colors in VIBGYOR).

May be this is the reason why we succumb ourselves to the light as God praying:

deepam jyoti para brahma, deepam jyoti paraayane
deepeNa varadaa deepam, sandhyaa deepam saraswati

(Meaning: This light is equal to God, makes all our wishes come true. The light that removes darkness from our lives and enhances our wisdom and knowledge, we salute to such light).

My further thoughts then went to my favorite topic – money and banking. Interestingly, the analogy of God and Light, from the dimensions of Reality and Unreality works even in the context of Money. Like God and Light, even the definition of Money is uncertain (to even most of the economists – see the number of books on Money that were written after the financial crisis). Money is what money does, concludes economists when questioned too much to give a precise definition of money.

We may argue that the coins, currency notes, cards, electronic wallets, and the cheques that we use in our daily lives are money. But they are forms of money and not money themselves. It is indeed the reason that the Central Bank Governor also promises to pay the bearer a certain sum when the closest form of money (the currency note) is brought to the Central Bank (while all the other forms of money are exchangeable with the issuer by a currency note). It is an acknowledgement that the currency note itself is not money but it is merely a sum guaranteed by the Government and this guarantee is operationalized through the Central Bank as Money.

May be this is the reason we consider Government as the Sovereign (or the unquestionable – the way we tend to label God as the Supreme). Remember the way it is hailed in the era of Kings – King is Dead, Long Live the King – which means, while the person who is momentarily called as King is Dead, the supreme force that should rule the kingdom is wished by the citizens to live long. Same way in the democratic Governments, we keep saying – of the people, by the people, and for the people. In other words, Government is nothing but the people constituting it – a philosophical version of saying – Aham Brahmasmi – I (the Citizen) am the Government.

Being a Sovereign, the monetary system (like that of human life) is the creation of the Government (like that of God). This is operated through the Central Bank (like that of Maya) which results in momentary feeling of the things we hold – gold, coins, currency notes, cards, electronic wallets – as Money. In fact, like human life, which begins with God and reaches the eternity at the end, money too begins with the Government issuing its bills based on which Central Bank initiates the circulatory system of Money. Money passes through various forms and institutions and ultimately reaches government in the form of taxes or bailouts.

So, whoever is in the temporary belief that he is in possession of money and is wealthy, is only taking pleasure of the Unreal, in terms of Gita. The reality is that this possession of wealth is at the mercy of the Governments to whom we gave the right to rule us and the Maya of Central Banks through which these Governments operate the monetary system.

May be that’s the reason, hoarding of money, without either consuming it or distributing it, is throughout denounced by all the Hindu thinkers and dharma shastras. Consider the verse to reflect upon this:

dAnaM bhogo nAshastistrI gatayo bhavanti vittasya;
yo na dadAti na bhu~Nkte cha tasya tR^itIyA gatirnAshaH

(Meaning: Money is destined to go in one of these three ways only – charity, enjoyment, and destruction. One who neither spends in charity, nor enjoys it, his is sure to go by the way of the third, i.e. destroyed).

One should keep always in mind that the best use of Money, like life and light is to see it as “Pass-Through-Certificate” rather than try to treat it as permanent. If you don’t believe this soon, the God will make you realize it in His own terms – either in the form of death, day-end or demonetization.


An out-of-the-Box thinking on a Budget Day !!!


Finance Ministers from the NDA Government are known for moving away from some of the rituals associated with presenting the Union Budget.

Earlier, the Budget used to be presented at 5 pm, which was essentially a continuation of the colonial-era practice (to ensure that Budget in India and the Budget in UK are presented at the same time, during the pre-independence period). It was during the previous NDA government of Atal Behari Vajpayee in 1999 when this ritual was changed. That year, the budget was presented by Yashwant Sinha at 11 am on the Budget day.

PM Modi’s government also made another change by bringing the Budget ahead by a month to present it on February 1.

However, there is one Budget related tradition which is still carried on by the current Finance Minister. That is posing before the journalists with a Budget Box in his hand on the day of presenting the Budget. A peek into history reveals that this ritual also has its roots in the colonial British rule in India.

To understand this, one needs to understand the term “budget” etymologically. It was derived from the Old French word bougette, meaning a “leather bag”. The word originally meant a pouch or wallet, and later its contents.

The usage of this Budget (aka a carrying box to be simple) in the context of Government Finances of the United Kingdom (UK) is generally traced back to 1860. It was then the Chancellor of British Exchequer William Gladstone carried his documents in a Red Box when he went to Parliament. He then presented his annual statement, by “opening the budget” and spoke for good long four and half hours.

The UK Budget Box is typically a red leather-on-pine box lined with black satin, with the letters VR – for Victoria Regina – embossed on its surface. It belonged to a large family of red briefcases that have been manufactured, since the early 1800s, for British ministers by the London firm Barrow and Gale.

Since 1860, the same box was used until 2010 when it was retired to be kept in the Museum owing to its frail condition. Notable exceptions to the same were by the Chancellors James Callaghan (1964–1967) and Gordon Brown (1997–2007), who had new ones commissioned in 1965 and 1997 respectively. Gladstone’s budget box was used back by Alistair Darling (2007–2010) and by George Osborne till June 2010.

In India, a similar tradition goes back to independent India’s first ever budget presented by RK Shanmukham Chetty on November 26, 1947. The budget photograph shows Chetty, wearing a dark, pin-striped, three-piece suit, and carrying what looks like a leather portfolio bag. Ten years later, T T Krishnamachari poses with a slender file instead of the usual budget box.

Successive Finance Ministers used different budget boxes typically procured by the Finance Ministry. It is understood that the Finance Minister is presented with the choice of three or four boxes of which he picks one depending upon the color. That’s why in India we see some of the Budget sessions where Finance Minister is even holding a black Budget Box.

To conclude, the Box that carries the proposals designed to impact our future thus owes its history to the rituals carried from our historical past.

Hóng Bāo – Where Cultural Tradition is “Nudged” by Cash-less Technology


Since the on-set of demonetization, I have been enthusiastically reading articles about the way in which behavioral economics could help in public policy decision-making.

The reason is fairly simple. At the heart of demonetization, there is an enormous challenge to bring about drastic changes to transacting behavior of Indian public. And it is in this context, I chanced upon the tool called as “Nudging”.

Nudging is a concept in behavioral economics and is imported from cybernetics – the term loosely used to denote gaining control of any system using technology. In its truest form, it’s a trans-disciplinary study drawing references from biology and engineering.

Simply put, nudge is any aspect of choice architecture that aims at altering people’s behavior in a predictable way. The aim is to bring about change in the behavior without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to adopt. Nudges are not mandates. In the words of Richard Thaler and Cass Sunstein, “putting fruit at eye level counts as a nudge – banning junk food does not”.

Now linking back this tool to the attempt of bringing about changes to transaction behavior of Indian public. On one hand, there can be regulatory attempts to impose restrictions – direct or indirect – on cash-withdrawals. But on the other hand, there can be a systematic way to influence the payment behavior by using cultural events and gifting traditions.

The tradition of Hóng Bāo during the Chinese New Year is a case in point. Literally translated, Hóng Bāo is a “Red Envelope” through which the elderly people gift cash to younger ones on the eve of the Chinese New Year. The excitement around this event is so visible with several Red Packets drawing attention at any of the local stores, malls and public places during this season.

The red color of the envelope symbolizes “good luck” and is a symbol to ward off evil spirits. The amount of money stuffed in the envelope usually ends with an even digit. Care is taken to ensure that the amount does not contain 4 (like 4 or 40 or 444) as the Chinese pronunciation of four is homophonous to the word death.

 During the Chinese New Year holiday in 2014, the local mobile instant messaging service WeChat introduced a new feature to its electronic wallet function in the mobile app. It digitized the concept of “Red Envelope” by creating virtual red envelopes of money via the wallet platform. One can load the Wallet with some random amount and send it as a New Year wish to the contacts in the phone. The system distributes the amount randomly to the contacts who keep opening the message. It’s fun to watch this during the festive season as an additional amusement to the traditional way of wishing each other.

The popularity turned to be a business warfare between WeChat and its competitor Alipay which also added similar messaging service later. Analysts estimate that over 100 billion digital red envelopes would have been sent over the New Year holiday in 2017.

On one hand, it’s a tradition that is made out to be more fun by adoption of technology. But at the heart of it, it has led to discouraging the use of Cash even at the eve of traditional social gifting occasions like a New Year holiday. A behavioral change was slowly introduced, without any change in economic incentives to the public. It was easy and cheap to adopt and avoid as the way public would choose to. It’s not a mandate but a psychological tuning of the peoples mind to remain contemporary in technology usage.

India is a land of similar customs and traditions. It will not be a bad idea to explore how these can be technologically leveraged for promoting digital transaction behavior amongst the common public.


Image Courtesy: www.money.cnn.com




Dr. B R Ambedkar – The architect of Republic of India and The Reserve Bank of India

As India celebrates its 68th Republic Day, it is usual for us to review history and remind ourselves of the significance this day holds to the nation. There are two significant events that many of us (including myself till about recently) are not aware of when talking about Republic Day.

The first one is of course, all of us are aware of the fact that this day is to honour the date on which the Constitution of India came into effect on January 26, 1950 replacing the Government of India Act (1935) as the governing document of India. But that is not all. The Constitution of India was adopted by Indian Constituent Assembly on November 26, 1949 and came into effect from January 26, 1950. The effective date was chosen as January 26 because it was exactly on that day in 1930 that the Indian National Congress proclaimed the Declaration of India’s Independence (Purna Swaraj) as opposed to the Dominion status proposed by the British Empire.

The other important fact is that the association of Dr. B R Ambedkar as the architect of the constitution of India is formally recognized only on this day, while for the rest of year he is recognized only for his contributions towards upliftment of Dalits (untouchables).

In my view, remembering Dr. B R Ambedkar only as the architect of the Republic of India’s governing document i.e., the Constitution (and as a Dalit leader) will only means celebrating his legacy partially. Unknown to many, Dr. Ambedkar is also the architect of the Reserve Bank of India’s (RBI) conceptual framework.

Indeed, RBI was conceptualized as per the guidelines, working style and outlook presented by Dr. Ambedkar in front of the Hilton Young Commission. When the members of the Royal Commission on Indian Currency and Finance, as it was formally known, came to India in 1926, each and every member of this commission were holding Dr. Ambedkar’s book named “The Problem of the Rupee – Its origin and its solution.”

The Book was first published in 1923. Ever since its publication it has had a great demand; so great that within a year or two the book went out of print. The demand for the book has continued, but unfortunately Dr. Ambedkar could not bring out a second edition of the book for the reason that his change-over from economics to law and politics left him no time to undertake such a task. Therefore he, devised another plan: it was to bring out an up-to-date edition of the History of Indian Currency and Banking in two volumes, of which The Problem of the Rupee forms volume one. Volume two will contain the History of Indian Currency and Banking from 1923 onwards. The official historical archives of RBI start with the developments from 1920s onwards.

And if we go deep into history, one would notice that Dr. Ambedkar was the first Indian economist who was trained abroad. He was also the first political leader of India with formal training in economics. He was awarded double doctorate in economics (one from London School of Economics in 1923 and from Columbia University in 1926). It seems that during the years he spent at the Columbia University he took 29 courses in economics, 11 in history, six in sociology, five in philosophy, four in anthropology, three in politics and one each in elementary French and German, according to the Columbia website. The book, “The Problem of Rupee” was his thesis presented to the London School of Economics.

And to recollect these overseas intellectual experiences of Dr. Ambedkar in his own words – “My five years of staying in Europe and America has completely wiped out of mind any consciousness that I was an untouchable, and that an untouchable wherever he went in India was a problem to himself and to others.”

We would be really doing disgrace to him if we celebrate his legacy only a leader from an untouchable community who is the architect of the Constitution of India, and do not commemorate his contributions to the establishment of Reserve Bank of India.

Happy Republic Day.

Monetary Design Policy and Central Bank communication

‘When bankers get together for dinner, they discuss art. When artists get together for dinner, they discuss money. When Central bankers get together for dinner, they could discuss more often their own banknotes as a form of art.
– By Oscar Wilde (1854-1900) as modified by De Nederlandsche Bank NV

The aftermath of the global financial crisis of 2008 saw a renewed interest in the role of monetary policy as a communication tool of central banks. Several research papers analyzed the signal and noise aspect of the central bank communication strategy while dealing with the monetary policy. While the global academia is busy in monetary policy research, the currency swap exercise (aka the demonetization) in India presented me an opportunity to peek into the less nuanced area of economics research – designing policy for monetary instruments (currency notes).

The Government of India announced the currency swap exercise on November 8, 2016. The announcement called the citizens of India to exchange their old High Denomination Notes (of value of Rs. 500 and Rs. 1000) with the banks and offices of RBI in a time-bound manner. New notes of value of Rs. 2000 and Rs. 500 were introduced by the RBI with new design features.

Series of articles have been written in last two months carrying out critical analysis of the design features of the new currency note. The New currency notes are of different color shades from prevalent ones (Rs. 2000 is of magenta color and Rs. 500 note is of stone-grey colour). The notes on obverse side feature a portrait of Mahatma Gandhi as well as the Ashoka Pillar Emblem, with a signature of Reserve Bank of India Governor. They have the Braille feature to assist the visually challenged in identifying the currency. The reverse side features a motif of the Mangalyaan, depicting the India’s first interplanetary space mission (for Rs. 2000 note) and of the Red Fort, depicting the India’s heritage site (for Rs. 500 note). Both the notes have the logo and a tag line of Swachh Bharat Abhiyan.

The new design thus brings about elements of identity of currency note through the physical color it is projecting, the public accessibility it is providing, the national theme it is preserving and the social message it is presenting. It is interesting to note that these elements are now catching the attention of central banks across worldwide while debating the design of the respective currency notes.

For instance, from a physical accessibility perspective, most nations have made their currency notes are braille compliant. The counterfeiting technology is also catching up with the latest trends with the introduction of polymer currency notes (starting with Reserve Bank of Australia and followed by other countries such as Canada, United Kingdom, New Zealand, Republic of Maldives and Nepal). However, the design element of the currency note has not been subject to rigorous academic research. Design considerations such as – What kind of emotions should currency notes evoke? Should they exude happiness or create a warm feeling? Which story should be told? In other words, what is the identity of the currency notes issued? – are not widely discussed academic topics even though from a cognitive perspective they evoke the trust factor that the currency notes intend to provide as assurance to public.

It would be thus an interesting research study if one would to look at the elements that go into the design and identity of the currency note. A good starting point would be to look at the De Nederlandsche Bank NV occasional paper on this subject titled, “Designing Bank Note Identity” (2012). It introduces the reader to several design methods to support the development of an identity policy, like positioning and balance diagrams, familiarity and design freedom. The paper further describes 37 design elements, divided into currency and bank note elements.

From an economics standpoint, another paper by Williams and Anderson (2007), states that the “currency design problem” could be framed as a constrained optimization problem in which the objective is to maximize the contribution of circulating currency to social welfare. In a scenario of no constraints (both economic and technical), social welfare is maximized by producing currency notes that contain “all” desirable features, including those that deter illegal reproduction, make denomination rapid and accurate, make the currency easily used by the blind and visually impaired, and (as with machine-readable features) minimize the cost of high-volume currency handling by third-parties. However, since it is reasonable to believe that the objective functions of monetary authorities differ (for example, some might have a relatively larger fraction of their currency notes in circulation abroad, or might have a relatively more highly educated population, or might face relatively higher labor costs for currency handling), the solutions to their optimization problems—the resulting currency designs—will differ.

From a public policy standpoint, the “currency design problem” encounters public debates on various aspects such as gender diversity, national achievements and aesthetics. For instance, after much public discussion and debate, UK is releasing new GBP notes with prominent public figures such as Sir Winston Churchill (the only British Prime Minister who received Nobel Prize for literature) on GBP 5 polymer note, Elizabeth Fry (social reformer) on the GBP 5 paper note, Jane Austen (celebrity author) on GBP 10 paper note, Adam Smith (father of Economics) on GBP 20 paper note and Matthew Boulton and James Watt (business partners who developed steam engine) on GBP 50 paper note. Similarly, the U.S. Treasury announced in April 2016 that Harriet Tubman, who led hundreds of slaves to freedom, will become the first woman and the first African-American to appear on the face of U.S. currency, taking the place of Andrew Jackson on the USD 20 bill.

Of late, designing currency notes to make them look “cool” with little risk-taking and imagination, has become an interesting topic in social media. For instance, a thesis project (by Travis Purrington) regarding the proposed US dollar redesigned note submitted to the Basel Design Institute caught up social media attention as it chose to celebrate science as a theme instead of the Presidents. The researcher admits that it would not be accepted by the Federal Reserve considering the set process it has for redesigning the currency notes. But Norwegian Central Bank went ahead and unveiled its new currency notes in November 2016, which are for the first time in monetary history not adorned with portraits, but instead pay homage to Norway’s tight bonds with sea through pixilated image architecture.

Currency note is in a way the ambassador of the country and the culture it represents. It represents the front or show piece of a nation, often referred to as the calling card or business card function. They are the tools of visual communication for the message of stability that the central bank of the country as the monetary authority intends to convey to the nation. However, adequate academic attention is yet to be received to this interesting study that cuts across topics of cognitive science, art, visual communication and national culture – apart from traditional concepts of technical authenticity and physical accessibility.

A curious economist would therefore end up in an interesting research project if he could keep in mind the words of President Duisenberg of the European Central Bank (ECB) who in 2003 referred to this identity function of the currency notes and wrote that they ‘are not only a means of payment, they are also pieces of craftsmanship, reflecting the soul of the nation’s issuing them.’

Happy New Year

Yes, indeed its a belated Happy NEW Year wish.

All along these years, when I wished everyone a very happy NEW year, it was a formal wish with not much exciting NEW stuff about the year, except that it was the beginning of one more calendar year.

Year 2017 of course has been very special and indeed NEW for me from different perspectives.

Its gonna be NEW for me because,

As a public policy enthusiast, I am keen to see how unprecedented sweeping NEW public policy changes in areas of anti-corruption would be judged by voting public of the country.

As a banker, I am excited to see how the NEW digitisation drive is going to bring about a disruptive change to the payment culture of the common public.

As an economist, I am eager to learn how the NEW perspectives of behavior economics and cognitive science will redefine the traditional contours of mainstream economics.

As a researcher, I am interested to study how perspectives of emerging economies will shape up building up of NEW institutions that could challenge the existing economic world order laid down in 1944 Bretton Woods Conference

As a reader, I am looking forward to read the NEW range of books on topics that synthesize wide range of topics like history of money with future of technology, geographical diversity with political dynamics, climatic conditions with economic prosperity, and financial innovation with sustainable development

And all of these finally because 

As an employee, of the NEW DEVELOPMENT BANK based in Shanghai, becoming a part of the institution-building journey of historical significance. 

From Cash to Trash to Ash The Journey of a 500 / 1000 Rupee Note


With an unexpected public announcement that is popularly dubbed as the “Surgical Strike” on the black money Prime Minister Mr. Narendra Modi unveiled a significant event in the Indian economic history. The announcement backed by the statutory changes and the recommendation of the Central Board of Reserve Bank of India (RBI) rendered all High Denomination Notes of the value Rs. 1000 and Rs. 500 as invalid for legal tender.

People often refer to this as demonetisation and there are various economic analyses of the pros and cons of this process. Of particular interest to economists is the manner in which the RBI is finally going to handle the withdrawn notes from circulation. To take a back-of-envelope calculation, out of the Rs. 17 lakh crore worth of currency notes in circulation (at March 2016 as per RBI reports), 80% or Rs. 14 lakh crore (approx.) is in the HDNs. Now there is this element of black money that was hoarded in cash hitherto, a portion of which may not be turned up to the formal banking channel for exchange with new notes for possible taxation aspects. Assuming if the notes worth of Rs. 12 lakh crore have been tendered for exchange with new HDNs, two questions merit attention would be:

  1. What happens to the Rs. 2 lakh crore that is currently residing as liability of central bank (issued in the form of currency in circulation) but has not been tendered for exchange?
  2. What happens to the physical currency notes worth of Rs. 12 lakh crore that are tendered for exchange with RBI as they no longer represent currency note of value, but a mere physical paper?

The views of economists w.r.t. the first question (a) seem to be divergent. Since these are forming part of liabilities of RBI, and are (after the last date for exchange of old notes with new notes officially as per law) unclaimed notes, these can either be transferred to reserves or can be used to set off against the government bills against which these notes have been issued in the first place. The most plausible explanation seems to be that these liabilities need to be phased out in tandem with the tenancy of the government T-bills against which these are issued in first phase.

While the final action that is going to be taken by RBI can only be known in future, there seems to be some good precedence for the possible answer to the second question. Historically, the activity of exchanging the old notes with new notes is undertaken by RBI on a regular basis (remember the soiled notes concept?). Now these all notes are sorted by RBI manually once again to see if they are re-usable notes. After this, these notes are subject to the machine scrutiny named as Currency Verification Processing Systems (CVPS).

Each CVPS is capable of processing 50,000-60,000 notes per hour. It counts, examines the genuiness of notes, sorts notes into fit and unfit and destroys the unfit notes on-line. The shreds are on-line transported to a separate briquetting system where they are compressed into briquettes of small size. The system is also environment-friendly, as it does not create pollution that was created by burning of notes in the past. The briquettes can be used as residual fuel in industrial furnaces. They can even be used for land fillings or for making items for use at office and home and paperboard.

Even in the United States this briquetting technology is administered with utmost security standard so that the currency is crushed almost to the extent of a powdered form (so that there is no security information that can be gleaned from these pieces). The briquettes are then used in several major military installations that still use some coal-fired furnaces on their campuses. These installations can augment the coal by co-mingling it with wastepaper briquettes, meaning lower emissions and a little less pressure on how much coal gets used.

In Hungary, the government decided to use these briquettes to help the needy in the deadly cold snap. Hungarian central bank pulped wads of old notes into briquettes to help heat humanitarian organisations. Since these briquettes have a high calorific value, they require only a few bits of wood and the rooms are kept really warm.

The journey of a currency note thus begins its life as cash once the notes are issued into circulation by the country’s central bank, becomes a trash once they are stripped off its legal tender status by law and finally becomes ash when they are briquetted and finally destroyed. And mind you, in the end, it is not the “money” that is getting destroyed, it is just the “currency note” that is being destroyed, which by virtue of its legal status played an important role for a major part of our life – and subsequently lost its life legally.