Change for the better

 

 

Source: By Swapan Dasgupta: The Telegraph

 

 

Many countries, particularly in Europe, have a facility to enable short- term visitors to reclaim the tax they have paid for their shopping. To avail of this facility, visitors are given a stamped form by the retail establishment where they have made the purchase which they submit to the customs at the airport before departing. The tax (minus a service charge) is then either collected in cash or deposited into their credit card. Apart from the long queues in airports such as Heathrow, this is an efficient and relatively hassle- free system of buying duty- free goods. The system also operates on trust and the understanding is that goods once taken out of the country won't be re- imported.

 

Many years ago, a long- term Indian resident of the United Kingdom explained to me a very simple way of subverting the system. A resident, who is not entitled to the taxfree facility, catches hold of a tourist, usually a relative. He then makes his purchase and secures a tax- free form. The goods are dutifully packed into the tourist's bag and taken to the customs counter which, in one or two Heathrow terminals, is located before the check- in counters.

 

The customs officer checks the goods and stamps the form. If the refund is to a credit card and the queues are long, even the perfunctory examination is dispensed with. The tourist then hands over the goods to the resident who says a grateful goodbye and departs. The tourist then checks in his bags and departs, minus the dutiable goods, which remain in the country.

 

I don't know the estimated quantum of this fiddle or whether it makes economic sense for cash- strapped UK government to hire more officers to police the system better. However, when I explained this fiddle to a native Briton some years later, he was aghast. It is not merely that he was surprised at how easy it was to cheat the system for, admittedly, modest gains. What struck me more is that he had never even contemplated breaking the law and exposing himself to a cheating charge.

 

This is a very small example of a cheating exercise. Many Indians can no doubt cite better examples of equally simple ploys that have resulted in the exchequer being short- changed by vastly larger sums of money. But the idea is not to identify potential loopholes in a system that can be exploited by those out to make a dishonest buck.

 

What is far more significant in my view is that there is a very large body of Indians, who seem quite incapable of playing with a straight bat. Their instinctive response to any situation is to look for ways to beat the system. In the more evolved countries, accountants and lawyers are obliged by strict professional standards to keep within the law and advise their clients accordingly.

 

In India, alas, the reputation of many professionals has been built on the strength of their ability to subvert the system. The accountant whose ' contacts' in the local income tax or excise departments is formidable and the lawyer whose main skill is to ' fix' the judicial system are much sought after and have a lucrative practice. This week, the tax authorities in Delhi raided a legal firm that was overflowing with the much- sought- after new currency. Yet, most of the eminent lawyers I spoke to had either never heard of the partners of the firm or were clueless about their practice.

 

In India, a premium is attached to the fixers. Had the amount of creative time used in trying to discover innovative ways to beat the system been used for something more worthwhile, our country would perhaps not have been perceived as merely ' emerging'. The reasons for this unfortunate celebration of deviousness go back to the days of the East India Company. On paper, and before 1833, the Company had a notional ' monopoly' of trade in the territories under its control. However, this was effortlessly subverted by the private trade carried out by its own functionaries with, naturally, the assistance of Indians. The corruption and venality the Company's officials injected into society outlived its dissolution and the direct rule of the Crown. The corruption game received a big boost during World War II when Indian contractors made an absolute killing and took full advantage of a beleaguered administration.

 

After Independence, the shortage economy and ham- handed government attempts at over- regulation coupled with the punitive rates of income tax, particularly during the high noon of Indira Gandhi's socialism, exacerbated the trends. By the time the liberalization process began, dishonesty had become a part of the Indian way.

 

Lord Curzon's provocative assertion at the Calcutta University convocation of 1905 that "truth took a high place in the moral codes of the West before it had been similarly honoured in the East" may have been excessively flattering to the Occident but it wasn't devoid of all connection with the Indian reality.

 

Ideally, the rationalization of personal taxes and the greater space given to private enterprise should have brought in a large measure of correction. Alas, the mindset decay had infected the body. Take the real estate sector as an example. Over the years, the rates of capital gain tax have been made extremely competitive but the practice of taking at least half the proceeds in cash has persisted. A few months ago, when I offered my credit card for a modest Rs 2,000 purchase of a light fitting in Delhi's Khan Market, the shopkeeper retorted sarcastically: " so you are interested in building roads?" It could be argued that tales of government profligacy and corruption have lessened the average citizens' desire to be completely transparent in their financial dealings, except when, like the salaried classes, they have no choice in the matter.

 

However, the urge to see less government — a legitimate conservative and even libertarian impulse — is offset by a political culture that demands a greater official role in infrastructure spending and social welfare. There is a striking mismatch between the expectation from government and private moral codes. This mismatch has come to the fore in the carefully orchestrated outrage over demonetization.

 

Whether demonetization has succeeded in lessening the quantum of the cash economy (which also includes a black economy crafted on dishonesty and evasion) will be known soon. However, the suggestion that just because a project is daunting and just because it runs counter to a nasty national habit it shouldn't be attempted at all is spurious. There are times in history when it becomes necessary to force change, even in a democracy, by wielding a stick.

 

Yes, it is true that some of the efficacy of demonetization has been blunted by the same innovative powers of evasion that have characterized India. Some bank managers have betrayed public trust and ended up as partners in the elaborate game of laundering black money. Some Jan Dhan Yojana accounts, aimed at bringing modern banking to the poorest, have been misused. And some political parties have provided covering fire to those who want to defeat the main purpose of demonetization.

Yet, given the sheer magnitude of the project, this is one of the most audacious projects ever undertaken by a political leadership. Reining in black money, enlarging the tax net and working towards a digital future are worthwhile economic objectives. Far loftier is the bid to make India a more honest place and force all Indians to think straight. That is the real challenge.

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Now what do we do with the money

 

 

Source: By Madan Sabnavis: The Financial Express

 

 

The demonetisation plan has three dimensions, with each one superseding the other with time. It started as being a part of the crusade against black money and counterfeit currency. This could be termed as the ‘adagio’ of the musical piece. It was followed by the ‘andante’ or the quest for changing the way in which we transact business where the elegance of digital transactions was extolled. As we end with the ‘allegro’ the questions now are centred on what do we do with the goodies that are collected? The scheme, it was assumed, would at the end of the day catch the black money holders and put them in a spot.

 

The first stage was to ensure that a strong due diligence process was followed when taking in cash as deposits with banks. This would, finally, leave those who could not justify the same with currency that was worthless. Once out of the system, RBI could reassess its balance sheet. When currency disappears, then the size of the liabilities contracts and this could be interpreted as a transfer of a surplus to the government. The pundits had argued that amount, Rs 3-4 lakh crore, that would be left can give the government ammunition to fight various battles of development. The purists (including ex-RBI Governors) were against this move, even though the government made no such potential claim on these amounts. It was, hence, more of an intellectual speculation.

 

The party has apparently been dented by two factors. First, the pace of conversion of old notes to deposits has been very brisk and it appears that there may, after all, not be much left for balance sheet adjustments. Second, RBI, in its recent post-policy press meet, has made it clear that these amounts will not leave the balance sheet though they would cease to be legal tender. This, sort of, puts to rest the controversy over what happens to money left in the system.

 

The other route of getting money for the government is in questioning, investigating and penalising what enters the banking system. This was not a part of the original plan, as the demonetisation measure was taken just after the formal income declaration scheme came to an end. But once it was noticed that people were gaming the system by backdating bills on jewellery or transferring funds to other peoples’ Jan-Dhan accounts by giving them a part of the money in exchange, the government has thought of ways of identifying and taxing them with a fine. This Robin Hood scenario would be played out in two ways. The first is to encourage people whose accounts have been used not to return the money to those who have deposited their money, which will be poetic justice.

 

The second is to tax the deposits that cannot be ‘justified’. This is done by first giving a chance for voluntary disclosure where one pays 50%. If one does not declare the same, but gets caught subsequently when the IT/Intelligence department catches them then the punitive charges could go up to 90% with possible penal action. The calculators are out in guessing the collections and estimates range from Rs 50,000 crore to Rs 150,000 crore. Assuming the final number is somewhere in between, what can be done?

 

One option is to transfer all this money to the Jan-Dhan accounts which was a promise made by the government when talking of black money. But with over 25 crore such accounts in operation, an amount of Rs 6,000 per account would be very small. Also, it will not be possible to sift through the misused accounts and the regular ones to lower the targeted group. But this is an option.

 

The second would be to be fair and compensate all account holders who deposited cash in their accounts with clean money, meaning thereby those that have not been taxed. The sum total could be transferred equally into these accounts which are a way of compensating the country for the trouble they have been through for no fault of theirs. This will be a fair way out much in the Rawlsian spirit.

 

Both these options should be seriously considered as government’s stance on the November 8, was that this exercise was a nod to transfer funds from the ‘criminal rich’ to the poor. Yet another route is to transfer the funds to the budget and then use them for spending on specific purposes like roads, rural electricity, urban infrastructure, health, education.

 

This will indirectly add to the welfare of the people in the medium run. But at any rate the money should not be used to cushion the deficit to 3.5% this year, and make up for failure in disinvestment or any other collections.

 

Another alternative is to use these funds to fully recapitalise public sector banks which are short of funds. The proceeds of demonetisation could be used for compensating banks for the trouble they have taken—though the non-PSBs would be left out.

 

Which is a better way of using this money? Using it for projects which includes bank capitalisation looks more appealing and logical and would be looked at positively by the global community, especially the rating agencies. Transferring funds to the bank accounts of the masses may be problematic as it looks like bestowing largess and is analogous to ‘subsides’ and ‘waivers’ of loans. But a call has to be taken on whether or not the government considers this transfer as being a commitment made earlier to the people. A more serious impediment would be to address the concerns of the Election Commission which will observe such transfers as being done to curry favour in the upcoming elections.

It would definitely be prudent for the plan to be cast right away to decide on the use of the additional revenue garnered from this scheme. Besides improving transparency it would also clearly spell out the stance of the government on sharing the proceeds with the people of India.

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Indian lessons

 

 

Source: By Mukul Kesavan: The Telegraph

 

 

What does the debate about the global resurgence of right- wing populism look like from New Delhi? The eruptions of liberal despair after Brexit and Trump's triumph have drawn ' I- told- you- sos' from both the Left and Right. Both sides have scolded liberals for two connected failures: one, for being blind to the economic stagnation and decline endured by silent working- class majorities and two, for replacing the traditional progressive solidarity with working people with multiculturalism and minority politics designed to create a rainbow coalition.

 

Like all political generalizations, these criticisms are overstated but they need serious consideration; which is to say, they need to be examined without the easy consolations of sarcasm and snobbery. The notion is the stupidity and bigotry of the half- educated that stops them from understanding what's good for them is a useful example of liberal superciliousness. In Britain this summer, Remainer conversations were disfigured by precisely this sort of exasperated contempt. The main point that critics like John Gray, the conservative English philosopher, make is that liberals or progressives call them what you will, allowed themselves to be co- opted by something called neoliberalism.

 

Neo- liberalism is the belief that open markets and the free movement of capital and labour will combine with liberal, rightsbased democracy to create a stable, peaceful and prosperous international order. This, argue critics from both Left and Right, was always nonsense because this ideologically- driven globalization created a small international elite of winners (that storied one per cent) and a large rump of permanent losers. The triumphalism that followed the collapse of the Soviet Union transformed the pillars of international capitalism, the World Bank, the International Monetary Fund and the Atlanticist powers that ran them, into crusading doctors determined to administer their cleansing neo- liberal enemas to every country too weak to resist their ministrations.

 

This cure very nearly destroyed post- Soviet Russia. It helped prepare the ground for a kleptocracy ruled by an authoritarian who used the economic destruction and geopolitical humiliation visited upon Russia by the NATO powers to build a revanchist nationalism fuelled by resentment and bigotry. It did destroy the Middle East in the aftermath of the invasion of Iraq.

 

Iraq, Libya and Syria was serially sacrificed on the altar of democracy and the war against its sworn enemy, Islamist terror. There's a symbolic tidiness to the fact that Paul Wolfowitz, the arch- ideologue behind the invasion of Iraq, was made the president of the World Bank afterwards, fusing in one body the failed economic and political dogmas of neo- liberalism.

 

Discredited abroad by the disaster in the Middle East, neo- liberalism (indistinguishable from its twin, neo- conservatism) was discredited in its Anglo- American home by the Great Recession of 2008. This meltdown made the economic prospects of working class communities in the 'rust belt' in the United States and in the northeast of England seem even bleaker than they had before, leaving them ripe for mobilization by right- wing populists like Nigel Farage and Donald Trump. This line of argument can be extended with minor variations to other European countries where the political centre of gravity has moved to the right: Hungary, Italy, Poland, Austria and France. Gray has for some years now, been an advocate of Brexit, arguing that the European Union is the perfect example of the failure of the economic integration advocated by neo- liberals. Working- class communities at the receiving end of economic liberalization do not want their factories disappearing abroad and resent the fact that they have to compete for the jobs that remain with foreigners. Gray argues that this is not xenophobia — though it can be harnessed as such by politicians — but rational self- interest. He chides liberals for stigmatizing popular feeling born of firsthand experience as right- wing populism: why, he asks rhetorically, does an electorate become a racist mob when it returns answers that liberals don't like? There are many objections to be made to this seven- league- boots style of argumentation, the most obvious being that the margins for Brexit and Trump were so small that they can scarcely sustain the weight of these generalizations.

 

Multiculturalists and the rainbowcoalition wallahs could ( and do) point out that that the Republican Party has systematically cultivated a white rump as its base for decades, and therefore to assign Trump's win to working- class discontent and not to a racist mobilization is simply to give the white working class and its prejudices a pass routinely denied to others. The Economist might argue that the case against a globalized economy is just wrong and point to the hundreds of millions that have been lifted out of poverty by free markets and ability of capital to cross borders. People on the left, the world over, will point to the fact that theirs was the original critique of finance capitalism, that they were the prophets in the wilderness years after the collapse of the Soviet Union, who cried themselves hoarse warning that the collapse of capitalism was nigh.

 

These responses make serious points but they sound plaintive and unpersuasive. The doomsayers of the Left might have been right but since the Soviet Union collapsed and took Marxism with it, the Left has failed to produce an agenda for popular mobilization. Bernie Sanders's barnstorming campaign and Occupy Wall Street were important movements, but the centrist political establishment of the Democratic Party succeeded in defeating and co- opting them. Sanders might have been on to something but he lost and lined up behind Hillary, effectively neutering the Democratic Party's ability to channel Middle America's insurgency. If white Americans were as racist as the Left claimed, how did Obama achieve the approval levels he did at the tail end of his presidency? As for The Economist 's use of China as a defence of globalization, Gray points out that China succeeded because it was the only one of the great powers that had a rational ( that is, achievable) sense of what it wanted from the international order. This was foreign capital and foreign markets; it did not include liberal democracy or the free movement of people. China has less than 1,500 naturalized citizens. China didn't drink the Kool- Aid; the Atlanticists did.

 

Gray sees Trump's election, Brexit and ( as he sees it) the imminent break- up of the EU as a return to an older global arrangement: the inauguration of an era of Great Power rivalry based on realism in foreign policy and measured protectionism for the management of national economies. It is a pragmatic view of the world, self- congratulatory in its detachment, but it's worth our attention, coming as it does from a man who opposed the West's intervention in Iraq, and who, in his book, False Dawn, pointed to the fragility of global capitalism a decade before the near- collapse of the world economy, and who foretold Brexit and the Trump triumph before they happened. (Gray is also something of an ideological chameleon, having serially supported Labour, Thatcher and New Labour before arriving at his present anti- globalist stance.) What relevance does this explanation of the West's recent past have for us? Gray's most pertinent thesis is that when the middle classes and the poor are disoriented by the upheavals of economic liberalization, they turn to the right for consolation, not the left, because the Right has always had at its ideological core, the idea of the People as a beleaguered community that needs to be protected from predators both within and without. The Left, hamstrung by its rhetorical internationalism and its concern for minorities, seems less attentive, less willing to invoke a People, lest it call forth a monster.

 

Desi liberals knowingly tell their foreign friends that Trump's victory and the progressive hysteria that followed filled them with déjà vu. They had been here before, in 2014, when Narendra Modi won an absolute majority. They are wrong; Narendra Modi is not Donald Trump. Modi comes out of the mainstream of Hindu nationalism and its institutions; he isn't a maverick outsider. Perhaps our maverick populist lies further down the road.

 

What if our resident sorcerer, having made our money disappear, fails to complete his trick? If demonetization permanently damages the economy and creates widespread discontent, by the time the next election comes around the principal beneficiaries mightn't be the anti- Bharatiya Janata Party opposition, but some unforeseen Trump- like figure from the right who moves to annex the BJP in the name of a new, more fiercely majoritarian agenda. He would have to be a recognizable face and a pan- Indian brand. He would boast of his success as a self- made man able to purge a corrupt system from outside.

 

He would have the money to underwrite his political ambitions. He would be Hindi- speaking, more saffron than Modi, more bearded, and, most importantly, more telegenic. He would, in short, look remarkably like Baba Ramdev.

 

Here's a man who is the face of a company estimated to be worth billions of dollars, a saffron sant whose image is plastered all over Patanjali's products, whose television audience via devotional channels like Aastha rivals Trump's television presence, whose political ambitions are obvious to anyone who has followed his career. When a journalist friend of mine mooted this nightmare scenario, I thought he was insane. After Trump and post- demonetization, this future, or one like it, no longer seems impossible.

Jayalalithaa's death is a good moment to think about what a secular populism looks like. The traditions of welfare and affirmative action inaugurated by the Dravida Munnetra Kazhagam and MGR and carried forward by Jayalalithaa helped Tamil Nadu achieve high scores on the United Nations human development index. Routinely rubbished by economists and pundits, this ' populism' helped educate its people and empower its women without noticeably compromising Tamil Nadu's economic performance relative to India's other states. More to the point, it helped these Dravida parties consolidate political constituencies. There's much in Dravida politics to criticize, but their ability to mobilize electoral majorities that aren't majoritarian, isn't one of them. Given our Modi- fied present and a future where political babalog are routed by juggernaut babas, the liberal- Left in India had better embrace populism, instead of disdaining it.

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Demonetisation lessons for GST

 

 

Source: By Amitendu Palit: The Financial Express

 

 

The large-scale withdrawal of currency notes from circulation in India has implications for the impending GST to be adopted by the country. There are concerns over whether the expected contraction in economic activity following demonetisation will impact state revenues adversely. As the finance ministers of West Bengal and Kerala have noted, demonetisation is adversely affecting state revenues given the decline in collections from many relying heavily on cash transactions such as hotels & restaurants, transport, entertainment, tobacco, etc. The argument that the GST would come in at a time when several state revenues are already reducing can lead to demands for greater coverage of state revenue losses by the Centre. It might also provide the ground to some states to delay implementation of the GST.

 

Even if the GST kicks off on its scheduled date of April 1, 2017, the demonetisation experience has brought to light some of the challenges the implementation of the GST is going to face. Foremost among these is the capability of the technological infrastructure. Indeed, plunging into the GST without adequate technological preparedness might be counterproductive.

 

By now, most agree that while the objective of demonetisation was well-meaning, the authorities overestimated the capacity of domestic institutions for handling the ‘shock’ impact of withdrawal of more than 80% of the currency in circulation. The importance of settling very basic issues like recalibration of ATMs for dispensing new currency notes and equipping retail outlets and vendors for accepting plastic money was grasped only a few days after the withdrawal of notes and panic reaction from public. It can be argued that the banks were unaware of the move and taken by surprise. But the cash crunch actually compounded problems faced by people under normal circumstances for withdrawing such as ATMs reporting inability on several occasions to dispense cash, the need to repeatedly insert cards in these machines before the latter respond to the magnetic stripes, and the touch-screens of many ATMs being only partly sensitive to finger taps. For an already struggling digital infrastructure in many parts of the banking system, coping with the cash crunch has been an onerous task. On the other hand, frustrations have been high among many trying to use mobile wallets as unexpectedly high server traffic has led to delays in materialisation of transactions.

 

The success of the GST in ensuring a common market for goods and services in the country depends how efficiently various actors in the GST game are able to lock on to its technological apparatus. The numbers of actors involved in the process are huge. Apart from banks and financial institutions, the GST administration would involve manufacturers, traders, wholesalers, retailers, e-commerce operators, and mobile and data service providers and, most importantly, central and state tax administration authorities. The GST network for enabling the technological infrastructure of the GST in the country would require, among other things, facilitating two-way data flows between the Centre and states. This by itself is a humongous exercise, made more complicated by the fact that the GST would require crediting of taxes paid at every stage of the supply-chain to the next user.

 

Managing demonetisation has been simple in one sense. The onus of performance has been on the banks. Post-demonetisation, the government-public interface has been limited to banks. No central or state government department has directly figured in the interface. The GST is going to be very different. For a long time, GST-sceptics have been pointing to the differential abilities and varied preparedness of states to take on GST as one of the major reasons for the commercial chaos that might follow its implementation.

 

With less than four months to go for bringing in the GST, the demonetisation experience has brought to light the great importance of various agencies reaching a common minimum level of technological preparedness and user knowledge for administering the GST. Such lack of preparedness can well create odd situations similar to those experienced during demonetisation like inability of ATMs to disburse new currency notes due to delay in recalibration. The risk of technological disequilibrium is high for GST given that all states are yet to agree to it. Though the consent of the minimum number of states necessary for getting the GST going has been obtained, flagging off the GST regime in a fiscal federation where not all states are party to it, might lead to greater complications.

At a time when demonetisation has ordained the economy and its actors to change their style of functioning to more cashless modes, the GST will add its own rules of the game. Before adding the latter, it is probably important to be as granular as possible in ascertaining the technological preparedness for implementing these rules. There is no harm in a few months’ delay for launching the GST if the technological preparedness across the country is not up to the mark.

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Relevance of Parliament

 

Source: By B K Chandrashekar: Deccan herald

 

By now, the multi-faceted failures and misadventures of demonetisation are well known. That the BJP spokespersons and top guns, Prime Minister Narendra Modi included, are demonstrably defensive and consequently more aggressive, even offensive, is visible. What is not quite realised is the devalued status of nation's Parliament - the centre piece of the Constitution of India.

The BJP manifesto for the 2014 Lok Sabha elections promised: 'Good Governance: Transparent, Effective, Involving and Encouraging, and open Government and Accountable Administration'. So, both good governance and accountability were promised. 'Governance' directs our attention, among other features, to the process of decision making.

In the case of demonetisation, however, since the prime minister asserted the need of secrecy, the desirability for information on the 'process' factor need not be pursued. 'Accountability' is a different matter. The prime minister has been surprisingly emotional ('will risk my life') - with tears in his eyes on a couple of occasions - in stating that he took the decision to demonetise on behalf of the nation and that he would take the issue of black money to its logical conclusion, implying that he is responsible and accountable for his decision.

Who should the PM be accountable to and in which forum, is an issue that has paralysed Parliament ever since the monsoon session began on November 16. Since he chose not to announce the decision in Parliament, Modi believes that he is not obliged to initiate or partake in the debate in the House. True, the PM cannot be technically faulted on his promise, but it is equally reasonable to argue that a fundamentally important policy decision adversely affecting the common man's daily transactions deserved to be announced in Parliament that was meeting barely eight days later.

That would have renewed Modi's reverence of Parliament that he chose to display when he got down on his knees, as one would at a temple, at Parliament's entrance as the PM-elect. He would have sent out a clear message to sycophants in all parties including his that while the BJP and the Parivar have conceded that he is everything, he nevertheless accepts his own accountability to Parliament. Don't forget the BJP's tongue-in-cheek declaration in its 2014 manifesto that "the only epic of a Government should be India's constitution"!

I spoke above of Modi's refusal to be accountable to Parliament as being technically defensible. But a far more critical value in the concept of parliamentary democracy is that of propriety. The presiding officers of Lok Sabha and Rajya Sabha have held, following the practice in the UK House of Commons, in a large number of cases that "courtesy demanded that all important announcements on matters of public interest or policy statements should first be mentioned in the House", in particular, when Parliament was sitting.

A point worth the mention is that the PM is elected in the same manner as any other Member of Parliament; his party elects him as leader of the majority parliamentary party; he forms a cabinet; it formulates policies which are debated and approved in the House. The cabinet, including the PM, is thus accountable to the House. This is what distinguishes parliamentary democracy from a directly elected Presidential system where he/she is not accountable to Parliament and thus it will not be a forum for debate. Modi's "I won't debate in Parliament" stand is further impaired by his serious and self-righteous charge that the opposition parties were howling because they were not given time to manoeuvre their unaccounted cash. Meanwhile, what of propriety? The charge against the opposition conveniently implied that the BJP itself did not need to manoeuvre their cash and stocks.

Just as well, I believe that our PM avoided a debate. It was evident, after just four days down the line from November 8, that demonetisation had let loose chaos in the large (rural areas and) unorganised sectors suggesting a major deficit of due deliberation prior to the theatrical announcement. The PM lost out on the benefits of: careful consideration, consultation by reaching out, and crucially, avoiding over-hasty decision. His advisors failed to spot problematic points in the economy and society as a result of demonetisation.

Twenty notifications

The 20 notifications so far extending the dates for exchange of notes, tightening withdrawal of cash, relief to farmers, despatch of 'war teams' of officers to the rural areas to identify immediate needs of credit to cooperative banks and so on, are testimony to the deficit of deliberation, anticipation and planning. Such "on-the-job-learning" is an inexcusable luxury when crores of people are visibly suffering.

We may not be in a vicious circle but the government, caught in a vortex of blanks and gaps, is compelled to improvise everyday on its administration of demonetisation. No wonder, the PM's advisors grabbed the only oxygen mask they readily found in the form of "PM's App" to conduct what they called a 'survey' or 'referendum', another instance of direct reach with citizens by bypassing parliament.

The PMO claimed that 10 lakh people had responded to PM's questions. The question is: how valid is the survey itself? Most were leading or loaded questions and some were far too vague. The question, 'does black money exist?' has confused people. Is money 'saved' by women at home, but not deposited or reported, 'black'? 'Do you think the evil of corruption and black money needs to be fought?' squeezes two questions into one as if the two concepts are the same. Likewise, what the respondent thinks of the "government's efforts" becomes, in the next question, "Modi government's efforts" and so on.

A genuine survey or referendum should be designed and implemented by an independent authority, and not by those in the government, so that questions leading people to give desired answers are not asked. The Modi App survey may also provide opportunities for others to play havoc with so-called 'public opinion'.

 

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A vision for Digital India

 

 

Source: By TV Mohandas Pai: The Financial Express

 

 

Our prime minister has given his vision of Digital India to connect all Indians and empower them. It is a truly transformative dream which will remake India and create a digital society, removing disadvantages and distance. It will unify us, level the field and create a new generation that can compete in all respects globally. It has become even more critical now that we have demonetisation of 86% of our currency and a renewed drive to bring in digital banking for the masses.

 

Digital India is about empowering 127 crore Indians by connecting them to each other and to the internet through a smart device with low-cost data plans, thus creating one single virtual nation!

 

It is a mission which will enable every Indian to access all government services and schemes directly, through e-governance, thus eliminating intermediaries and the tyranny and corruption of low-level officials. Every Indian, irrespective of her status, will enjoy the same level of service. Most government services and schemes will be delivered electronically across India—creating a rich data base—in a transparent manner, with grievance redressal and assured time-bound delivery.

 

Every Indian will have access to full financial services through the India Stack on the mobile—accessing credit and bank accounts, and transferring money at very low costs. She will be able to get account information, make payments, and get all benefits directly credited to her account (DBT). She will have life insurance, medical insurance, opportunities to invest savings and make investments electronically in the comfort of her house. Tax collections will increase and evasion will come down as electronic transactions increase. The transmission loss and corruption in government schemes will come down.

 

Every Indian will have her health records electronically available, be able to transmit her medical condition to specialists across India, get a diagnosis done, have a video conference from even remote places with doctors and access the best of health facilities, including emergency and hospitalisation services. Through the medical content on the web, she can learn about healthcare and the latest discoveries and treatments available. She can access health-services in any part of the country.

 

Every Indian child above the age of 10 will have a tablet pre-loaded with rich multimedia education content in a language of her choice, suited for the prescribed curriculum, with 4G and wi-fi. This will also create the ability to access all necessary content on the web from the best of teachers, participate in quizzes, watch documentaries and learn at their own pace and at their own convenience. Every student in college will have a tablet/laptop pre-loaded with curriculum-based content as well. This will enhance the educational experience and, to an extent, level the field. This will also create a generation which is digitally literate and aware. Also, schools, colleges and universities will be fully networked. The world’s best educational content in every subject—mostly available for free—will be available to every student. All text books will be converted to e-books and available for free, greatly reducing the cost of education.

 

India is a land of traditional artisans and farmers. Every self-employed individual, whether an artisan, a farmer or a service-provider, will have an individual web page and access to a payment gateway, bank accounts, the benefit of doing commerce directly with the consumer anywhere. This will reduce the middlemen in the value-chain, enable full price-discovery and considerably enhance incomes. This will allow the easy access of credit as full records will be available. This will create a new professional, self-employed class that is directly linked to markets. Every Indian will be able to access goods and services through e-commerce at reduced costs, through direct purchases and transparent price-discovery. An automated supply-chain promises massive savings to consumers. Job opportunities in the formal and informal sector will be known easily and asymmetry of opportunity will reduce.

 

Every Indian will have access to entertainment to enhance the quality of life on a global basis, through access to movies, music, folk songs, real-time viewing of plays, museums, talks, videos, etc, in various languages. A truly national audience will be available. As stored programmes will be available, a synchronous viewing will be easily possible. This will remove the drudgery of life and be both entertaining and educative. The archives of All India Radio and Doordarshan, which has very rich cultural content, will be available for free. All books, manuscripts, documents and the likes that are no longer copyright protected will be available to all for free. An enormous store of human civilisational achievements all over the world will be available to all Indians.

 

Every Indian will have the ability to create personal groups through various apps, communicate with each other, have a video conference with family either in India or overseas and maintain family memories through videos, photos, etc. Loneliness will be less for aged parents, children and for spouses who can now communicate freely at low cost. Every Indian will have the ability to listen to their leaders, including our PM, watch speeches on streaming services, communicate with the leaders and chat with them. Our leaders will get direct access to citizens, rich or poor. The poor and marginalised will be empowered due to this access. Democracy will deepen due to better communication, free flow of ideas, availability of information and choice.

 

The government will ensure that all disadvantaged citizens, including those in the BPL category (especially women), will be given a free smartphone in a scheme on the lines of the BPL LPG scheme that has greatly empowered women. All school children and students in colleges who are economically disadvantaged will be given the tablet and laptop free by the government so that this mission succeeds. Apps, content and all else to make this work is already available in plenty, with more on the way. A huge number of start-ups have the ability to deliver this today. The lack of adequate devices in the hands of citizens was a handicap which can now be solved by the government through Digital India. The cost of this is easily affordable and the funds in the USO or borrowing against future USO can be availed.

A Digital India Mission is needed to make this work over the next 2 years. The availability of low cost 4G data plans is no longer a constraint nor is the ability to scale up across the country, due to the entry of a large competitor. We can finally create one United Virtual Virtuous Nation of Indians through Digital India.

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A dream of our unity

 

 

Source: By Valson Thampu: Deccan Herald

 

 

I sing the national anthem with gusto. And even offer to lead the singing, whenever it is safe to do so. There is a reason for it. I am a failed singer. I used to fancy myself, in my innocent days, a singing talent. My very first attempt to sing in public disabused me of my illusion in this regard.

 

The only song I feel free to sing, given my lamentable dearth of musical talent, is "Jana Gana Mana" This is absolutely the only song in our history of which, the victims of your singing, expect no tune or talent on your part. You can sing it from any podium at the top of your voice and get away with, as your victims could tell you, "with murder". So, I am a votary and I have no problem with the anthem being played in cinema halls in principle.

 

There is a second reason, besides my indifferent musical talent, for my partiality to the anthem. That goes back a few decades. I chose Hindi as my second language. I was happily proficient in Malayalam and deeply desirous of choosing it as second language in my undergraduate days. But my patriotic mother willed otherwise. "Hindi," she counselled, "is our national language. Son, you must opt for it." I did.

 

I was at sea right away. Couldn't make head or tail of the grammar. The gender-based case endings foxed me. I could never make out if pen, table, book etc, were male or female. There were a million similar perplexities, besides. After a few valiant efforts I gave up. I began to neglect Hindi, like all else in my batch. But we had to pass a university examination. A way was found. We learned "Gana Gana Mana..." by rote and reproduced it, verbatim, on the script. Irrespective of the questions, the answers were only copies of the anthem, repeated as many times as there were questions.

 

All of us passed. And I topped the list in my district, scoring a whopping 65% in 1970, when marks were supposed to mean something! I nurse that undying sense of gratitude. So, should the anthem be played in cinema hall? Of course, it should be. But I am left still with one practical problem, which might as well be stated. Let us assume that everyone rises to his or her feet and stands when the anthem is played, being obliged to do so.

 

Does standing per se be token "respect"? I am afraid; it is possible to stand in a way that secretes resentment, vexation, or even disrespect. Who is going to decide if the way this citizen stands is patriotic or not? Who will certify if the way I stand is respectful or not? I will not be surprised if tomorrow a new breed of national anthem vigilante’s springs up and roams at will in cinema halls terrorising hapless citizens. It does not take any specialised sense of history to see the link between regulations and violence, just as there is a link between rules and corruption.

 

It is not only likely but almost certain that many - in fact, a vast majority - could stand "disrespect" to the anthem out of sheer ignorance. Because of my personal fondness for the anthem, I watch attentively how people stand when it is sung. I can vouch that not even 1% of our citizenry know how to stand appropriately for the duration of the anthem.

 

I suggest a couple of simple exercises. Just watch our netas, when the anthem is sung, and see how they stand. Then come to your own conclusions on: (a) if they know how stand for the anthem and (b) if such standing as many of them casually and awkwardly undertake is expressive of respect or clumsy disrespect. Second, conduct a random survey among citizens -take the most educated among them- and find out how many out of, say, a hundred know how to stand for the anthem. You will be, I dare say, in for a shock.

 

'Anti-national'

 

What is the need - one may ask at risk of being branded anti-national - to order people to "show" respect to the national anthem? The answer is simple. The need to have recourse to force means only one thing: we are unsure if we have done enough as a country to imbue our national flag and anthem with emotional richness and patriotic resonance. We have to force citizens to "show" respect only because we are worried that they don't feel it towards these symbols.

 

I find it hard to believe that anyone can be ordered into respecting anything. Citizens can be ordered into hypocrisy, though, which can only breed resentment. Given the logic of human nature, people are sure to resent everything thrust upon them. Coercion vitiates respect and replaces it with insincere, if not slavish, obedience. Nobody is going to be told, in all likelihood, why they should stand, much less how they should. People will only know that they "have to" stand. In matters of sentiment, this is not a happy state.

But resenting the anthem or the flag is not an option. What we need to do is to create a national climate in which these symbols acquire a positive and resonant significance for all citizens. We must render respect towards national symbols spontaneous and effortless. We need to become a country healed and united. We are miles away from that happy state. A dream of our unity is, after all, embedded in the Anthem. The saving of all people waits in thy hand, Thou dispenser of India's destiny.Victory forever.

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Intellectual property vs competition law

 

Source: By Shamnad Basheer: Mint

 

Given that we just celebrated yet another honorific day on 5 Decemberthe World Competition Day—I want to pose a fundamental question on the interface between intellectual property (IP) and competition law. To what extent should competition law be permitted to intrude into the hallowed halls of IP?

IP purists argue that IP regimes are good enough to internally sort out the negative fallouts of excessive monopoly power typically engendered by avaricious IP owners. An egregious example is excessive pricing or a refusal to supply the patented invention in quantities sufficient enough to satiate the market. It is thus that the Indian patent regime (and many other similarly situated regimes) stipulates that in such situations of abuse, the IP owner could be hit with a compulsory licence.

India invoked this compulsory licensing provision (Section 84) some years ago in a controversial case pitting Bayer, a German multinational pharmaceutical company, against Natco Pharma Ltd, an Indian generic company. Natco had petitioned the patent office arguing that Bayer’s price for its patented anti-cancer drug, Nexavar, was exorbitant at Rs2.8 lakh and unaffordable to a large segment of the patient population and that it was willing to supply the drug at less than 1/30th of the patented price, i.e. at Rs8, 800. The patent office ruled in favour of Natco, holding in pertinent part that Bayer’s price was excessive.

However, the patent office did not showcase any metric to arrive at this conclusion of excessive pricing. It cleverly relied on Bayer’s own admission that the drug reached only 2% of the patient population; and took this to mean that the drug was unaffordable to the other 98% of patients. This, of course, begs the question of whether the others wanted the drug at all in the first place! After all, India is home to a large number of patients that never so much as see the insides of a decent hospital and/or others who put their faith in faith healers and traditional medicines.

But even assuming this handsome heuristic may have worked in this one instance, future cases will demand the formulation of a rigorous frame for determining “excessive” or “unaffordable” pricing; one built on a nuanced understanding of the healthcare market, purchasing power, insurance schemes and the like. Are patent offices competent enough to make this complex evaluation? Not quite, given the perennial problems with getting even basic patent examination right! Which then leads us to: Is this complex evaluation better performed by a competition agency? Given their allegedly superior proficiency in economics and data crunching, one may be tempted to answer in the affirmative.

Except that there is many a slip between the cup of theory and the lip of practice. The jurisprudential worth of many a decision from the Competition Commission of India (CCI), particularly those that traverse the IP-competition interface, leaves much to be desired. I speak in particular of the Shamsher Kataria case involving automobile spare parts, where the CCI confidently pronounced that there can be no copyright protection over industrial drawings that underlie spare parts, when our courts have been struggling with this very issue for years on end.

Effectively, we are stuck between devil and the deep sea. And the competition cure may well be worse than the patent plague that it was meant to heal; engendering an iatrogenesis of sorts! So quo vadis: Perhaps we could begin by infusing our IP offices with in-house competence in economics by recruiting ad hoc experts. After all, an ex-post evaluation of a purported patent abuse has less to do with measuring the technical merit of an invention (requiring some competence in science/technology) and more to do with economics and the like.

As the innovation ecosystem undergoes cataclysmic changes and fragments itself into a diverse set of players in the value chain, old notions of absolutist IP protection through exclusivity are slowly yielding to a newer and more progressive sharing regime, where IP owners are denied injunctive relief against infringers and forced to contend with a mere right to share in the royalties that emanate from the infringers’ use of the IP.

No doubt, a determination of the appropriate sharing percentage (“reasonable” royalty) will require a serious engagement with economic frames. But then again, given the inherent arbitrariness of valuing an intangible such as IP, do we really need to spend time and resources in getting this right? As a valuation expert once quipped: give me the price you want and I’ll work out the methodology!

And this is where the cookie crumbles. For in the end, patents are tricky tools of the trade; boasting uncertainty of an unusually high degree. They are largely luck-based (lottery like) and can be invalidated at any time owing to the discovery of a primal piece of prior art. For this and various other reasons, patent value will remain relatively indeterminate. The best we can do is to pretend that there is some methodological rigour in our analytical framework. So long as we have a broad frame, one conclusion may well be as good as the other. Or to put it more bluntly, the legal realists may well have won the day!

 

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Heart of Asia

 

Source: By Salman Haidar: The Statesman

 

Afghanistan has been described in different ways at different times, ‘Cockpit Of Asia’ being a frequent 19th century term. That was perhaps a reference to the endemic strife in and around the country, and an acknowledgement too of the fact that Afghanistan was never absorbed into the prevailing imperial structure, and the rulers of Afghanistan were always ready to try consequences with the British armies pushing into their domain. It thereby remained free when the tide of imperial red had covered most of the rest of the map. Afghanistan’s strategic situation is such that it has been a great thoroughfare for armies, and has often been forced to pay a heavy price for its geographical centrality in Asia ~ ‘Heart of Asia’ today but yet coveted by many and recipient of unwelcome attention from many sides. The last century was especially troubled, with the greatest powers of the day, Soviet Union succeeded by the USA, sending in their troops to try to impose control, and being compelled, after prolonged conflict, to depart in disarray.

It is only in the most recent phase that the focus has shifted and rather than seek military ascendancy, key members of the international community have joined in a concerted bid to address Afghanistan’s underlying issues of peace and development. This is no easy task, for international rivalries and unending jockeying for advantage in Afghanistan’s strategic space are still in the way. There have been intermittent previous efforts, as for instance in the heyday of US engagement when attempts were made to rally regional support for Afghan economic development, for which the UN provided a framework and called a few meetings of potential donors, thereby initiating a process. But regional issues kept intruding, underlying differences remained unresolved, and not much was achieved. Pakistan opposed Indian participation, which dampened the international effort, and US-Iran differences had similar effect. It was only later after foreign forces had left that international effort could be renewed, this time adequately broad-based and thus better positioned to work for peace and stability. As may be expected, problems remain even today, but a vast international support effort has been successfully initiated a few years ago, bringing together a number of countries to participate as supporters of the development process in Afghanistan, united by the need to bring under control regional problems of terror and instability. Istanbul was the venue of the first conclave and since then the ‘Istanbul Process’ has been sustained through a series of high-level meetings of Heads, Ministers, and senior officials. This activity is indicative of the earnest commitment of those seeking consolidation of Afghan stability and progress.

The progress and development of Afghanistan is something in which India has long been closely engaged. Even when its resources were severely limited, it was able to eke out the means to make a proper contribution to the development of that country. Projects in agriculture, irrigation, health, culture, mineral exploration, among several others, brought the two countries closer and strengthened their friendship. Their early development cooperation established a strong base for the modern relationship of today which has made India a partner of choice for Afghanistan.

It is in this setting and against the background of a well-established friendship that India assumed the chair at the just-concluded ‘Heart of Asia’ meeting in Amritsar. It was an imaginative decision of the organizers to choose Amritsar as the venue, for this city in the centre of Punjab has played an important part in the commercial and economic life of the entire region. Afghanistan was in earlier times closely linked to Amritsar and other centres of manufacture and trade in the area, and enjoyed active cultural exchanges with them. The physical links that once bound the region together have been affected by the political developments of 1947 when what was once a single economic area was split into separate units, with Afghanistan being reduced to landlocked status between uncertain neighbours. To mitigate some of the adverse effects of that division has long been an objective of India’s neighbourhood policy, and Afghanistan also seeks easier access and transit across the region where it benefited from unrestricted coming and going. Liberalized access would be a substantial economic boost for Afghanistan whose traditional trade with India has not recovered from the restrictions imposed by the transit country, Pakistan. Multilateral conclaves like that in Amritsar revive hopes for at least a measure of restoration of the traditional exchanges.

However, economic issues including transit were not the main focus at Amritsar, for this meeting was held in the shadow of yet another terrorist incident at Nagrota that saw armed killers cross into India from Pakistan in order to wreak murder and mayhem. High indignation in India at the event made it impossible for a regular meeting on the pattern of the earlier ‘Istanbul Process’ gatherings to be held. Pakistan sent a very senior personality and Pakistani spokespersons gave the impression that they wanted Amritsar to provide an occasion for at least partial repair of the breach between India and Pakistan. However this did not happen and despite the presence of high dignitaries from either side, nothing more than a cursory bilateral meeting took place, nothing like a top level exchange in the margins as is customary at comparable international conferences. Meanwhile, the terrorism issue that was raised by India became the prime theme of the conference, with India not alone in pointing a finger at Pakistan for its actions, for the Afghan President made some forthright observations on the same subject.

Owing to the sharp differences within the region it is not clear how far the gathering in Amritsar was able effectively to advance the Istanbul Process. It is also evident that Indo-Pak relations are currently in a deep trough from which it will be difficult for them to be extricated. Exposing Pakistan’s role in terror has become one of the important preoccupations of Indian policy and as a result of active presentation by India at Amritsar and elsewhere there is wider international awareness of the realities and dangers of this matter. At the same time there is a certain amount of international apprehension about where matters could lead if no corrective efforts are made. The Iranian Foreign Minister, who was at Amritsar, went so far as to offer to mediate between India and Pakistan if they so desired. There is no likelihood of India seeking any such intervention but New Delhi cannot be unmindful of the desire of others to see matters calm down in South Asia. The wish for resumed Indo-Pak contact and dialogue has been voiced, and how best to manage this may be the next challenge before New Delhi.

 

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Why India needs a new Constitution

 

 

Source: By Atanu Dey: Mint

 

 

India is unreasonably poor. The 2015 International Monetary Fund ranking of countries places India at the 140th position with an annual per capita gross domestic product of only $1,600. For China the figures are 73rd and $8,000. India had the potential to be at least a middle-income country with negligible poverty by the turn of the century. Why has India failed to realize that potential despite the fact that Indians are as capable of creating wealth as any other people?

 

A country would have reason to be poor if it suffered adverse conditions such as periodic devastating natural disasters, protracted civil strife and foreign wars, or insufficient human and natural resource endowment—none of which is true for India. Assuming that the gods are not maliciously inclined towards India, we can rule out divine decree as the cause of India’s poverty. That leaves us with economic policy as a proximate cause. Centuries of economic history teaches us that bad policies fail to produce economic growth. The claim here is that India’s lack of progress is due to the Constitution since that determines the nature of the government, which in turn dictates those policies.

 

India’s Constitution has the dubious distinction of being the largest in the world and consequently unreadable, and largely unread. It gives the government enormous powers to intervene in the economy, to enact laws that discriminate among citizens based on attributes such as religion and caste, restricts freedom of speech, and limits the right to property. In short, it allows deliberate political and economic exploitation. Undue government interference in the economy politicizes the economy, which in turn leads to the corruption of politics. By contrast, the US Constitution is short, guarantees the freedom of speech, protects property rights, prohibits discrimination among citizens, and limits the power of the government.

 

The most salient distinction between the US and Indian Constitutions lies in the relationship between the people and the government the Constitutions define. The US Constitution places the people as the principal and the government as its agent. This is evidenced in the limits that the Constitution imposes on the government. The Indian Constitution places the government as the master and people as its servants—as can be expected of an essentially colonial government. Like the British government before it, post-1947 Indian governments took on the role of the master and imposed limits on the economic and civic freedoms of Indians.

 

India is a functioning democracy with routine peaceful transfer of power following elections. Each election raises the hope that with different political leaders, governance would improve. Sadly, regardless of which party or leaders are in power, the policies hardly change. Nobel laureate economist James Buchanan wrote, “It is folly to think that ‘better men’ elected to office will help us much that ‘better policy’ will turn things around here. We need, and must have, basic constitutional reform, which must, of course, be preceded by basic constitutional discourse and discussion.”

 

Constitutions provide the structure of rules and constraints within which political decisions are made. Very large constitutions encoding a vast set of rules point to a “low trust” society. India is not inherently a low trust society but it became so because of the adversarial relationship between the government and the people, established by the British and continued post independence. The British government was not popularly chosen but was imposed by force on an unwilling population. The laws, rules, regulations were all designed to have comprehensive, oppressive control over the people. There cannot be a relationship of trust between oppressor and oppressed. The seeds of mistrust sowed by the colonial British Raj have led to a paternalistic government which treats citizens as irresponsible, immature children.

 

The Constitution’s colonial origins give the government near omnipotent powers that are not consistent with a free society. It allows the government to interfere and restrict economic and civic freedoms. India needs a new Constitution that constrains governmental power and restricts it to the proper role of the government in a free society, namely to protect life, liberty and property of the citizens. The new Constitution must prohibit discrimination and must guarantee that all laws follow a generality norm that apply equally to all regardless of sex, religion, group affiliation or origin. The legitimacy of the government of a free society depends on the consent of the governed. Consent by the people even in principle is meaningless if the Constitution is a mysterious document revered by all but understood by few. The new Constitution must be readable and be read by all. Therefore it must be in plain language and not in legalese.

For India’s trajectory to change towards prosperity that has been denied to it for so long, India needs a new Constitution that rolls back the power of the state and vests power in its people where it rightfully belongs in a constitutional republic.

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Long road to gender equality in India

 

Source: By Jayachandran: Mint

 

India formally adopted gender budgeting in 2005. In that year, finance minister P. Chidambaram included in the budget documents a separate statement on spending programmes that benefit women in particular. It was his predecessor Yashwant Sinha who began the preparatory work for a shift to gender budgeting.

Every Indian budget since 2005 has a statement that lists out schemes meant specifically for women. There are two types of schemes that are included—those in which the entire provision is for women and those where at least 30% of the money is meant for women. Sixteen states have also embraced gender budgeting over the past decade.

Has gender budgeting just been for show or has it had a real impact? A new research paper by economists at the International Monetary Fund (IMF) uses data from the states to check whether a focus on gender budgeting has made a difference in those states that have adopted it. Their empirical model shows that states which have adopted gender budgeting have tended to move towards greater gender equality measured by female to male enrolment ratios at different levels of schooling. The impact is more intense when it comes to primary rather than secondary schooling. The IMF economists also show that gender budgeting has a significant impact on spending on infrastructure.

Specific programmes targeted at women do make a difference. One of the best examples is the decision of some state governments to give free bicycles to girls going to school. It is also widely accepted that the lack of safe toilets for girls in schools is one big reason why so many drop out. A lot also depends on the nature of political power. Economist Esther Duflo has shown in her research that village panchayats controlled by women tend to spend more on public goods such as drinking water which are closer to the concerns of women rather than men.

Such interventions are undoubtedly welcome. However, gender budgeting alone is unlikely to solve the massive problem of gender inequality that not only prevents women from living a full life but also hurts economic growth. For example, India has the lowest level of female participation in the labour force when compared to most other regional economies. Indian women enter the labour force only when there is economic distress while they retreat back into their homes once the situation improves—a rare case of employment going down when the economy improves.

There are two other issues that also need public policy attention—economic freedom and public goods. In its latest report on economic freedom in the world, which was released in September, the Fraser Institute draws a link between the economic freedoms of individual countries with the level of economic freedom its women enjoy. The Fraser Institute has developed an index to measure the legal barriers women face when it comes to exercising the same economic freedom available to men in their countries. There are five components to the index of gender disparityfreedom of movement, property rights, financial rights, freedom to work and legal status.

In the Indian case, these legal rights are protected by a liberal constitution but social norms do prevent women from exercising these freedoms. Prime Minister Narendra Modi was on target when he said this in his speech to the nation on 15 August 2014: “I want to ask every parent that you have a daughter of 10 or 12 years age, you are always on the alert, every now and then you keep on asking where are you going, when would you come back, inform immediately after you reach. Parents ask their daughters hundreds of questions, but have any parents ever dared to ask their son as to where he is going, why he is going out, who his friends are.”

The other big issue is public goods. These by their very nature are accessible for all citizens because their consumption is neither exclusive nor rival. Yet, the lack of certain core public goods such as safe streets or lack of clean drinking water are more likely to hurt the economic prospects of women more than men. The argument for safe streets is almost self-evident. The lack of clean drinking water on tap in effect means that women in many parts of the country spend several hours every day walking in search of water. India is still a laggard when it comes to gender equality, and changing this situation is an urgent task.

 

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Time to embrace a cashless economy

 

 

Source: By Mukesh Butani: The Financial Express

 

 

Even as demonetisation has triggered an intense debate, particularly on the efficacy of its implementation, most hardened critics of Narendra Modi do not dispute the idea (at least in public) to cleanse the system of the parallel economy and implement an effective strategy to de-risk national security challenges posed as a result of surge in counterfeit.

 

There are several aspects which missed mention in the debate, some of which extend beyond Indian shores. India is not the only country with rising anti-cash movement as the fight against a cash-dominated economy is here to stay and could well intensify. A case in point is Australia, where less than a week after India’s demonetisation move, similar demands were raised, interestingly, by two major banks—UBS and Citi Bank—for the elimination of the Australian dollar 100 and 50 bills and go cashless.

 

Recent efforts have shown a healthy coordination at the G20 forum to promote cashless society. Several governments are driving a crackdown on cash economy and tax evasion, with the last piece of Multilateral Convention (MLI), popularly called action point 15 of G-20’s Base Erosion & Profit Shifting (BEPS) initiative, which was released last week. The MLI to which India would be a signatory will result in a series of coordinated efforts by almost 100 nations to bring amendments to over 2,500 double taxation agreements for preventing erosion of tax base of nations, which results in stateless income. Arguably, such tax policy shifts are not isolated steps as they would necessitate nations to put in place a series of domestic economic, fiscal and monetary policy changes to meet goals. Since the past few years, advanced and emerging nations have engaged in coordinated actions to combat corruption, money laundering and terror financing to support creation of transparent ecosystem of formal financial networks.

 

Demonetisation can hardly be viewed as an isolated action.  More is expected to come at domestic and bilateral level. India’s collaboration at the global level for promoting a digital society is an outcome of two major initiatives which have gone unnoticed. In September 2015, India joined the United Nations’ ‘Better Than Cash Alliance’, an implementing partner for G20 Global Partnership for Financial Inclusion. The ministry of finance also signed a memorandum of understanding with the USAID on partnering for a digital inclusive economy.

 

Both initiatives were launched to build on the Pradhan Mantri Jan-Dhan Yojana (PMJDY), under which over 250 million bank accounts have been opened with nearly 200 million Rupay debit cards, aggregating deposits of more than R720 million (witnessing a steep rise of 60% post demonetisation). The objective is to make benefits under social schemes better targeted and to move towards digital transactions.

 

Leaving aside the debate on citizens entitled for PMJDY, anecdotal data suggest that over 90% of retail transactions are in cash. For most advanced economies, the number stands around 10% and for emerging economies the figures range between 30-40%. The question, however, is: How does one figure out the unaccounted income in India’s informal economy? It is easy to gauge what portion would form part of untaxed income and what has been taxed, albeit transacted in cash. India’s retail chain is just the tip of the iceberg; the entire supply-chain of business, particularly payments to unorganised labour, logistics, etc, where transactions are made in cash, skip the legitimate part of the economy! The debate gets more interesting if one factors in other avenues for cash generation such as transaction in real estate and gold/bullion. Imagine implementing a GST law, which attempts to make all transactions in the value-chain visible? The GST roll-out, by flushing out cash—particularly, untaxed—may also render its implementation more effective.

 

If the objective of demonetisation is to embrace a cashless society, an objective which no citizen will dispute, the question that begs an answer is its timing and measures to smoothen its implementation. From an economic policy standpoint, there are three key points worth highlighting to understand the broad contours of a nation’s choice of demonetisation and why India chose to walk the path.

 

First, elimination of cash makes it easier for states to keep track of financial transactions, and reduce instances of under-reporting of income. Governments have made laws—American law-makers passed the Bank Secrecy Act as early as 1970—to enable reporting of small cash transactions. By bringing more income to tax, India can make a compelling case to reduce the corporate tax rates and GST in future, as high rates of tax are partly attributable to spurt in parallel economy and act as an impediment for doing business.

 

Second, conventional approaches of central banks are continuously challenged, particularly in an environment of global slowdown. Despite years of loose monetary policies marked with quantitative easing, inflation in advanced countries such as the US, the EU and Japan has remained at less than desired levels. India, even with declining inflation in past couple of years, witnessed relatively high growth in money supply. It is interesting to note that currency with the public (a component of money supply) witnessed high y-o-y growth (48% in FY16 and 34% in FY15), which is generally not associated with falling inflation. The trend in cash circulation clearly revealed a rapid increase in high denomination notes which left very few options other than arresting the surge.

 

Third, a political mandate for an unprecedented, global crackdown on offshore bank accounts could partly be attributed to ultra-low interest rates. A case in point is the EU venturing into negative nominal interest rates; some banks are demanding to charge customers for cash deposits. A section of economists and policy experts are calling for abolition of cash to suppress savings and fuel consumption to boost economy. While this might not be the case for India, the argument of going cashless to boost consumption holds significance given several domestic policy move on digitisation, JAM, PMJDY, income disclosure scheme, impeding GST law, etc.

 

To gauge cashless systems the Citi Bank–Imperial College London’s ‘Digital Money Index’, based on Financial and Technology Infrastructure, Presence of Digital Money Solutions and Propensity to Adopt, ranked India 63rd among 90 countries in 2016. The biggest drag on India’s ranking comes from its performance on the indicator ‘Propensity to Adopt’ (ranked 74th).

Demonetisation gives a chance to Indians—though it may be not a voluntary move—to move in tandem with the global trends of going cashless. As the famous English poet John Masefield said, “Most roads lead men homewards, my road leads forth.” The question we should ask ourselves after life comes to normal is how many steps we took to embrace change, given that most effective changes have an element of inbuilt disruption.

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Making India a cashless economy

 

 

Source: By Jayachandran: Mint

 

 

Even as ordinary citizens queue up for cash and economists are busy estimating the extent to which economic growth will be hit because of the ongoing drive to replace high-value banknotes, there has been a lot of discussion on whether the government can use the current situation to push India towards a cashless future. In his radio address on Sunday, Prime Minister Narendra Modi once again pitched for creating a cashless society.

 

Reducing Indian economy’s dependence on cash is desirable for a variety of reasons. India has one of the highest cash to gross domestic product ratios in the word, and lubricating economic activity with paper has costs. According to a 2014 study by Tufts University, The Cost Of Cash In India, cash operations cost the Reserve Bank of India (RBI) and commercial banks about Rs21,000 crore annually. Also, a shift away from cash will make it more difficult for tax evaders to hide their income, a substantial benefit in a country that is fiscally constrained.

 

To be sure, the government on its part is working at various levels to reduce the dependence on cash. Opening bank accounts for the unbanked under the and adoption of direct benefit transfer is part of the overall idea to reduce usage of cash and increase transparency. RBI has also issued licences to open new-age small finance banks and payments banks which are expected to give a push to financial inclusion and bring innovative banking solutions. Things are also falling in place in terms of technology for India. The recently launched Unified Payments Interface by National Payments Corporation of India makes digital transactions as simple as sending a text message.

 

So, will the exercise to exchange currency notes and the ongoing currency crunch be a decisive factor in making India a truly cashless economy? Nandan Nilekani, in an interview to this newspaper, termed this as “a defining point in India moving to cashless”. Shortage of cash has significantly increased the use of digital modes of payment, but the actual shift will only be visible after the cash crunch eases. It is possible that a section of people which has used electronic mode of payment for the first time due to the cash crunch will continue to transact through this medium, but there are still a number of hurdles in making India a cashless economy.

 

First, a large part of the population is still outside the banking net and not in a position to reduce its dependence on cash. According to a 2015 report by PricewaterhouseCoopers, India’s unbanked population was at 233 million. Even for people with access to banking, the ability to use their debit or credit card is limited because there are only about 1.46 million points of sale which accept payments through cards. Second, about 90% of the workforce, which produces nearly half of the output in the country, works in the unorganized sector. It will not be easy for the informal sector to become cashless, and this part of the economy is likely to be affected the most because of the ongoing currency swap. Third, there is a general preference for cash transactions in India. Merchants prefer not to keep records in order to avoid paying taxes and buyers find cash payments more convenient. Although cashless transactions have gone up in recent times, a meaningful transition will depend on a number of things such as awareness, technological developments and government intervention. For instance, mobile wallets have seen notable traction, and it is possible that a large number of Indians will move straight from cash to mobile wallets. A study by Boston Consulting Group and Google in July noted that wallet users have already surpassed the number of mobile banking users and are three times the number of credit card users.

 

However, as noted above, a material transition to a cashless economy will depend on a number of factors. First, the availability and quality of telecom network will play an important role. Presently, people face difficulties in making electronic payments even in metro cities because of poor network. Second, as one of the biggest beneficiaries of this transition, banks and related service providers will have to constantly invest in technology in order to improve security and ease of transaction. People will only shift when it’s easier, certain and safe to make cashless transactions. Third, the government will also need to play its part. It will have to find ways to incentivize cashless transactions and discourage cash payments. Implementation of the goods and services tax, for example, should encourage businesses to go cashless. Government should also use this opportunity to revamp the tax administration, as more than taxes, small businesses fear tax inspectors.

The government will have to create conditions—not necessarily by creating cash shortages—to push cashless transactions to a threshold level after which the network effect will take over. India may not become a cashless economy in the foreseeable future, but it needs to reduce its unusually high dependence on cash to bring in much needed transparency and efficiency in the system.

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Counter globalisation

 

Source: By Subrata Mukherjee: The Statesman

 

The US political process has developed within the parameters of geography and its unique history. This is exemplified by a strong tradition of isolationism and exceptionalism matched with considerable suspicion of a centralised political structure. It also incorporates the Jeffersonian ideal of a mass of small property owners with rough parity keeping alive the republican tradition even in a situation when such noble sentiments are on the decline or are retreating in Europe.

Besides, there are two strong traditions in the US. A tradition of predominance of economics over politics and also the perpetuation of the medieval practice of continuing with one person holding both the positions as the Head of State and that of government, a practice that persists because of American exceptionalism. With a strong Lockean heritage, the concepts of constitutionalism and limited government provide the bedrock of US democracy and liberalism. This is contextualised with suspicions of a centralised political and economic authority. In an essentially apolitical society with a great deal of insularity, there exist a large silent majority, as noted by President Nixon, a devout church whose members pay their taxes regularly and are generally law abiding.

This tranquility of the major support base, essential for any political party to have a winning coalition, was traumatised by globalisation and neo liberalism, which worked silently but firmly, in ensuring the unexpected victory of Donald Trump over Hillary Clinton in the 2016 Presidential election. Interestingly, in course of diagnosing this deep wound, both Bernie Sanders and Trump were correct in addressing the accumulated anger about a rigged economy and the government becoming an agent of corporations and multinationals, ignoring, insulting and provoking the multitudes of these silent law abiding citizens who existed in a condition of insecurity and anxiety in a society which became alien to their American dream. They complained of economic vulnerability and social exclusion.

The other serious issue was identity politics which was essentially divisive. To these important concerns, no authentic concern was expressed or explanation given by Clinton. Furthermore, she epitomised this alienated Washington establishment. With the exposure of the sensitive emails and the Clinton foundation, the door was closed for the Democrats to evolve a plausible antiestablishment strategy. Sanders’ exit left the ground open for Trump and allowed the latter to galvanize this popular upsurge against the political establishment.

Traditional politicians on both sides were suspect, seen as an oligarchic cartel. Wikileaks aggravated Clinton’s woes, reinforcing the resolve of the ordinary Americans to change even if it was a risky proposition, but one that was worth taking, hopefully restoring transparency and confidence. The choice of Hillary Clinton was wrong at a political juncture when the ordinary American saw her as a continuation of the Obama years with little change in policy. She was perceived as a politician of yesteryear, not fit for reconciling the fractured politics of Washington or to provide a new hope to the loss of tens of thousands of blue collar jobs especially in mining and allied industries. The promise of a minimum wage of $ 15 per hour was drowned with the cry of thousands who remained jobless for years.

The very context of US politics of bipartisanship was shaken up by Obamacare which was passed without a single Republican vote. The 1968 election brought back a lot of change in the Democratic Party nomination process with the dismantling of Delay’s machine politics, but the average voter today perceived the Democratic Party as a corporate entity rather than a party which once championed the cause of the organised working class and average Americans. The members of the ruling class were perceived to be corrupt and unconcerned with the needs, aspirations and anxieties of the average Americans. This was reflected not only by the defeat of the Democratic Party presidential candidature, but also the loss of many well-known Democratic candidates in the Congress. This ensured a comfortable Republican majority in both the House of Representatives and the Senate. The New Statesman simplistically sees it as a vote of racism and fears its repetition in Europe which is reeling under the impact of the Brexit vote. But this is only a partial truth. It was a rejection of identity politics which divides rather than unites people. This was accentuated by a perception of the American media which comprises urbanised elite that had contempt for the average American. The liberal bias of the media also fuelled greater anxiety and insecurity in the minds of the average American. The fear of liberal bias emanates from a few that a Supreme Court with a majority of liberal judges might tinker with the first ten amendments of the Constitution including the right to carry guns. As is well-known, the first ten amendments of the Constitution, also known as the Madisonian amendments, are the most important factors overriding the Constitution itself. The average American voter was not prepared for such a huge shift in the Constitution, based on checks and balances. It was amusing that many Hollywood personalities declared that they would leave the US if Trump won. It was seemingly rooted in confidence built on sand as the libertarian Lockeian liberalism had become an elitist liberalism both in the US and Western Europe. What was forgotten was that Liberalism, as Laski once described it, was a mood rather than a doctrine.

The endorsement of Clinton by most of the well-established liberal newspapers confirmed their alienation for the average American, non-college educated but steadfast in their loyalty to the nation. Surprisingly even the widely respected British weekly, The Economist, endorsed Clinton without realising the gap between the entrenched press and the perception of the ordinary people. Nixon had once remarked that the US does not need an American President for domestic policy. He has been proved wrong by history. We often forget that the US is also a nation-state, of course with exceptional characteristics. The average citizen has his own perceptions and views of immigration, job security and social balancing. The exhaustion of highly centralised impersonal politics in Washington has come to an end with the raising of more issues than solutions. But one aspect is fairly definite; specifically that new liberalism and unrestricted globalisation have been seriously halted by Trump’s victory. The world will have to settle for a different state-centric economic and political order based on the Westphalian state system. Liberalisation and globalisation will have to be worked out within the ambit of the nation-states. In the fulfilment of this imperative, the US is no exception.

 

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Need to abolish triple talaq

 

Source: By R D Sharma: Deccan Herald

 

At present, some of the contentious and controversial provisions of the Muslim Personal Law (MPL), notably the triple talaq and polygamy, are under challenge before the Supreme Court (SC) to consider doing away with them as they are biased and discriminatory to women. The government, in response to the SC's notice in this regard, supported the petitioners' plea in court for the abolition of such practices hurting gender equality and women's dignity. It also asked the National Law Commission (NLC) to examine afresh the entire gamut of issues involved in enacting the Uniform Civil Code.

However, several Muslim organisations, including the All India Muslim Personal Law Board (AIMPLB), have boycotted any such move by the NLC, considering it a gross interference with their personal law. They consider divorce, polygamy and other such practices as an intrinsic part of their religion and wish to retain them as it is. India has separate sets of personal laws for each religion. Just as Hindus, Jews, Christians and Parsis are governed by their own personal laws, so are the Muslims. The British Legislature had enacted the Shariat Act in 1937 covering matters pertaining to Muslim marriage, divorce, maintenance, inheritance and custody of children, which later came to be known as Muslim Personal Law.

Various provisions of the existing personal laws including the MPL, based on scriptures and customs of religious communities, are deemed as not only outdated and discriminatory to women, they are also seen to militate against the very essence of democracy, basic human rights and secularism at large. While Hindu family laws were overhauled long before despite stiff opposition from conservative sections of the community, the MPL mostly remained unchanged. The MPL prescribes different modes of talaq for the dissolution of marriage. But against all norms of justice and equity, Muslim males have adopted "talaq-ul-biddat" - unilateral dissolution of marriage - as the modus operandi for divorce. The husband simply pronounces the word 'talaq' thrice in one sitting and it results in irrevocable termination of marriage.

And there is no scope for any compromise or reconciliation even if it has been uttered out of sheer passion, momentary anger or drunkenness. Once divorced, the woman can't return to her husband without going through a difficult process. It requires that after the divorce, she should get married with another man, consummate the marriage and let her second husband divorce her to go back to join the former husband. This practice is called 'nikah halala' in common parlance. All Hanifi ulemas agree that instant divorce in one sitting is against the holy Quran and Sunnah (practice), and term it as later-day innovation. Yet, it is the most widely practiced form of divorce among Muslims.

Thanks to the advent of modern technology, the practice has become more rampant through telephone, email, SMS, Skype, Twitter and even Facebook, thereby denying women any say in the matter and leaving them and their children homeless and destitute overnight. Most eminent Islamic scholars agree that the preferred mode for divorce should be ' talaq-e-ehsan' in which a couple is given three months to separate if they wish. The separation period gives them a chance to patch up. The Quran clearly asks Muslims to try reconciliation and arbitration before giving talaq.

Many Muslim countries, including Pakistan, Tunisia and Indonesia have banned triple talaq and religiously follow the former. Hence, many argue that there is a case for a similar ban on this in India. While the Quranic principles and practices, originated in a particular context in the past, played a progressive role then, several such customs have become fossilised and are of no relevance to the world of today. For instance, seventh century Arabia, riven with tribal conflicts, saw decimation of menfolk, and the phenomenon of orphans, widows and girls without the prospects of grooms, was common.

Under those circumstances, the introduction of limited polygamy was considered to be a reform of high order to rehabilitate them. However, despite the non-existence of any such condition now, the practice of polygamy still prevails. Not only has polygamy outlived its historical necessity but has degenerated into an oppressive institution for women.

Matrimonial break-ups

Needless to say, it is the major cause of frequent matrimonial break-ups. Once the husband brings in another spouse, the first wife virtually loses her marital dignity. She can't question even the ill-treatment because it is too easy for a Muslim man to give her talaq. Polygamy, therefore, deserves to be abolished in the interest of gender justice. Many Islamic countries have by law restricted marriage to more than one woman at a time. It is beyond comprehension why India has not done so to ensure a better deal for Muslim women. The Hindu law was also reformed in the teeth of strong opposition from obscurantists but Hinduism did not collapse.

The practice of bigamy has been made a punishable offence. The Child Marriage Restraint Act, the Widow Remarriage Act and the law banning sati are some of the important examples of social reforms. In all fairness, the MPL should also be suitably reformed so as to keep it in tune with contemporary social needs of society. Laws can never be static. They grow and change with times. There should be equal rights and equal laws to all women irrespective of their caste, community and religion to ensure gender justice. While the judiciary's role in attempting to rectify gender and other biases that prevail in community-specific legislations is widely welcome, the legislature cannot escape its prime responsibility of law making and updating laws from time to time.

 

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