Debt versus Equity Financing. Why the Difference matters?


There is a lot of confusion between debt and equity financing, though there is a clear line of demarcation as such. Whats even more sorry as a state of affair is these jargons being used pretty platitudinously, and this post tries to recover from any such usage now bordering on the colloquial, especially on the activists’s side of the camp.

What is Debt Financing?

Debt financing is a means of raising funds to generate working capital that is used to pay for projects or endeavors that the issuer of the debt wishes to undertake. The issuer may choose to issue bonds, promissory notes or other debt instruments as a means of financing the debt associated with the project. In return for purchasing the notes or bonds, the investor is provided with some type of return above and beyond the original amount of purchase.

Debt financing is very different from equity financing. With equity financing, revenue is generated by issuing shares of stock at a public offering. The shares remain active from the point of issue and will continue to generate returns for investors as long as the shares are held. By contrast, debt financing involves the use of debt instruments that are anticipated to be repaid in full within a given time frame.

With debt financing, the investor anticipates earning a return in the form of interest for a specified period of time. At the end of the life of a bond or note, the investor receives the full face value of the bond, including any interest that may have accrued. In some cases, bonds or notes may be structured to allow for periodic interest payments to investors throughout the life of the debt instrument.

For the issuer of the bonds or notes, debt financing is a great way to raise needed capital in a short period of time. Since it does not involve the issuing of shares of stock, there is a clear start and end date in mind for the debt. It is possible to project the amount of interest that will be repaid during the life of the bond and thus have a good idea of how to meet those obligations without causing undue hardship. Selling bonds is a common way of funding special projects, and is utilized by municipalities as well as many corporations.

Investors also benefit from debt financing. Since the bonds and notes are often set up with either a fixed rate of interest or a variable rate with a guarantee of a minimum interest rate, it is possible to project the return on the investment over the life of the bond. There is relatively little risk with this type of debt financing, so the investor does not have to be concerned about losing money on the deal. While the return may be somewhat modest, it is reliable. The low risk factor makes entering into a debt financing strategy very attractive for conservative investors.

What is Equity Financing?

Also known as share capital, equity financing is the strategy of generating funds for company projects by selling a limited amount of stock to investors. The financing may involve issuing shares of common stock or preferred stock. In addition, the shares may be sold to commercial or individual investors, depending on the type of shares involved and the governmental regulations that apply in the nation where the issuer is located. Both large and small business owners make use of this strategy when undertaking new company projects.

Equity financing is a means of raising the capital needed for some sort of company activity, such as the purchase of new equipment or the expansion of company locations or manufacturing facilities. The choice of which means of financing to use will often depend on the purpose that the business is pursuing, as well as the company’s current credit rating. With the strategy of equity financing, the expectation is that the project funded with the sale of the stock will eventually begin to turn a profit. At that point, the business not only is able to provide dividends to the shareholders who purchased the stock, but also realize profits that help to increase the financial stability of the company overall. In addition, there is no outstanding debt owed to a bank or other lending institution. The end result is that the company successfully funds the project without going into debt, and without the need to divert existing resources as a means of financing the project during its infancy.

While equity financing is an option that is often ideal for funding new projects, there are situations where looking into debt financing is in the best interests of the company. Should the project be anticipated to yield a return in a very short period of time, the company may find that obtaining loans at competitive interest rates is a better choice. This is especially true if this option makes it possible to launch the project sooner rather than later, and take advantage of favorable market conditions that increase the projected profits significantly. The choice between equity financing and debt financing may also involve considering different outcomes for the project. By considering how the company would be affected if the project fails, as well as considering the fortunes of the company if the project is successful, it is often easier to determine which financing alternative will serve the interests of the business over the long-term.

In summation, equity financing is the technique for raising capital organization stock to speculators whereas debt financing is the technique of raising capital by borrowing. Equity financing is offered forms like gained capital or revenue while debt financing is available in form of loan. Equity financing involves high risk as compare to debt financing. Equity holders have security but debt holders don’t have. In equity financing, entrepreneurs don’t need to channel benefits into credit reimbursement while in debt financing, entrepreneurs’ have to channel profit into repayment of loans.


Is Indian GDP data turning a little too Chinese? Why to be Askance @ India’s Growth Figures?


India defied expectations on Tuesday to retain the title of the world’s fastest growing major economy, despite the pain caused by Prime Minister Narendra Modi’s shock crackdown on cash.

Annual gross domestic product (GDP) growth for the October-December period came in at 7.0 per cent, a tad slower than 7.4 per cent in the previous quarter but much faster than the 6.4 per cent expansion forecast by economists in a Reuters poll. Economists are scratching their heads its almost seen for the economy is untouched by demonetisation now you are one of the strongest defendant of demonetisation. Would you agree that the economy was almost left untouched by demonetisation some pain was warranted was it not?

Shaktikanta Das: As we have explained earlier, we have to go by real statistics. Now, when the Q2 figures where the second quarter figures for the current year released the advanced estimates were released that time also we had explained that we have to go by real statistics and not by anecdotal evidence.

Being the fastest-growing large economy in the world is India’s destiny, and even the most poorly conceived economic policy imaginable can’t stop destiny….To say the data is startling is an understatement. The IMF had predicted that India would grow at around 6 percent in the half-year after “demonetisation,” as it’s called. Most independent economists forecast GDP growth would come in somewhere between 6 and 7 percent. Those economists naturally assumed that withdrawing 86 percent of the country’s currency and reducing access to bank accounts would dampen private consumption.  

Yet if one believes the government’s numbers, taking away most of India’s cash overnight didn’t hurt private spending at all. In fact, private consumption rose by 10.1 percent over the quarter. That’s the highest growth in spending in over five years, and it came at a time when consumer confidence was falling sharply. 

My take on the statistics:
Well, this is a simple tweaking of the equations that differentiate the growth curve. In short, we have all been a part of exams where 9/10 is different from 99/100, even if just one number distances the actual score from the maximum one could score. On similar lines, the crimes of growth are factored in on growth year/base year. This is mathematical jugglery narrowed in on political ends. Whichever way one looks at the data, some of the indicators are still found lagging the composite growth, thereby dumbing down the economists when the growth curve mandates a pattern recognition.
GDP, when calculated at Factor Cost is related with GDP at Market Price, and written as an equation of the form,
GDP (FC) = GDP (MP) – indirect takes + subsidies
While, Gross Value Added,
GVA (basic prices) = Sum (net of production taxes & subsidies) to GDP (factor cost)
Stamp duties and property taxes make up the production taxes, whereas labour, capital and investment subsidies are the other half. Why is this done? To inflate GDP after it starts representing the GDP of a country in terms of total GVA, i.e. without discounting for depreciation. Moreover, GDP at market price adds taxes and deducts subsidies on products and services to GDP at factor cost. The sum total of the GVA in various economic activities is called the GDP at factor cost. With a change in method and a subsequent change in base year, India has increased or rather expanded its manufacturing base in the sense of capturing it.  This has also enabled the country to include informal sectors, which hitherto had not found its true manifestation. This is mere adherence to standards that become internationalized.
Now, what happens in India’s case is the part subsidies, which has been the fixed denominator for our GDP, unlike most of the developed world, or even the developing economies. So, our GDP hitherto had largely been GDP (FC). After rearranging the equation above, GDP (FC) would have subtraction of the subsidies part, and yield GDP (MP), thus changing the base completely, and giving a large share of the economy as growing, rather than the dismal one predicted in the wake of demonetization. This has been effectuated since 2012 implying that whatever happens after demonetization, the growth period would project only redundant figures. Slip that into the quarterly period, and yes, the new base would indicate a growing economy, as used by the WB/IMF to forecast India growing more than China. So, there is nothing really dastardly an act here, but more about how to integrate the parts into the composite to yell at the world, we are growing.

Nobel Prize in Economics and Crimino(logy)/(genic). How Contracts Work? Note Quote.


How has the Swedish Central Bank’s committee that awards prizes in Economics in honor of Nobel responded to the field’s abject failures regarding the recent financial crisis and the Great Recession?  A lesser group would display humility, acknowledge its failures, and promise a fundamental rethink of the field.  Neoclassical economists, however, are made of sterner stuff.  The committee’s response is to praise the discipline for its theoretical advances and proposed policies related to finance, regulation, and corporate governance. Oliver Hart, and Bengt Holmström exemplify this pattern.

The economics prize is a bit different. It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give free-market economics for the 1% credibility. One of the Federal Reserve banks explained it succinctly, “Few realize, especially outside of economists, that the prize in economics is not an “official” Nobel. . . . The award for economics came almost 70 years later—bootstrapped to the Nobel in 1968 as a bit of a marketing ploy to celebrate the Bank of Sweden’s 300th anniversary.” Yes, you read that right: “a marketing ploy.”

The Economics Prize has nestled itself in and is awarded as if it were a Nobel Prize. But it’s a PR coup by economists to improve their reputation,” Nobel’s great great nephew Peter Nobel told AFP in 2005, adding that “It’s most often awarded to stock market speculators …. There is nothing to indicate that [Alfred Nobel] would have wanted such a prize.

Members of the Nobel family are among the harshest, most persistent critics of the economics prize, and members of the family have repeatedly called for the prize to be abolished or renamed. In 2001, on the 100th anniversery of the Nobel Prizes, four family members published a letter in the Swedish paper Svenska Dagbladet, arguing that the economics prize degrades and cheapens the real Nobel Prizes. They aren’t the only ones.

Scientists never had much respect for the new economic Nobel prize. In fact, a scientist who headed Nixon’s Science Advisory Committee in 1969, was shocked to learn that economists were even allowed on stage to accept their award with the real Nobel laureates. He was incredulous: “You mean they sat on the platform with you?”

Why economics? To answer that question we have to go back to Sweden in the 1960s.

Around the time the prize was created, Sweden’s banking and business interests were busy trying to ram through various so-called “free-market” economic reforms. Their big objective at the time was to loosen political oversight and control over the country’s central bank. According to Philip Mirowski, a professor at the University of Notre Dame who specializes in the history of economics, the

Bank of Sweden was trying to become more independent of democratic accountability in the late 60s, and there was a big political dispute in Sweden as to whether the bank could have effective political independence. In order to support that position, the bank needed to claim that it had a kind of scientific credibility that was not grounded in political support.

Promoters of central bank independence couched their arguments in the obscure language of neoclassical economic theory of market efficiency. The problem was that few people in Sweden took their neoclassical babble very seriously, and saw their plan for central bank independence for what it was: an attempt to transfer control over economic matters from democratically elected government and place into the hands of big business interests, giving them a free hand in running Sweden’s economy without pesky interference from labor unions, voters and elected officials.

For the first few years, the Swedish Central Bank Prize in Economics went to fairly mainstream and maybe even semi-respectable economists. But after establishing the award as credible and serious, the prizes took a hard turn to the right. Over the next decade, the prize was awarded to the most fanatical supporters of theories that concentrated wealth among the top 1% of industrialized society of our time. At the time of the prizes, neoclassical economics were not fully accepted by the media and political establishment. But the Nobel Prize changed all that. What started as a project to help the Bank of Sweden achieve political independence, ended up boosting the credibility of the most regressive strains of free-market economics, and paving the way for widespread acceptance of libertarian ideology.

The Swedish Riksbank awarded this year’s Nobel prize for economic sciences to Oliver Hart, a British economist at Harvard University, and Bengt Holmstrom, a Finnish economist at MIT, for their work improving our understanding of how and why contracts work, and when they can be made to work better.

Their work focuses attention on the necessity of trade-offs in setting contract terms; it is yet another in a series of recent prizes which explores the unavoidable imperfections in many critical markets. Mr Holmstrom’s analyses of insurance contracts describe the inevitable trade-off between the completeness of an insurance contract and the extent to which that contract encourages moral hazard. From an insurance perspective, the co-payments that patients must sometimes make when receiving treatment are a waste; it would be better for people to be able to insure fully. Yet because insurers cannot know that all patients are receiving only the treatment they need and no more, they employ co-payments as a way to lean against the problem of moral hazard: that some people will choose to use much more health care than they need when the pool of all those being insured picks up the bill. A common and important thread in work by Messrs Hart and Holmstrom is the role of power in planning co-operative ventures. Individuals or firms with the ability to hold up arrangements – by withholding their service or the use of a resource they own – wield economic power. That power allows them to capture more of the value generated by a co-operative effort, and potentially to sink it entirely, even if the venture would yield big gains for all participants and society as a whole. Contracts exist to shape power relationships. In some cases, they are there to limit the exercise of hold-up power so that a venture can go forward. In others, they are intended to create or protect certain power relationships in order to encourage good behaviour: workers or firms with the right to exit a relationship, for instance, force other parties to that relationship to take their interests into account. The broader lesson – that power matters – is one economics too often neglects.

The theory holds that the contracting costs between economic units are shaped by the nature of the interaction between them. These costs are not operational costs, such as commission fees or transportation costs. Instead, they stem from the lack of clarity and enforceability of the terms of the interaction and each unit’s dependence on the interaction. And, in the words of today’s prize winners, they cause contracts to be incomplete. 

Difficulties in Negotiating a Transaction

Difficulties in Monitoring an Ongoing Transaction

Difficulties in Enforcing an Agreement

When managers spot these sorts of problems on the horizon, a deal that potentially will create value may not get done because the contract is bound to be incomplete. The danger is that the contract will not specify how to resolve conflicts in the future. This is because the agreement between the parties does not cover all contingencies, all issues, or all possible states of the world. To govern a partnership successfully, then, you need to manage the gaps in the contract. Traditional management techniques call for command and control in these situations, to respond quickly and decisively to new conditions. But this solution is missing from typical partnerships, most of which are characterized by a sharing of control. It may be a formal joint venture with shared ownership or a looser arrangement whereby one party controls certain parts of the joint project and the other party controls others. So, each partner’s control in these combinations is also incomplete.

Neoclassical economic dogma is that money is the “high power” incentive.  Normal humans know that this is preposterous.  The highest power incentives are rarely monetary.  People give up their lives for others.  Some of them do so nominally for “duty, honor, country,” but actually because of the effects of “small unit cohesion.” A second neoclassical dogma is ignoring fraud and predation.  The 2016 prizes show how, despite their knowledge of the falsity of the implicit assumption, neoclassical economists repeatedly ignore the manners in which CEOs shape perverse incentives and render the Laureates’ compensation and governance policies criminogenic.  A third neoclassical dogma is, implicitly, to assume that perverse incentives do not influence CEOs and those they suborn.  Holmström and Steven N. Kaplan’s article about corporate governance in light of the Enron-era frauds unintentionally displayed this third neoclassical dogma about incentives. The fourth dogma is that regulation cannot succeed because it lacks “high power” incentives. Criminologists’ understanding of incentives and how CEOs set and pervert incentives is far more sophisticated than neoclassical economists’ myths about incentives.  Criminologists provide the content to how CEOs that predate “rig the system.”  Criminologists agree that perverse financial incentives are important contributors to white-collar crime.


Bad loan crisis continues: 56.4 per cent rise in NPAs of banks

Gross non-performing assets (NPAs), or bad loans, of state owned banks surged 56.4 per cent to Rs 614,872 crore during the 12-month period ended December 2016, and appear set to rise further in the next two quarters with many units, especially in the small and medium sectors, struggling to repay after being hit by the government’s decision to withdraw currency notes of Rs 500 and Rs 1,000 denomination………The RBI discontinued fresh corporate debt restructuring (CDR) with effect from April 1, 2016. Here, promoters’ equity was financed by the borrowed amount, that added the burden of debt servicing on banks. The CDR cell faced problems on account of delay in the sale of unproductive assets due to various legalities that were involved.


And despite the discontinuation, some strands of CDR are retained to say the least. Whats wrong and what must have gone wrong or perceived as such for the Central Bank to have withdrawn support to CDR. A small take follows.

15 per cent is still talking about minimalist valuations. The most important part of the whole report lies in CDR failing, and that too when promoters’ equity is getting funded on borrowed money, resulting in an intensification of burdens on banks’-directed debt financing. This directly cross-purposes with Sebi regulations regarding companies/corporations pledging their shares and then discovering that when such valuations compared with market capitalization slump down, this is really a fix, as companies where promoters have pledged a large share of their holdings are viewed with caution in that if a promoter defaults on this debt, the lender transfers the shares into their own hands on one hand, and when they need funds they dump this stock on the market on the other, leading to sharp movements in share prices. These fluctuations really nosedive when economy is on the downturn, forcing promoters to borrow against their shares (not that they do not do that otherwise) and all the more prompting them to go out and borrow to meet volatility checks denting the balance sheet health.



I might be now be better placed to outline my critique of the notion of Smart Cities and the political thereof. The example of China is valid, but more inclined towards the domestic sector where export-oriented growth imploded, leaving the realty estate in a vacuum. Assuming that these habitats lend values to their inhabitants, the point of rupture would lie in setting up ground for vendors and their allies and alliances with a techno-savvy cognitariat operating the digitally conceived spaces. These would be precisely license-free, for they would have ample expertise in architecture of infrastructure and communication lines. Such technological platforms with network connections would plug and play into monetising services involving access to subscriptions and the latest big-thing in town, ‘data analytics’. A successful implementation of such would mean economising any sharing applications with others venturing out to have their version of success involving a plethora of professions and professionals creating a viability gap between the cognitariat and the precariat. And this would be precisely the gap where political fires would be ignited, grounded, and without an across the gulf implementation, systems integration would only be diffused. Such a diffusion would do no politics any good, and only exacerbate the already fragile ecology. 

Instead, what needs to be done is not any replication of failed systems, but a cognisance of how such monopolistic citadels are recognised and how and what intensity-level of intervention is required. In the form of monetisation when it comes to providing services, my political take goes from the inhabitants being charged to a massive costs overhead involved in when others try and replicate this successful model across other cities. Thats where the related question of monopoly would get in, and thats going to be a war of the corporations that poses a scare for me. And this is a political battle We’d be up against.If Smart City is a dystopia, their planners are much smarter than we have thought of them hitherto. That unbundling is what I mean by flipping the coin. 

100 Days of #Demonetization. Citizens’ Protest on 19th February 2017.


The highs of demonetization when the Government can’t be LYING low.

Countering the Economic Emergency imposed ON the people. 
The Government has redefined Democracy, A form of Government BY the people, FOR the people, OF the people and crucially, ON the people. Rather than democracy, Demonetization has shown what DEMONcracy is all about. Please join in huge numbers on the 19th February 2017 for a Citizens’ Protest and shout out to the Government that Enough is Enough. 

#Demonetization #100DaysofDemonetization #CitizensProtest #JantarMantar

 नोटबंदी के 100 दिन 

धरना और रैली

19 फरवरी, 2017, रविवार , 12 बजे से 

मंडी  हाउस  से जंतर मंतर तक 

जंतर मंतर पर जनसभा और सांस्कृतिक कार्यक्रम

इसमें कोई गुंजाईश नहीं कि पिछले 100 दिनों में भारतीय जनता आर्थिक आपदा से जूझ रही है. 8 नवंबर 2016 की रात को प्रधानमंत्री ने 500 और 1000 के नोटों का विमुद्रीकरण कर इनके चलन को अवैध घोषित कर दिया और दावा किया कि इससे कालाधन पर रोक लगेगा, कर चोरी रुकेगी, आतंकवादी गतिविधियों के फंडिंग पर रोक लगेगी और जाली नोटों पर लगाम लगेगा. जिनके पास ये नोट थे, उन्हें जमा करने के लिए करीब 2 महीनों की मुहलत दी गयी और निकासी के लिए  भारतीय रिजर्व बैंक ने कई स्तर की सीमाबद्धता निर्धारित कर दी. भारतीय अर्थव्यवस्था जो मुख्य रूप से नकदी पर आधारित है और इसमें भी एक बड़ी तादाद ऐसे लोगों का है जिसे इस पूरे आर्थिक तंत्र से बाहर कर दिया गया है, वह केवल और केवल नकदी मुद्रा पर निर्भर है. यह गुहार किया गया कि “फौरी तौर पर थोड़ी तकलीफ सह लें” क्योंकि यह देश की सेहत के लिए बहुत जरूरी है. प्रधान मंत्री का यह आह्वान था कि इस “तात्कालिक मुसीबत” को झेल लेने से भारतीय अर्थ व्यवस्था की सारी बीमारियाँ ठीक हो जायेंगी.

लेकिन हुआ क्या? पूरे देश की जनता अपने बचत को जमा करने और नोट बदलवाने के लिए बदहवास बैंकों की कतारों में लगने को मज़बूर हुई. नए नोटों के लिए लम्बी और अंतहीन कतारों में लोग लगे रहे. इन कतारों में कई लोगों की जानें चली गयीं, बीमारों का समय पर इलाज़ नहीं हो पाया, सामाजिक कार्यक्रम जैसे शादी और मैयत के लिए लोगों को दर-दर की ठोकरें खानी पड़ी और ताने ये दिया जा रहा था यह कि देश की सरहद पर हमारे सैनिक अपना खून देकर आपकी रक्षा कर रहे हैं, और आप थोड़ी तकलीफ नहीं झेल सकते? पर उनका क्या जिनका किसी बैंक में खाता तक नहीं है. या उनका क्या जो बैंक या एटीएम से काफी दूरी पर हैं,वो अपना  नोट कैसे बदलवायें? उन लोगों का क्या जो अपनी छोटी-छोटी बचत को जमा करने के लिए अपनी दिहाड़ी छोड़ कर दिन भर कतारों में लगे रहे? उन महिलाओं का क्या जो बड़ी मेहनत और जतन से किसी विपदा के लिए वर्षों से कुछ बचा कर रखीं थीं? उन करोड़ों रुपयों का क्या जो कोआपरेटिव बैंकिंग सिस्टम में बचत कर के रखा गया था, जो अभी भी मुख्यधारा के बैंकिंग तंत्र से कोसों दूर हैं, लेकिन ये कई राज्यों में  करोड़ों लोगों के पैसे को हिफाज़त से रखते हैं? जो लोग इस मुसीबत को झेल रहे थे, मालूम हैं उनके लिए पी.एम. मोदी का समाधान क्या था? 9 नवंबर को लगभग तमाम अखबारों में विज्ञापन दिखा “अभी एटीएम नहीं पेटीएमकरो”

ऐसी क्या मज़बूरी थी कि सरकार यह नहीं बताना चाह रही थी कि अस्थाई मुसीबतें कैसे हमारे जीवन को, आजीविका को और अनौपचारिक क्षेत्र की अर्थव्यवस्था को स्थाई रूप से तबाह कर देगी . सरकार को पता होना चाहिए था  थ कि इस कदम के लिए न तो आरबीआई और ना ही बैंक पूरी तरह से तैयार थे, और यह कदम उल्टा पड़ सकता था. प्रधानमंत्री को यह निश्चित तौर पर मालूम था कि इससे कालाधन पर रोक नहीं लगेगा. अमेरिका-मेरिल लिंच बैंक के एक अध्ययन के मुताबिक अनुमान है कि सकल घरेलू उत्पाद में 25 % धन काली अर्थव्यस्था का है और इसमें महज 10 प्रतिशत हिस्सा ही नकद रूप में है. यानी कि 90 फ़ीसदी कालेधन का कभी भी नकदी के रूप में प्रयोग  नहीं रहा.  यह सच्चाई श्रीमान मोदी, श्रीमान जेटली और श्रीमान शाह अच्छी तरह जानते थे. आखिर क्या वजह है कि सरकार उसी जनता से लगातार झूठ बोल रही है, जिसके वोट से ये सत्ता में आये हुए हैं. आखिर किसके हितों को इस नोटबंदी के जरिये साधा गया.

जहाँ तक जाली नोटों का सवाल है, RBI का आंकड़ा दिखाता  है कि करीब 90.26 अरब भारतीय मुद्रा के नोट 2015-16 में चलन में थे, इसमें से मात्र 0.0007% ही जाली नोट थे. 2015-16 में इन नोटों का कुल मूल्य मात्र 29.64 करोड़ रुपये था जो कुल चलन में 16.41 लाख करोड़ रुपये का महज .000018 फ़ीसदी ही है. नोटबंदी का वास्तविक असर जैसा कि ढिंढोरा पीटा जा रहा था, बहुत ही आंशिक रहा . पुरानी कहावत  है कि “एक चूहे को पकड़ने के लिए पूरे घर को जला दिया गया”. इस नोटबंदी के पीछे यह भी तर्क दिया गया कि इससे देशद्रोही गतिविधियों के लिए फंडिंग रुकेगी. लेकिन क्या आज तक एक भी उदहारण देखने को  मिला जिससे कि आतंकवादी गतिविधियों में कोई रुकावट आयी हो? यदि कुछ प्रभाव पड़ा भी तो महज क्षणिक ही प्रभाव रहा जबतक कि नए नोट बदल नहीं लिए गए. नए  2000 और 500 के नोट पुराने 1000 और 500 के  नोट से कहीं ज्यादा देशद्रोही गतिविधियों के लिए माकूल हैं. तमाम गतिविधियों में नकदी का चलन बहुत छोटा हिस्सा है, यह ना तो आतंक का प्रेरणा स्रोत है और ना ही आतंकवादी गतिविधियों का मूल कारण. केवल एक ही दहशतगर्दी दिखी, वह थी सरकार द्वारा देश की जनता पर चलाई गई आर्थिक दहशतगर्दी.

आखिर यह पूरी कवायद क्या थी. हम भारत के लोग, पूरी शिद्दत के साथ अपनी आवाज बुलंद करते हैं कि हमें किसी अतिमानव (सुपर हीरो) की जरूरत नहीं जो अलोकतांत्रिक ढंग से काम करता हो और हमें सपने दिखाता  हो, और सपने बेच कर हमें उल्लू बनाता हो. हमें जनपक्षीय सरकार की जरूरत है ना कि कॉर्पोरेटपरस्त आर्थिक आपदा की. हम इस प्रकार के किसी भी आर्थिक और राजनीतिक  विमुद्रिकरण को अस्वीकार करते हैं, और पूरी शिद्दत के साथ मांग करते हैं कि हमें पारदर्शी और जवाबदेह सरकार चाहिए जो वर्त्तमान सरकार के कुतर्क तर्क और झूठे दावे “हमें मालूम है लोगों को क्या चाहिए” को पलट दे. हम आधार स्कीम के तहत सरकार के तानाशाही और दमघोंटू मुहिम का पुरजोर विरोध करते हैं और मांग करते हैं कि इस मुहिम पर तत्काल प्रभाव से राजनीतिक और न्यायिक दखल कर रोक लगाई जाय. हम मांग करते हैं कि सरकार नोटबंदी पर श्वेतपत्र जारी करे कि लोगों की जिंदगी और उनके आजीविका पर कितना प्रभाव पड़ा है और इसका तुरंत हर्जाना दे. हम मांग करते हैं कि कॉर्पोरेट द्वारा “कैशलेस” मुहिम को तत्काल वापस लिया जाय.

Indian people have undergone nothing less than an Economic Emergency for the last 100 days. On the midnight of 8/11/16, in a single pronouncement, the Prime Minister of India made higher denominations of Rs. 500 and Rs. 1000 illegal tender under the pretense of curbing black money, arresting tax evasion, stopping funding of terrorist activities and counterfeiting of currency. Those who had these notes were given a time frame of less than 2 months to deposit them and withdraw new denominations in different slabs of limits set by the RBI. The Indian economy, which is predominantly cash based and the Indian people, a great section of who are financially excluded, existing solely on hard currency, would somehow have to manage through this ‘temporary crisis’ for the greater good of the nation. This was the call of the Prime Minister to undergo ‘temporary hardships’ to root out the ills of the Indian Economy.

And so what happened? The country panicked and people rushed to banks to deposit their cash savings, exchange high denominations and lines formed. Long lines, winding unending lines full of people waiting to deposit and get new notes. People died in those lines, many patients could not get timely medical help, many social functions – marriages and burials got drowned in questions of “why cant you suffer a little for the country, when soldiers are giving their blood in the borders to protect you”. But what about people who never had a bank account? Or those too far away from a branch or ATM to withdraw or exchange? Or those whose earnings were so marginal that they could not spare losing a day’s work waiting in lines? Or women who had painstakingly collected money for emergency over many years? What about those crores of rupees that was saved through co-operative banking system, still far away from the mainstream banking operations – but was safeguarding the money of crores of people in many states? Modi’s solution for those suffering was clearly evident on the morning of the 9th, plastered on almost every major newspaper “abhi ATM nahin, Paytm Karo.”

What the government did not tell us was that these temporary hardships would leave a permanent damage on lives, livelihoods and disturb a major chunk of the informal economy. The Government should have known that with underprepared RBI and unprepared banks, the move was bound to backfire. In retrospect, the Prime minister surely knew that demonetization wasn’t about black money; it wasn’t about funding the terrorists; and it certainly wasn’t about counterfeit currency.  A study done by Bank of America-Merill Lynch estimates black economy at 25% of GDP and quantifies the cash component at 10% of the above. Hence, 90% of black wealth was never in cash. A fact that was well known to Mr. Modi, Mr. Jaitley and Mr. Shah. Why did the Government then lie to the citizens of India who voted them to power? Whose interest are being pushed through demonetization?

As for counterfeiting, RBI data shows that, of the 90.26 billion Indian currency notes in circulation in 2015-16, only 0.0007%, were detected as fake. The value of these fake notes in 2015-16 was Rs 29.64 crore, which is 0.0018 per cent of the Rs 16.41 lakh crore currency in circulation. The actual impact of demonetization is then so marginal that the ideology behind its application can best be captured by the old saying, “burning down the house to catch a mouse.” Seditious funding was also given as a reason for demonetization, but did we ever hear of any examples of how terrorism was halted by this move? Even if there was any impact, it can only have been temporary, until new cash replaced the old! The new Rs.2000 and Rs.500 note is as seditious as the old Rs.1000 and Rs.500 note then! Cash is merely one of many conduits; it is neither the source, the motivation nor the act of terrorism. The only act of terrorism seems to be by the government in economically terrorizing the entire population of the country.

So, what exactly was the drive for? We, the people of India, affirm that we do not need a superhero, who does not act democratically and instead is all about weaving and selling dreams. We need people oriented governance and not corporate driven economic emergency. We reject the economic and political premises of demonetization and affirm that a transparent and accountable government is required to replace the current logic of ‘we know what is good for the people’. We reject in totality the authoritarian drive to push the UID/Aadhar scheme down people’s throats and demand political and judicial intervention to stop the drive immediately. We demand that the government produce a white paper on the impacts of demonetization on people’s lives and livelihoods and compensate for the lives and livelihoods. We demand that the corporate driven ‘cashless’ economy plan be immediately withdrawn.

Spreading Dynamics Over Trading Prices in the Market


Market time series can be seen as a composite of the set of M interacting dynamical sub-system. Investors put their trading decisions due to their portfolio and market strategies, shaping the prices of the traded stocks. Over time, the prices are depicted the dynamical processes within the collective behavior of the investors. The vicissitudes of a price could affect the dynamic of other prices due to their portfolios. Capturing the dynamics of spreading ups and downs within the market is observing the information flow from one price to one another. For instance we have a source system 𝒴(𝑡) as the source of information affecting other sub-system 𝒳(𝑡), collecting the remaining sub-systems in the vector of 𝒵(𝑡). From the information theoretic studies, we know that the differential entropy of a random vector 𝒳 is defined,

h(𝒳(𝑡)) = −∫ 𝑑 𝑝(𝒙)ln𝑝(𝒙)𝑑𝒙

as the random vector takes value in 𝔑𝑑 with probability density function 𝑝(𝒙). When the random variable 𝒳(𝑡) is multivariate discrete of all possible values of 𝑥 ∈ {𝑥1, 𝑥2, … , 𝑥𝑛}, the entropy is

𝐻(𝒳(𝑡)) = − ∑𝑛𝑖=1 𝑝(𝑥) ln 𝑝(𝑥𝑖)

where now, 𝑝 is the probability mass function of 𝒳. Thus, the transfer entropy,


of the previous 𝒳(𝑡), 𝒴(𝑡), and 𝒵(𝑡) is written as,

𝒯𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡) = 𝐻(𝑋(𝑡)|⟦𝑋(𝑡), 𝑍(𝑡)⟧) − 𝐻(𝑋(𝑡)|⟦𝑋(𝑡), 𝑌(𝑡), 𝑍(𝑡)⟧)

where 𝐻(𝐴) denotes the entropy of the variable 𝐴, 𝐻(𝐴|𝐵) the conditional entropy,

𝐻 ( 𝑋 ( 𝑡 ) | 𝑌 ( 𝑡 ) ) = − ∑𝑛𝑖 = 1𝑚𝑗 = 1 𝑝 (𝑥𝑖,𝑦𝑖) l n 𝑝 (𝑥𝑖 | 𝑥𝑖)

for 𝑚 can be different with 𝑛, and 𝑝(𝑥𝑖|𝑥𝑖) as the conditional probability, as to

𝐻 ( 𝑋 ( 𝑡 ) | 𝑌 ( 𝑡 ) ) = − ∑𝑛𝑖 = 1𝑚𝑗 = 1 𝑝 (𝑥𝑖,𝑦𝑖) l n 𝑝 (𝑥𝑖 | 𝑥𝑖)

with 𝑝(𝑥𝑖,𝑥𝑖) as the joint probability. The past of vectors 𝒳(𝑡), 𝒴(𝑡), and 𝒵(𝑡) are respectively 𝑋(𝑡) = {𝑋(𝑡 − 1), 𝑋(𝑡 − 2), … , 𝑋(𝑡 − 𝑝)}, 𝑌(𝑡) = {𝑌(𝑡 − 1), 𝑌(𝑡 − 2), … , 𝑌(𝑡 − 𝑝)}, and 𝑍(𝑡) = {𝑍(𝑡 − 1), 𝑍(𝑡 − 2), … , 𝑍(𝑡 − 𝑝)} with the length vector 𝑝, and the vectors in the bracket ⟦𝐴, 𝐵⟧ are concatenated.

From there we have,

𝒯𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡) ≡ ∑ 𝑝(𝑋(𝑡), 𝑋(𝑡), 𝑌(𝑡), 𝑍(𝑡))𝑙𝑛 𝑝(𝑋(𝑡)|𝑋(𝑡),𝑌(𝑡),𝑍(𝑡))/(p(𝑋(𝑡)|(𝑋(𝑡),𝑍(𝑡))

𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡) 𝑝(𝑋(𝑡)|𝑋(𝑡),𝑍−(𝑡))

where 𝑝(𝐴) is the probability associated with the vector variable 𝐴, and 𝑝(𝐴|𝐵) = 𝑝(𝐴,𝐵)/𝑝(𝐵) probability of observing 𝐴 with knowledge about the values of 𝐵.

The notion of the entropy is an information theoretic terminology that can be regarded as the measure of the disorder level within the random variable of the time series data. Transfer entropy from 𝒴(𝑡) to 𝒳(𝑡) is reflecting the amount of disorderliness reduced in future values of 𝒳(𝑡) by knowing the past values of 𝒳(𝑡) and the given past values of 𝒴(𝑡). Time “moves” as entropy is transferred and observed in flowing information from series to series.

We have two regressions toward 𝑋(𝑡), the first is the moving series without putting the 𝑌(𝑡) into account,

𝑋(𝑡) = 𝐴⟦𝑋(𝑡), 𝑍(𝑡)⟧ + ∈1(𝑡) and the other one which regard to the information transfer from 𝑌(𝑡) to 𝑋(𝑡),

𝑋(𝑡) = 𝐴⟦𝑋(𝑡), 𝑌(𝑡), 𝑍(𝑡)⟧ + ∈2 (𝑡)

where A is the vector of linear regression coefficient, and the 1 and 2 are the residuals of the regression. The residuals have respective variances of 𝜎(∈1) and 𝜎(∈2), and under Gaussian assumption, the entropy of 𝑋(𝑡) is,

𝐻(𝑋(𝑡)| 𝑋(𝑡), 𝑍(𝑡)) = 1/2 (ln 𝜎(∈1) + 2𝜋𝑒))


𝐻(𝑋(𝑡)| 𝑋(𝑡), 𝑍(𝑡)) = 12 (ln 𝜎(∈2) + 2𝜋𝑒))

Thus, we can get the estimated transfer entropy

𝒯𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡) = 1/2 ln 𝜎(∈1)

This information theoretic notion opens the bridging discussions to the statistics of the autoregressive methods of Granger-causality. The idea of Granger-causality came from understanding that 𝒴(𝑡) is said to cause 𝒳(𝑡) for 𝒴(𝑡) helps predict the future of 𝒳(𝑡). This is a statistical concept equivalent with the transfer entropy, of which in our case, the Granger-causality is estimated as,

𝒢𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡) = ln 𝜎(∈1)/ 𝜎(∈2)= 2 𝒯𝑌(𝑡)→𝑋(𝑡)|𝑍(𝑡)

Thus, the entropy transferred can be seen as causal relations among random variables, with which we can learn the spreading dynamics over trading prices in the market represented by the multivariate data.