US Single Family Home Prices

The Following chart (by Chart of the Day) illustrates the sharp fall in the value of homes. Considering the fact that various other studies point the impact of wealth effect point to a correlation of 3-5% on the lower side, and a correlation of about 25% on the higher side, invariably all home owners (even those who bought their homes in the 1990s) will be feeling the impact of the falling home prices. Even if they do not feel poorer, they definitely will not feel richer.

Those excited by the positive wealth effect due to the rally, should keep in that the present rally has invariably has mostly benefitted only those in index funds, while those who own single family homes have not had a large rally that could lift their willingness to resume consumption. At best, the prices have not fallen any further, but that is hardly a reason to celebrate.

Probably the song line, "we have been down for so long, that it feels like it is up" has never been more valid than today.

Weekly Investors Survey
Dogs of the Dow

Values in brackets {} are from 4 weeks ago.

Short Term (3 month) Sentiment
Bulls = 52.9% {65.8%}
Bears = 20.6% {21.1%}
Neutral = 26.5% {13.2%}
Average Prediction = 2.8% {2.7%}

Long Term (12 month) Sentiment
Bulls = 76.5% {71.1%}
Bears = 11.8% {18.4%}
Neutral = 11.8% {10.5%}
Average Prediction = 11.4% {8.4%}

Interesting Quote

J.P.Morgan once declared:

"I never buy at lows, I never sell at the highs, I play the middle 60 per cent"

US Interest Rates: Past & Present

The following chart illustrates the US Federal Funds rates since 1950s. The interest rates are close to their level in the 1950's and far above where they were in the recent years. One question that we could ponder is: Is the USA headed the Japan way, where zero interest rates have been the norm for the past few years. Even if the US was not to stagnate like Japan for a decade, if the economy remains tepid for a prolonged period of time (say more than 2 years) then it could unleash its own set of problems.

If the economy continues to remain tepid (even by the most optimistic estimate) what it would be like if the US Fed were to start raising interest rates? The simple (and probably most generalised) would be that it would relapse into another downturn. We would believe that the US Fed would have great difficulty in raising rates till at least about October 2009 (if they can actually do it by then). Anyway, the US Fed Rate futures indicate that the interest rates will remain unchanged till March 2010. The question is if the US Central Bank can increase the rates after that.

US Railroad Traffic

The Latest US railroad freight traffic (as on 12 September 2009) statistics have been released by the Association of American Railraods. The chart below provides an overivew. The statistics indicate that the freight handled was down 19.8 percent compared to an year earlier. All 19 carload freight commdity groups were donw from last year. Interestingly, the lowest declines were in farm products, excluding grain (1.5%) and the highest in metallic ores (52.3%). The "Cash-for-clunkers" programme was responsible for a big jump in the auto freight movement, which in turn positively impacted the overall statistics.

Are we out of the Woods - Part I

Recent times have witnessed great euphoria that we are at the end of what has been called the 'Great Recession' after a period of 20 years of 'Great Moderation'. Apparently with so may prefix's 'Great' we thought it may be a good idea to provide graphical illustration of how the present 'recovery' compares with that of the past recoveries. By recovery, we mean that we comparing periods when the economy (in this case the US Economy) compares when coming out of past recessions.

This is meant to be a series that will provide some graphical evidence about the nature of the present recovery. We belive that if there is any recovery it will be more statisticial than anything else and that in turn would have been enabled by the governmental efforts rather than private business investments.

The chart below provides a representation of the Michigan consumer sentiment since 1975 to July 2009. Note the points where the sentiment was in the shaded areas (which are the periods of recession). It is only then that we tend to get a greater idea about how it actually is in historical perspective going back decades.

Compare the sentiment at the end of the recession of 2001-2. A glance at the index at the end of the recession in 1990, when it was close to about 90 gives an indication of why the 'green shoots' may actually become brown dust.

Dollar Carry Trade

What Happens if Dollar Becomes the Vehicle of Carry Trade

The global economy has over the past two years has had to navigate a number of risks associated with the bursting of the housing bubble. Unprecedented governmental and regulatory action has averted what seemed a certain financial meltdown in the not too distant past (15 September 2009, to be precise). While those risks have been barely surmounted a new albeit more ominous risk seems to be emerging in the global economy. This risk, if it is confirmed, is that of the US Dollar becoming the new preferred currency for carry trades.

However, it is prudent to note that this is not yet confirmed simply because it is so difficult to confirm its existence till it is in an advanced stage. What has however, given credence to these reported views is that it is increasingly clear that a structural shift may be taking place in the world with greater cynicism setting in about the fiscal health of the US economy and by corollary its currency, the US Dollar. We believe that this event (US Dollar becoming the preferred currency for carry trades) would unleash volatility on an unprecedented scale that would be detrimental to the health of the world economy considering the fact the US Dollar is the de facto Reserve Currency of the world.

The negative sentiment of the US Dollar can be gauged by the recent reported statement of David Bloom, the Chief of Currency, HSBC. He thinks that the USD seems a lot like the Sterling after the First World War and more like the currencies of the emerging markets. He further adds that the risk-reward for emerging market currencies has changed, not because their economies have had an increase in their standards but because of the decline of the western currencies and their economies.


What is carry trade and should we be so worried about what it could do to the world economy? The Short answer to the second part of the question is: Yes. Currency carry trade is essentially a trading strategy used by currency speculators to increase their returns. Utilising this trading strategy, investors borrow in a currency in countries that have low interest rates, sell that currency and use the funds to purchase higher yielding assets (or currencies) that provide either higher interest rates or simply higher returns. To illustrate this with an example, speculators would borrow money in the USA, since it has interest rates that are nearly zero. Sell the US dollars and use the proceeds to purchase other currencies, debt instruments, commodities, equities or any other assets. The premise of the strategy is that the returns from the assets thus purchased will exceed the interest rate paid and also any possible currency fluctuations. This seems to be amazingly simple and seems filled with obvious sound business logic.

The consequences of this are more complex than the seemingly simple trade. Traders will not risk borrowing in a currency in large amounts unless they are confident that the interest rates are low, and that would mean that they expect the interest rates to be low because an economy is mired in difficulties of a magnitude and complexity that the central bank will not be able to raise rates in the medium term. In the past, we had speculators borrowing in Yen once there was sufficient clarity that the Japanese economy would be mired in a deflationary spiral. They Yen became the preferred currency for carry trade for nearly 3 years: 2004-07. In the present instance, it is widely rumoured that the speculators are selling US Dollars and buying the Australian and Canadian Dollar. It is likely that a proportion of this money is also flowing into commodities and other Asian asset classes.

Now if the US Dollar is becoming the vehicle for carry trade, it would probably mean that the speculators do not expect the US Federal Reserve to interest rates till at least the end of 2010. The Fed Futures indicate near zero probability of a interest rate hike till at least March 2010. If the Fed is unlikely to raise rates before the end of 2010 (as per the calculation of the speculators) then it is highly likely that we will not even a semblance of a meaningful recovery till 2011.

If the underlying economy is weak then is likely that the US dollar is likely to remain weak, at least till then. Unfortunately, for the global economy world trade is mostly denominated in US Dollars since it is the World’s reserve currency. That would mean that the next few years (at least as long as the US Dollar weakens) would be followed by a rise in prices of nearly all dollar denominated assets, especially commodities. There will invariably be two sides to this coin. The falling dollar may be good for the USA where its exports become cheaper but it will be a disaster for most of the other economies, especially those in Asia which survive on exports. The list of countries that will be adversely affected is headed by China, little wonder that the Chinese are showing great keenness in entering into Yuan denominated currency swaps and Yuan denominated trade with different countries of the world.

If this process (of a dollar decline) is a long-drawn out process then over the long-term we may actually see a number of Trans-national corporations that invested in various emerging markets to exploit the low wages, may actually migrate back to the USA.

A more immediate problem will be that the export oriented sectors will be decimated in most of the countries. Large amounts of short-selling of the world’s reserve would lead to an exponential increase in the volatility of the currencies world wide. A larger than expected fluctuation of the dollar will lead to either a sharp rise or fall in the asset markets that would have attracted inflows due to their fortitude of being on the other side of the correlation or pairing matrix. Unlike the equity markets, the impact of currency volatility would be detrimental to the economy as a whole. Except the speculators (who are on the right side of the trade) very few would actually benefit. This would be because a large number of industries (and other users) tend to buy their requirements over a period of time. Very few of them actually have the resources plan and hedge their use, especially of commodities and currencies.

Extreme volatility (which will be an invariable bye-product of the carry trade speculation) mean businesses and consumers will not be able to gain any clarity on the nature of the cost of either their business (at best) or losses due to the price fluctuations of commodities, assets as well nearly all other goods and services. Unlike financial speculators, businesses will not be able to raise their prices (or reduce their prices) at the drop of a hat. Any government intervention in the currency markets tends to increase rather than decrease this volatility. A rise or decline in currency could lead to a cascading effect on not only the speculators but also those who borrow in foreign currency, importers as well exporters. This becomes all the more important as the last decade has seen integration of the financial markets and increased flow of capital to different geographies. Extreme volatility will not only increase the cost of capital, not many would want to take a long-term perspective until they gain greater clarity. Therefore, if this situation continues for longer than say 6-8 months, an already speculative financial system will resemble a casino where three months is the new long-term horizon. Commodity speculation, as well as speculative trading in other assets would be one of the major beneficiaries. Various social scientists over the years have clearly pointed out that when capital cannot be profitably invested in a business, it would find its way into speculation. History attests this wisdom. This may already be happening. The increased monetary stimulus instead of finding its way into the real economy may actually find its way into the speculative circulation space.

On a day to day basis, we could be headed for an era of asset inflation (or even bubbles), high prices, low growth and high unemployment. All the right ingredients for a period of possible stagflation, if not anything else.

What can governments do?
• Unfortunately for the governments there could be very few options. Either they could ban carry trade (an impossible task given the complexity of the financial markets);
• They could simply relax all the rules so that industries, business or consumers need not disclose their losses. This could include accounting changes that would enable a longer period to carry on their losses.
• Increase interest rates. This would be difficult as the economies would continue to remain weak and there would be tepid growth (if at all there is growth). Raising interest rates would be counter-productive.
• The best solution may just be to make speculation expensive. There could be a global tax on speculative transactions, which would be vigorously opposed by the financial industry. This opposition is bound to have a sympathetic audience among the US policy makers for the simple reason that the inter-linkages between industry and policy makers are far more complex in USA than in other parts of the world. But that is likely to be the only deterrent for speculators. It would be better if the policy makers this time err on the side of caution and the impose a tax that is on the higher side.

US Commercial Banks: Loans & Leases

The Chart provides an overivew of the US Commercial Banks total loans and leases as on 21 September 2009. Surely, inflation sees to be too far in the horizon to actually worry about it.

Bank Credit In USA

The US Federal Reserve starts its meeting today. There is a lot of talk about the US Fed giving indications about their withdrawing of monetary stimulus that they had pumped in so far. How far would they indicate that through actions, rather than statements? Plausible. But, personally we do not believe that strenuous effort is actually necessary.

We provide two charts below to validate our views. They show clearly that despite the money being pumped in by the US Federal Reserve, not much is actually reaching the real economy. As we have pointed out in a previous post, it has led to asset inflation in the financial markets, not inflation in the actual goods and services in the real economy. The sharpness of the contraction of credit is indicative of the problems that the US economy continues to face. The contraction in credit probably means that the Fed will probably do nothing to rock the boat. More so, because there is probably nobody better than Ben Bernanke to understand what happened in the Great Depression.

The charts show bank credit in the USA from 1973 to 9th September 2009 (the latest statistics released by the Fed).

This chart provides a broad overview:


The Chart below show the contraction of credit in the past one year.

Bear Markets Durations

This interesting analysis (in the chart below - Click on the image for greater clarity) of the recent bear markets was undertaken by Morgan Stanley. I would probably believe that only the 1930s case would be suitable for the present context for the simple reason that most of the other recessions never had to face the risks or even questions about the counter-party risks. This bear market is more about solvency problems rather than liquidity.

What is interesting about the post 2007 world is that probably never before have we had so many people being divided into two diametrically opposite camps - Inflation or Deflation. The Golden Mean seems to be almost non-existent.

Problems in the US Housing Market till 2011

The following chart provides probably one of the best overview of the intensity of the problem in the US Housing Market. Desipte all the official claims about the 'Green Shoots' it is clear that the major problems for the US Housing Market lay ahead. This is only being belatedly realised.

It has recently been pointed out that a large part of the recent demand for housing is due to a US government tax benefit to the tune of nearly US$8000 for first time home buyers. This unfortunately runs out by end November. But we can rest assured that the US government is likely to extend this. Extending this sort of small benefits are politically more feasible than the big time US$500 billion bailouts.

Assets in US Money Market Mutual Funds

The Investment Company Institute of USA released its statistics about the funds in various US money market mutual funds on 17 September 2009.

Warning Signs about Commodities

The recent run up in commodity prices seems to an anomaly (or are they harbinger of more dangerous times). The reaction of the governments' to the financial crisis have been to inject unprecedented monetary stimulus (about US$12.8 trillion by official count) as well as various other unorthodox measures. This invariably led to an immediate complete meltdown. While some may claim that it would lead to inflation down the road, the immediate consequence has been asset inflation. Stocks and commodities have shot up. Copper for instance has more than doubled since its March 2009 low. Lead recently hit a 16 year high. The list goes on...

This post will essentially try to grapple with the Question: Are Commodities in a Bubble? The short-answer is "may be" (which is akin to saying the glass is half-full). There are some traders who believe that they are in middle of their multi year upward super cycle. If that is true then we should be relived that, at least they are not in a bubble. Even if they were in a bubble, the rising prices may have a long way to go over a period of time.

The following factors should be kept in mind.

• A reason for the rally is that there is invariably more amount of money flowing into commodity funds. Till date about US$200 billion dollars have flown into commodity funds against US$160 billion during the first half of the year. The funds are expected to attract another US$20 billion in funds. More importantly, the impact of these funds at sharply lower values (than last year first half, when they were at their peak) would be much. In other words, a fund could buy more quantum of commodity in the first of this year than they could last year.
• The growing financialisation as can be seen from the debate about the role of the US Natural Gas Fund (an exchange traded fund under the symbol UNG) about it cornering about 20% of the natural gas futures market only indicates the importance of financialisation (and expansion) of trading.
• Fears of inflation and decline in value of fiat money may be driving investors to commodities.
• Commodities as an asset class may be under-owned and investors are now diversifying.

Despite the above important factors, it is important to keep some important contrarian signs which may or may not be indicating a commodity bubble but at they do indicate that it is the time for caution.

• Technically most of the the commodity charts (especially metals) are showing what are called Negative divergences, which normally harbinger sharp falls. How sharp? Nobody knows.
• More problematically, the inventories of all the commodities are rising (as per LME data)
• Bullish analysts who have been bidding up copper prices claim that since the 'economic recovery' the total inventories are sufficient for only about 4 months of production. If that were the case, then why are the mines not investing and producing more. They should normally be increasing production if the economy really were so good. I have taken copper because it has widespread applications.
• Worryingly, Pig farmers and other speculators in China may have amassed nearly 50,000 metric tonnes of copper (according to London based Sucden and reported by Bloomberg) which is about half of the total inventory tallied in the Shanghai Futures Exchange.
• Often a contrarian signal is one that comes when we open the daily newspapers (non financial ones). There is an increased coverage of the new high's that gold is hitting.
• The managed money long positions on the US Futures exchange were exponentially high. (See a previous post about Long/Short statistics)
• Baltic Dry Index does not reflect the optimism of the prices of commodities. It indicates indecision at best and stagnation in the demand for commodities at worst.
• According to the IEA, more than 60 million barrels of fuel is stored on tankers offshore.
• It has been reported that oil producing nations are producing about 600,000 barrels more than we need on a daily basis.

Conclusion of all that: Be cautious. There could be wild swings.

Gold:Speculating on Speculators' Speculation

This post is essentially for Gold Speculators and is based on an analysis based on Technical Analysis. So this post is by nature quite speculative in nature.

Short term gold seems to be at its most critical turning point. The chart below provides the Hourly chart of Gold since the 8th of September. The area in the circle indicates the move bold but the interesting thing is the area within the circle. At a broader level there is a diamond formation that is shaping up. If the price of gold were to decline below 1004 it is likley to lead to a sharp short-term sell off that could take it to about 985 level. However if the prices were to rally beyond 1019 it is likely that gold is not only like to touch a new all time high over the very short-term, but would also rally sharply over the medium to long-term.
An expanding triangle has been forming since 16th in the hourly charts. These triangles are generally considered to be dangerous as they tend to dissipate the strength of the underlying security.




Hence it is prudent for investors to be cautious while speculating in Gold. Maybe it is the time for a violent move either way.

Statistics about US Consumption & Investment

The following statistics have been complied from US Federal Reserve Flow of Funds Statistical Release (17 September 2009)

The statistics are provided in order to provide an overview of the bubble era (from 2004 to end of 2nd Quarter, 2009)

(The following are in US$ billions)

Item 2004 2005 2006 2007 2008 2009 (Q2end)
Personal Consum 8285.1 8819 9322.7 9826.4 10009.8 9996.6
Fixed investments 1903.6 2122.3 2267.2 2170.8 2066.6 1558.6
Residential Invest 680.6 774.9 761.9 629 477.2 346.2
Household Sector 594.4 681.9 670.1 541.9 401.1 289
Net Private Savings 679.2 619.1 666.5 495 619.7 913.6
Net Govt Savings -387.8 -257.1 -152.7 -214.8 -724.8 -1305.8

Status of US Household Wealth

The US Federal Reserve released its Flow of Funds release for the second quarter of 2009, which provides a fascinating insight that should normally debunk the theory of "green shoots". However, the recent events since March 2009 in the financial markets have brought about a paradigm shift in irrationally of the ever exhuberant Wall Street, whose new centrality is the concept of "Less bad news is good news". Moreover,c onsidering the fact that rationality is alien to the irrational markets, we just have take cognisance of the problem and keep reminding ourselves that deflation is still a likely possibility, if the world economy doesnot recover quickly.

The following points have been gleaned from the most recent release (on 17 September 2009):

-- Household debt contracted at an annual rate of 1.75 percent in the second quarter, the fourth consecutive quarter of contraction.

-- home mortgage debt decreased at an annual rate of 1.5 percent, while consumer credit decreased at an annual rate of 6.5 percent.

-- Household net worth—the difference between the value of assets and liabilities—was an estimated $53.1 trillion at the end of the second quarter of 2009, $2.0 trillion dollars more than in the preceding quarter

Disappearing Money Supply in USA

Two interesting factors seem to have largely gone either unnoticed or have been given low priority. One, credit has been declining at a rate of nearly 1% a month in the USA, the largest consuming nation, and Two, the M2 supply as show in the Graph below is indicative of disappearing money. That unfortunately is not a good sign. The last time that credit declined at such a rate was during the Great Depression. It is pertinent to note that the during April 2009, the M2 Money Stock (M2MS) has actually declined from US$8376.4 billion to US$ 8327.3 Billion in July to US$8294.2 billion in August 2009.

While a few months are not indicative of a major in policy, if it does continue for a longer period of time, then the US economy (and with it the global economy) could face a greater prolonged downturn. The chart below provides a better perspective of the gradual decline in money supply (with the chief culprit being the banks, which are refusing to lend).

If the banks continue to withdraw from the lending, then no amount of stimulus would be available for businesses (especially small and medium enterprises, which account for more than half of the employment in USA) and instead it would be used by the larger funds to simply speculate in the financial markets.

This would invariably exacerbate further, the pressure on the US consumers who seem to have
only begun their long overdue but painful readjustment from the excesses of the recent bubble. The chart below of US Household liabilities shows the liabilities are still at historically high and unstainable levels considering the destruction of household wealth.

Gold Holdings of Major Countries

The table below provides the details of Gold holdings of the major countries at the end of June 2009.

USA	8133.5
Germany	3412.6
IMF	3217.3
Italy	2415.8
France	2450.7
SPDR Gold Fund (ETF)	1102
China	1054
Switzerland	1040
Japan	765.2
Netherlands	612.5
Russia	536.9
ECB	501.4
Taiwan	423.6
Portugal	382.5
India	357.7

Source: World Gold Council

Correlation of Commodity Futures with Other Assets

Correlation of Commodity Futures returns with stocks, bonds and inflation

(Overlapping data of returns from 1959-2004)

Period	Stocks	Bonds	Inflation
Monthly	0.05	-0.14	0.01
Quarterly	-0.06	-0.27	0.14
1 Year	-0.10	-0.30	0.29
5 Year	-0.42	-0.25	0.45

Peek Into History: India Budget, 1949-50

The Budget Speech of the Finance Minister in 1949-50 provides fascinating insights.

The major issues that the country had to grapple with include the problem of refugee resettlement, cyclone as well as famine in parts of Gujarat, Rajasthan and Saurashtra, apart from the usual challenges arising from the complexity of integration, etc.

The country imported about 2.8 million tonnes of food grains at a cost of Rs.130 crores, more than estimated. The country produced 29.73 million tonnes of Coal and 854,000 tonnes of Steel.

The Revenue Receipts of the country was Rs.338.22 crores, while the Total Expenditure was Rs.339.87 an increase of Rs.82.49 crores over the previous Budget estimate. Among the major items of expenditure Defence accounted for Rs.157.37 cores while Civil expenditure accounted for Rs.165.16 crores. The expenditure on refugee related activities amounted to Rs.52.82 crores.

The Government set aside a princely sum of Rs.6.98 crores to meet the expenditure towards the establishment of The Shipping Corporation of India.

The major sources of Revenue were Central Excise: Rs.107.25 crores, Income Tax: Rs.155 crores, Posts & Telegraphs Rs.30.26 crores (after expenditure of Rs.28.63 crores, there was a surplus of Rs.1.68 crores.

The Balance of Payments Position was critical and the government deficit of US$45 million in the six months from April-September 1948.

The exchange rate between the Great British Pound to the US Dollar was in the ratio of 1:4.

US Investor Sentiment

Interesting survey results that were give out by a site www.dogsofthedow.com

Note - For comparison, values in brackets {} are from 4 weeks ago.

Short Term (3 month) Sentiment
Bulls = 48.5% {58.6%}
Bears = 30.3% {24.1%}
Neutral = 21.2% {17.2%}
Average Prediction = 1.1% {1.9%}

Long Term (12 month) Sentiment
Bulls = 64.5% {55.6%}
Bears = 22.6% {33.3%}
Neutral = 12.9% {11.1%}
Average Prediction = 4.3% {0.4%}

Long/Short Positions of Traders in USA

Data from CFTC

Gold:(contract of 100 Troy Ounces)
Sept.15, 2009
Total Open Interest 622,094
Producer Long Positions 51,596
Producer Short Positions 248,426
Managed Money Long Positions 214,661
Managed Money Short Positions 821

Silver (Contract 5000 Troy Ounces
Sept 15, 2009
Total Open Interest 164,397
Producer Long Positions 8,344
Producer Short Positions 69,468
Managed Money Long Positions 44,533
Managed Money Short Positions 1,042

Future of Global Finance: The Lesson From Japan

A study of history may throw some light on the possible future for the finance world.

I would believe that the next three years (at least) would be like those in the rounded off areas as in the case of the Nikkei chart provided herein.
The chart of the benchmark Nikkei Index in Japan since 1982-to the present (September 2009) witnessed major rallies (four rallies) of more than 50 percent but two decades later it is more than 70 percent lower. If we were to add the rally since 2003-2007 (the global bubble era), it would make it five.



Lesson from Japan: the era of financial speculation is gathering momentum and the centre-stage will be taken over by the financial speculators, especially those in commodity speculation. Two factors are aiding this era of financial speculation: (a) the loss of confidence in fiat currency, and (b) era of low interest rates due to the aftermath of the bursting of the biggest bubble in the history of human race.

Will History repeat itself: The Case of 1929 Crash

Dow Collapsed about 48 percent in 1929, then there was a huge market rally, when it climbed 48 percent. Interestingly, the Dow had declined by a more resonable 17.3 percent for the year 1929. Apparently, people thought (as do now) that the bear market was over and the good times (or the roaring twenties) were back. In 1930, Dow fell by 33.5% and another 52.7% in 1931. The depression signed off with yet another 23.1% decline in 1932 - a decline of 89% from its all time peak in 1929.

Peak Value of Dow in 1929:381.17 Points (3rd September 1929)
From its decade low it had gained 491.51%.
Low Value of Dow in 1932: 41

India 1947 and Now

In 1947 India had a population of nearly 300 million. The currency in circulation had risen from Rs.172 crores in 1939 to over Rs.1200 crores in 1945 (to place things in perspective by end of July the money in circulation was about Rs.40 lakh crores).

In the first budget after Independence, the government of India budgeted for a revenue of Rs.171.5 crores and a revenue expenditure of Rs.197.39 crores. The net deficit on revenue account was Rs.26.24 crores.

By the way, Customs receipts were estimated at Rs.50.5 crores, while income tax was expected to yield Rs.66 crores.

Of the budgeted expenditure of Rs.197.39 crores, Rs.92.74 crores was for Defence services

The public debt of India at the start of 1947 was Rs.2531 crores of which unproductive debt was Rs.864 crores

From April to Septembe 1947, India imported 10.62 tons of foodgrains costing Rs.42 crores.

India was expected to produce nearly 800,000 tonnes of Steel in that financial year.

A good starting point would be consider the various aspects of India’s growth (as well as costs) from a budget that had an expenditure of less than Rs.200 crores to the most recent one that had an expenditure of Rs.10 lakh crores.

By the way USA was no different:
In 1909, the US federal government had an annual budget of $US 0.8 Billion. With this it governed a population of just over 90 million people. The cost of government was about $9 per capita.

In 2009, the US federal government has an annual budget of $US 3,550 Billion. With this it governs a population of just over 300 million people. That’s a cost of about $11,675 per capita.

Is the US 1200 times better off?

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