Thinkpad: The Great Divide

Happy Sunday.

It’s been a week where many a divide has been in focus.

The most prominent among them has been the continued stand-off between a section of India’s farmers and the government’s attempt to change decades-old farm sector structures.

It may be interesting to model the farm protests in the context of game theory.

The game here has two parties — the protesting farmers and the government.

In the first stage, the farmers had to make a decision on whether to organise collective action and oppose the government’s policy or not. In joining a collective action, each individual party would assess whether their participation would further their cause or if they will bear a disproportionate burden of the cost by participating in it. If a large enough collective had not gathered, the government would have likely won and the game would end there itself.

It didn’t. Collective action was organised; opposition was mounted. The game now moves to the second stage. In this stage, it is up to the government to either repress or accommodate. It tried both. In the early days, the attempt was to repress the protests but these proved costly in terms of the image projected. And so the government’s next move was to try and accommodate.

This week it suggested a mid-path to farmers, saying that states will be allowed to impose taxes and fees in private mandis to ensure a level-playing field. This seemed to be an important concession and brought us to another turning point in the game. If the farmers had accepted, the game would have ended, both sides incurring some costs of the compromise.

But the farmers chose to escalate further and reject the proposals. With this, the game continues into the final stage where either the government concedes more ground, perhaps by putting down the minimum support price provision in the law, or withdraws the legislations for review.

The outcome in this final quadrant of the game remains uncertain. Will it be a winner-takes-all game for the farmer lobbies? We’ll wait and see. Thinkpad believes it would be a pity if a long-needed change in the agricultural sector is fully shelved because of poor processes and inadequate consultations.

Onto other divides. The divide between the capital market and ...well...mostly everything else.

Global capital markets are booming. This week saw big valuation IPOs from DoorDash to Airbnb. It’s almost like it is 1999 again, says this Bloomberg article.

According to a Dec. 2 release from Refinitiv, $762 billion in equity capital raising took place globally so far this year. The global bond markets have absorbed $8 trillion in new debt issued by sovereigns and corporations.

Indian markets have not been left out. Benchmark indices have moved to record high, IPOs from the likes of Burger King have received a terrific response. In the secondary markets, even the rusty-and-dusty public sector banks have managed to raise capital via institutional share sales.

If you are away from the capital markets, of course, you have an understandable case of FOMO. Income and wage growth is far lagging capital and wealth appreciation. Inequalities are worsening. Expect much more debate on this issue in the coming months.

The final divide. The communication divide. Watch here what happens when a British Member of Parliament asks Boris Johnson about India’s farm sector protests. No words can capture these expressions so we’ll let you watch and chuckle.

Hope you are winding down for the year. Have a good weekend.