
Sāmatvārtha Part 2 - Monetary Localism for India that is Singapore and Africa
3 February, 2024
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This is a guest essay by the Twitter handle Moberation. They also run a Substack blog.
Sāmatvārtha for the Many Indias
In the previous post - we set the foundations for the mindset that will shape the policies to accelerate into a solarpunk circular economy.
To summarize, we need to embrace ecological harmony, technological productivity, market price discovery, and simpler administrative heuristics to achieve a more open, interoperable, sovereign, federated, modular, inclusive, sustainable, and regenerative future. We need to avoid over-abstraction of novation as well as of micro-management, to avoid the power creep by rent-seekers and control freaks. Throw away the baggage of the fabian-socialist, and reject the subversion of the candy-capitalist. Bring to life this collective vision of a solarpunk indic-futurism by accelerating civilizational progress while nourishing nature and ecology, instead of just exploiting it. A regenerative, embedded economic view of our human interactions. A solarpunk indic-futurism.
With due importance being given to the whole embedded economy, growth shall not spiral out of concerns of ecological and humanitarian exploitation. Therefore, the singular focus on GDP as a metric gets replaced with a holistic basket of opportunity cost signals to achieve those objectives. With a better set of holistic metrics, we can focus on delivering policy prescriptions with clear tenets (or objectives) in mind. The below image summarizes one such set of proposed metrics as well as the tenets of Sāmatvārtha.

These goals will need the right policy prescriptions and equally crucial change management thereof, and Sāmatvārtha aspires to be the panacea. With this context on the vision and the mission, let’s understand where we stand right now.
India 1-2-3 that is Singapore and Africa
Kishore Biyani’s India 1-2-3 thesis has regained popularity thanks to his recent podcast appearances. To summarize, the reality of consumption patterns in India highlights a crucial segmentation of our economy and growth patterns. Per research by the famed retailer, India can be divided into three broad markets (_not _countries as some other commentators like to say):
- India-1: Consuming Class
- 30 to 40 Million households; 100-120M people
- Consumes say ~100k items/SKUs in lifetime
- Say anybody who has a domestic help
- Does most of the value-added consumption, and around 60% of the overall consumption portion of India’s GDP
- India-1 is further divided into three markets with following analogies:
- Singapore: 6M people. Family household income >$100k
- Poland: 35-30M people. Family household income >$40k
- Mexico: 70-80M people. Family household income >$20k
- India-2: Serving Class
- 100 to 120 Million households; 300-400M people
- Consumes say ~10k items/SKUs in lifetime
- Say someone who works as domestic help, driver, watchman, etc.
- Helps India 1 lead a better life
- India-3: Struggling Class
- The rest; maybe a billion people!
- Consumes say ~1k items/SKUs in lifetime
- Say a small farmer, daily wage earner, etc.
- Makes ends meet via government support; Sub-saharan life
KB suggested the need for India to increase value-added consumption massively to grow. But is this thought compatible with the tenets of Sāmatvārtha, or does it need more color? Is value-added consumption the only way for us to grow? And is it the kind of trickle-up growth that we can deliver or even sustain? Maybe inverting this lens, we can again reach a better framing - that of disposable income - of lack of jobs.
KB also famously said that India-1 doesn’t pay India-2 enough. While I agree with this, it is also a reflection of the job market. Ultimately, it is the equilibrium that has been reached between the India-1 economy and India-2 economy, further complicated by factors such as illegal immigration, social esteem of a job, large informal economy, etc. Without going deeper into what even it means to ‘work’, for now, let’s just accept the fact that the quality (demand), as well as the quantity (supply) of jobs, are nowhere near what they need to be. Further, the disincentives that ‘freebies’ politics create in the labor markets do not help either.
There are some other estimates for India 1-2-3. Back in 2018, there was a sudden discourse in VC circles about Indian startups not building for ‘Bharat’ but only building for ‘India’. Below is a summary infographic of other India-1-2-3 estimates from a 2018 blog post by Sajith Pai about the same.

The key point to focus on is how do we think about the economics between these ‘India’, the jobs that are within as well as that connect these different worlds! Some estimates suggest that India needs to create around 100 million jobs in the next decade! Who will create those? The government? Or the entrepreneurs? Well, I for one do not look forward to either the mai-baap fabian-socialists or the trickle-down candy-capitalists. The answer might be somewhere in between those, in self-employment and MSMEs, in monetary and fiscal localism, in Sāmatvārtha. What is needed is the atmosphere and incentives for the enterprising to envision a bigger pie and for the laborious to make it happen!
This jobs and entrepreneurship problem of India-1-2-3 can be retrofitted to our 3 key policies in focus: Taxation, broadly impacting India-1; Welfare, broadly impacting India-3; Urbanism, broadly impacting India-2. It is India-1 whose enterprising zeal will allow technological deflation unlocked by the productivity growth of India-2 to bring to life better opportunities for India-3. Trickle-down economics of jobs - not consumption - as a focus to trickle-up lifestyle for all.
Now while bad taxation policies can hamper the enterprising, bad welfare policies can further disincentivize the marginalized to take the next steps. A simple, reformed Taxation will accelerate India-1 ability to enterprise and innovate so that more people can become part of the India-1. A simple, reformed Welfare policy will ensure the safety net for the marginalized India-3 as well as the risk-takers in India-2 to aim higher. A simple, reformed Urbanism will ensure the basic necessities of life and ecology for all, be India 1-2-3. There is no profound insight here per se, it’s just that we have become so used to over-abstraction and micro-management that we simply rule out the possibility of simpler governing heuristics being effective as well as efficient. If not that, then the excuse becomes that of change management. This is an invisible door that needs to open now!

Eventually, everyone gets an opportunity to trickle up their lifestyle in our circular - more like spiral - economy. It won’t happen if India keeps up with its record of being a land of missed opportunities, certainly not with the latest political chauvinism similar to Lebanon’s Confessionalism in the name of J.A.U.H. Having said that, it is not impossible to achieve Sāmatvārtha, we just have to carefully curate and repeat China’s scale efficiency with Singapore’s policy effectiveness. The aim is to go from India 1-2-3 that is Global South, to Bharat that is Singapore.
Let’s open that invisible door, shall we?
Policy That Builds The Machine That Builds…
In a recent appearance, Sharad Sharma, founder of iSPIRT, mentioned how India needs to unlearn its approach to value capture - i.e. it needs to focus more on RandD instead of job work or trading. A product nation, as he says! He takes an example of the Textile industry, where how China is capturing most of the value by focusing on precision machinery, which India then buys to capture minimal value via job work. An extension of this idea can be what Elon Musk says - building the “machine that builds the machine”. And maybe a machine being not just a mechanistic device but also that organizing humans for successful coordination.
India has many problems - a village economy problem, an RandD problem, an urbanization problem, a commute and (public) transit problem, a policy incentive problem, the already mentioned fabian-socialism problem and the upcoming candy-capitalism problem, just to name a few! Do we then have the right policy that aligns us to build the machine that builds the machine that builds the machine that builds…?
On one hand, it seems our policymakers - bureaucratic or otherwise - just can’t resist the lure of paternalistic governance, with its heady mix of id-serving rhetoric and rent-seeking. For them, it’s easier to slap a band-aid on a hundred symptoms than to tackle the root causes. Corruption, lobbying, and non-compliance are just the norm, while private capacity building is not trusted and liberated from the power creeps. It’s no wonder our state’s growth and welfare motive is hindered by a dysfunctional machinery that desperately needs to evolve.
But on the other hand, it is - apparently - difficult for policymakers to do anything out of the norm - be it due to system incentives or first principles clarity. To fight this systemic inertia, therefore, change management becomes as crucial as the core (techno-cratic) policy proposal. Figuring out how to swiftly navigate the challenge of political economy and rent-seeking interests with agility is a crucial part of the process.
Whatever it might be, if we truly want to build the machines that build our nation, nothing else can exponentially accelerate it more than right policy. The love for micro-management needs to go. The pretense of intended consequences, disregard for the unintended consequences, and the sly of intended consequences of the ‘unintended consequences, all of these need to go. The norm of overly complicated, ever-changing, inefficient, ineffective, corrupt lobbying needs to go. Let’s remind ourselves again of the beauty of simplicity, stability and transparency - bringing clarity to the masses and ease of compliance. This will only come to be when we can find a relative win-win situation for relevant stakeholders.

We should not forget that fundamentally every act of governance is an act of implied coercion. Thus, we should be very cautious where it is used and is acceptable. As Max Weber postulated, the state is a monopoly on violence, a power to coerce. And guess what - ‘with great powers comes great responsibilities’. Therefore, one could argue - as we are doing - that the only reason for a state to act is market failures (of four types mentioned below:)
- Public goods, i.e. non-rival and non-excludable goods with a free-rider problem;
- Asymmetric information, therefore regulations on quality control and against fraud;
- Externalities and collective action problems, like pollution;
- Market power concentration, coercive agents or anti-trust activities.
Ajay Shah and Vijay Kelkar agreed with such a view in their work “In Service of the Republic: The Art and Science of Economic Policy”. The reason it is critical for the state to retreat is to create more breathing space for civil society and social capital; we are anyways short on effective state capacity! It is also critical to have one instrument for one objective, to avoid a spaghetti code of conduct. These will allow the state to design cleaner incentives, which is crucial because behavior is endogenous to incentives/codification. Thus, compliance is also bound by (meta) incentives. As per them, one can use the following four dimensions to assess the complexity of public policy: (1) No. of transactions or touchpoints; (2) Discretion at the front line vs living by the manual; (3) Stakes - high or low; (4) Secrecy (less accountability) vs transparency (more accountability).
Acknowledging these realities, let’s move towards some brainstorming for now, and we will give due focus to change management in the following writeups. Key to the approach is - simpler heuristics for complex adaptive systems which can internalize externalities and solve for collective action, all while being comfortable with market equilibrium. It’s time to simplify our self-designed complex systems, remove the friction and malaise, and unleash the true potential of our economy. Let’s think fundamentally about Money, Taxation, Welfare, Urbanism, Fiscal, and the Monetary.
A Hypothetical ‘Foreign Aid’ to India by India
Back in 2016-17, UPI had been launched, fierce public debate was happening on linking welfare with Aadhaar, demonetisation of a majority of Indian currency notes would happen, Bitcoin would start picking steam, and I was - allegedly - learning economics in my university. The jobs problem was part of public discourse even then, and I started ruminating on a thought experiment, without knowing much about the India-1-2-3 thesis, or banking in the 16th century.
Hypothetically, let’s split the Indian economy/participants into two halves based on household income. Call them India A - the top half - and India B - the bottom half. Now assume India B is not allowed to interact with India A. What this essentially means is that India B does not participate in the jobs market of India A. India B also holds relatively minuscule land/assets thus their impact on their price markets can be ignored and assumed negligible. Now what happens to the labor/wage markets of India A? Will the cheap domestic help or daily wage earners in India A become slightly more expensive? Will their standards of living improve? Most likely yes, as the supply of labor from India B is gone.
Now let’s assume there is a kind of foreign aid that gets sent to India B from India A - the Welfare which will allow them to survive and upskill enough to be able to migrate to India A. Let’s assume the whole economy of India B is of welfare and runs on a different currency than INR. The distribution of this new welfare currency and its relationship with the base INR of India A is equivalent to the fiscal and monetary policy of India B’s welfare currency. Peg some aspects of it to taxation in India A, and we get an interesting hypothetical playground. Now let’s blur the boundary between India A and India B to avoid the pitfalls of means-testing, and we might start seeing patterns similar to that of typical welfare as well as Universal Basic Income.
The above thought experiment, in hindsight, was my first crude attempt at Sāmatvārtha. My thoughts on Universal Basic Income have evolved since then. It for sure avoids the pitfalls of means-testing, but it does have a slippery slope issue, considering the dominance that modern monetary theory came to enjoy especially during COVID-19 era printing. So, Universal Basic Jobs maybe then, well that again goes closer to the fabian-socialists than to liberation. Maybe just go another level meta, and extend it to an already existing idea of basic deduction in taxation - maybe Universal Basic Exemptions might become an answer, being operated on a parallel currency of tax credits. More on this in the #3 of Sāmatvārtha - Tryst with Taxation.
But before that, what even is a currency? What even is Money?
From Anthropological Obligations to Fiat Money Supply
The anthropological view on money, according to David Graeber, suggests that societies did not begin with barter systems, but rather, with gift exchange systems; that social relationships and obligations, rather than economic self-interest, have been the driving force behind the development of money. Per him, barter was a tool being used when it is a stranger on the other side; within the tribe though, it would be a simple gifting alongside an unsaid social obligation to give something back in future. A softer kind of “I Owe You” (IOU), an early version of social debt, obligation and trade.
Ethan Buchman in his blog The Properties of Money - Origin Account collates these views to suggest that in the paleolithic/anthropological money, accounting follows the logic of kinship and religion, reproductive power and justice. Units of Account are taken from nature in the form of stable quantities of valuable material private possessions that represent wealth. Eventually, a certain count of grain was equated with a weight of silver, giving rise to the first standardized Unit of Account - the shekel. But there also was a parallel evolution into neolithic/political money, where accounting follows the logic of redistributive states, of the accumulation and distribution primarily of grain.
Over time, people started using certain standards - of weights and measures - on commodities such as salt, seashells, beads, and eventually precious metals as a Medium of Exchange. This convenience of using commodities as money also solved the said ‘double coincidence of wants’ of barter. Money, thus, started having a nominal Store of Value as well beyond the intrinsic value of the underlying commodities - as being determined by their rarity, durability, portability, divisibility and desirability of it - making them a better tool for ever-increasing trade. Ethan also points out how with the introduction of coinage in the 7th century BC, the Medium of Exchange would begin an evolutionary trajectory towards ever more accessible and prominent forms, formalizing the market pattern and further empowering commerce as an anonymous force independent of the State.
Eventually, after a flourishing era of European banking, their private money started to get consolidated into sovereign currencies. These sovereign currencies were also originally backed by the underlying commodity of gold; but eventually, the reserve gold backing was also dropped to envision fiat currencies, probably not for the greatest of reasons. Fiat currency is money that is not backed by a physical commodity. Instead, the value of fiat is derived from the faith in the ‘sovereign’ government. It is just representative money which is essentially a debt instrument - an IOU (I Owe You) - by the sovereign. Eventually, on behalf of the sovereign state, the central banks took over the Store of Value property of the fiat.
The ever-increasing trade required ever-increasing velocity of money. This was either facilitated by moving to a more convenient form of medium of exchange - thus metal coins were majorly replaced by paper notes, which then got shadowed under the mammoth spectrum of digital money; or the velocity was increased in faux by just increasing the ‘sovereign’ money supply by the central banks - the modern monetary theory. End of the day, with each abstraction, someone’s money became another one’s liability. Thus trust versus verify norms have been an important factor in each evolution as well.

Today, there are a plethora of financial products that make up a country’s money stock or money supply. Let’s take a closer look at the various measures of money supply:
- M0 is the narrowest definition of money supply, including only hard currency in circulation. In other words, the money you can hold in your hand (or in CBDC wallets maybe soon). The liability here is of the central bank directly.
- MB includes M0 plus the hard currency held in bank reserves. This isn’t technically in circulation, but it’s still an important part of the money supply. Bank Reserves are like cash for Banks.
- M1 is a more common definition of money supply and includes M0 plus checking accounts - current accounts and demand deposits - and other checkable deposits like the outdated traveler check. These deposits aren’t technically in circulation since they’re held in banks, but they’re still considered part of the money supply because the owner can retrieve them from the bank upon demand.
- M2 includes all of M1, plus savings deposits and time deposits like CDs (Certificates of deposit, or fixed deposits in India). These deposits are slightly less liquid than checking accounts but can still be converted to cash quickly.
- M3 is the broadest measure of the money supply and includes larger deposits, institutional money market funds, and other larger liquid assets.
Central banks are responsible for controlling the money supply by adjusting various interest rates and ratio requirements, which in turn affects the rates charged by private banks - one way or another. This management of the money supply through interest rates is broadly known as monetary policy.

The history of money is still ongoing. The evolution of payment rails has been driven by changes in the money supply of the time. From shekels to coins, cash and now various electronic payment systems, payment rails are constantly evolving to keep up with changing technology and consumer preferences. Alongside that evolution also comes our cyclical understanding of “Trust, but Verify”. The monetary system will continue to evolve as long as humans aspire for a better-fit unit of account, medium of exchange, and store of value.
The Collaborative Finance (CoFi) View on Monetary Localism
This is where I would like to share how Informal System’s Collaborative Finance effort is thinking about Money. Money is where the payments are! To use some analogy from electricity, “Money is for payments - i.e. to Denominate and Discharge Debt” - where:
- Unit of account (UoA) helps to denominate debt
- Medium of exchange (MoE) helps to discharge debt, here and now
- Store of value (SoV) helps to discharge debt, elsewhere and later
These properties also bring in certain trade-offs or tension:
- UoA/MoE: liquidity - the tension between elasticity and discipline
- MoE/SoV: legitimacy - the tension between “bad” and “good” money
- SoV/UoA: solvency - the tension between deflation and inflation
Ultimately, what emerges out of these is a payment system - or a means of settling debt - which is considered the fourth property of money by some. A transaction is two transfers, and between them - however small - lies a monetary debt - an obligation to pay something worth a monetary amount. Thus, a payment system is a set of obligations and a liquidity source which can help discharge - or settle - those obligations.
Now the said liquidity source in a payment system can also be a local money abstractions on a currency: from custodial money, mutual credit, credit clearing, clearing houses, etc. The way to settle - beyond simply transfer of funds - can thus also be clearing set-offs, overdrafts or novation. Using these primitives, the CoFi team is attempting an interesting approach to monetary localism, which can clear obligations even across different currencies while saving liquidity by finding potential loops of obligations in the payment system.
The reason to discuss this is not to understand CoFi deeply, but to showcase that thinking in fundamental simple heuristics and first principles still has alpha. Money is just an IOU, and monetary policy is about managing the meta of the monetary obligations that the state has towards us. Similarly, fiscal policy can also be thought of as social contract obligations the state has towards us.


To quote from The Properties of Money - Intro • Easy There Entropy:
The institution of money specializes in settlements of a “monetary variety”, effectively, payments to settle debts. But it could also be said that the kind of money we use is itself a settlement between the various social strata on how value and wealth will flow through society, on how we replicate patterns of inequality over time. Even the (hegemonic) dollar system has the properties of money effectively unbundled, where the Unit of Account is the USD, the Medium of Exchange is the eurodollar, and the Store of Value consists of US Treasury Securities. With these thoughts in mind, maybe we should challenge the premise of having a single currency for a nation!
The economy is not just about efficiency but also about resiliency. Post-covid era is anyway gravitating towards industrial policy again, then why not attempt applying a similar lens to money as well? Money, at the end of the day, is just a tool for collaboration. In a world where the return on capital is highly favored over the return on labor, as Piketty pointed out, there are only two ways to tackle inequality:
- Either bring rate of return parity (wage inflation equating asset price returns), or
- Allow labor to translate to capital ownership as early as possible.
We thus need to better the velocity of ‘monies’, and in the right loops, for sponsoring more opportunities that turn our demographic labor into federated wealth. Maybe one such ‘money’ can also be explicitly about the ecology - to internalize the externalities and solve for collective action problems pertaining to urbanism, pollution and resource exploitation. Maybe another such ‘money’ can be about welfare, simply in the abstracted realm of universal tax credits. We already have many forms of money, maybe we can do with some more currencies as well..?
In the next post, we will go over the simplest approach towards taxation, welfare and urbanism. We will then figure out if is it possible to devise a smooth transition to such policies by leveraging CBDCs.