Inflation in India: what about behavioural economics?

Inflation in India is not coming down despite all brain-scratching and actions by India's topmost official economists and the Reserve Bank of India. All their projections on inflation have fallen flat, and this is happening for the last two years. They keep guessing if a good monsoon would bring it down, or a tight monetary policy would. Government's efforts to reduce fiscal deficit have failed due to their and state governments' profligacy. Even if they have been able to contain fisc to some extent, it is not showing up in inflation figures. A general thinking that rationalises high inflation is that the above 8% growth is leading to inflation. Inshallah, if we believe in such trade off between inflation and growth, the growth will soon go down below 8%.

No doubt, inflation/ price rise is a complex problem, linked to a hundred things many of which are not in government control and many have origin outside India. But rationalising inflation would not do. We must find an answer. It appears that the government and its economists are going by the rule book, and this precisely could be the main reason for the problem. In complex economic situations, you need to find new solutions. For that you need to think out of box.

I am not suggesting that I have the solution. But let me give one example of what the governmental economists might be missing when they are looking for [obvious] solutions. Has someone in the government thought of the population is humans? Have they applied what is called behavioural economics also to see why inflation is on the rise? Has some economist analysed how the consumerist society is pushing up demand of items that do not generate wealth in real sense? Has somebody tried to link the circulation of huge unaccounted money with inflation?

Will somebody give the government the correct diagnosis and the government administer the right medicine? If not, the economists will do the accounting based on the books they have read, and will keep telling you why they could not control inflation/ price rise [and other ills of Indian economy].

Rs 2300 crore public money for closing eye to corruption?

It’s difficult to find a sound reason in the government raising the MPLAD funds from Rs. 2 crore to Rs. 5 crore. As is reported in the press, the government chose to ignore the objections / negative comments from Planning Commission, CAG and NAC.

Though legally valid and theoretically sound, this scheme of MP Local Area Development fund is said to have become another fountainhead of corruption. Ironically, this act of the government, itself stung by corruption charges, is appeasement of parliamentarians. One is tempted to feel that it is being done so that vocal votaries of MPLAD scheme, some of whom happen to raise banner against government in corruption cases, do not raise too much noise.

If media reports are to be believed, MPLAD funds have sometimes been diverted to non-allowed purposes, even for clubs and schools run by relatives. There are reports even of some to be taking their ‘cut’ from the contracts given out of their funds.

Recently the Bihar government has decided to do away with MLA fund because of poor utilization of funds and its misuse. The centre should have taken a leaf out of this sensible move, but chose to pamper MPs with over Rs 2300 crore of public money.

Union Budget 2011-12 highlights

For record, I am giving below the main highlights of the budget presented by Pranab Mukherjee on 28th Feb 2011:

• Direct Tax Code (DTC) to be effective from April 01, 2012.
• Five-fold strategy to deal with black money. Group of Ministers to suggest ways for tackling corruption.
• Phased move towards direct transfer cash subsidy to BPL people for better delivery of kerosene, LPG and fertilizers.
• Additional banking license to private sector players proposed.
• Rs.6000 crore to be provided for maintaining minimum Tier I Capital to Risk Weighted Asset Ratio (CRAR) of 8% in public sector banks.
• Rs.500 crore to be provided to regional rural banks to maintain 9% CRAR.
• Rs.40,000 crore to be raised through disinvestment.
• FDI policy to be liberalized further.
• SEBI registered mutual funds permitted to accept subscription from foreign investors.
• FII limit for investment in corporate bonds in infrastructure sector raised.
• India Microfinance Equity Fund of Rs.100 crore to be created by SIDBI.
• Rs. 500 crore Women SHG Development Fund to be created.
• MSME get boost as Rs. 5000 crore provided to SIDBI and Rs.3000 crore to NABARD.
• Interest subvention for housing loans up to Rs 15 lakh, for houses up to Rs.25 lakh.
• Allocation under Rashtirya Krishi Vikas yojna (RKVY) increased to Rs.7860 crore
• Allocation of Rs.300 crore to promote 60000 pulses villages in rainfed areas.
• Rs. 300 crore vegetable initiative to achieve competitive prices.
• Rs.300 crore to promote higher production of nutri-cereals.
• Rs.300 crore to promote animal based protein supplements.
• Rs.300 crore Accelerated Fodder Development Programme to benefit farmers in 25000 villages.
• Credit flow target to farmers raised from Rs.3,75,000 crore to Rs.4,75,000 crore.
• Crop loans to get interest subvention of 3% from 2% at present.
• National food security bill to be introduced this year.
• Capital investment in storage capacity to be eligible for viability gap funding.
• 23.3% increase in allocation for infrastructure.
• Tax-free bonds of Rs.30,000 crore proposed by government undertakings.
• Environmental concerns relating to infrastructure projects to be considered by Group of Ministers.
• National Mission for Hybrid and Electric Vehicles to be launched.
• 7 Mega clusters for leather products to be set up.
• Allocation for social sector increased by 17% .
• Bharat Nirman allocation raised by Rs.10,000 crore.
• Rural broadband connectivity to all 2.5 lakh panchayats in three years.
• Increase in remuneration of Angawadi workers and helpers.
• Allocation for education increased by24%. Rs.21,000 crore allocated for Sarv Shikshya Abhiyan registering an increase of 40%.
• 1500 institutes of higher learning to be connected with Knowledge Knowledge Network.
• National Innovation Council set up. Additional Rs.500 crore for National Skill Development Fund.
• Plan allocation for health stepped up by20%.
• Indira Gandhi National Old Age Pension Scheme liberalized further.
• Rs.200 crore for Green India Mission.
• Rs.200 crore for cleaning of rivers.
• Rs.8000 crore provided for development needs of J&K.
• 10 lakhs Aadhaar (UID) numbers to be generated everyday from 1st October.
• Fiscal deficit targeted at 4.6% of GDP.
• Income Tax exemption limit for general category individual tax payers enhanced from Rs.1,60,000 to Rs.1,80,000.
• Qualifying age for senior citizens lowered to 60; senior citizen above 80 years to pay no income tax for income up to Rs.5,00,000.
• Surcharge on corporates lowered to 5%

Mamta's rail budget: populist - yes; 'people friendly' - doubtful; 'railways friendly' - no

Mamta Banerji's rail budget was expected to be populist and it is. No hike in fares and freight. In fact, in this age of high inflation, this dose of populism is welcome. Somehow, she has been more pan-Indian this time, and has been rather fair in allotting factories etc to other parts of the country than Bengal. Singur and Rae Bareli cannot be faulted too much. But she should also have been a bit more like a CEO; railways is after all a business concern.

Where Mamta is failing repeatedly is running railways like a leading business concern. It must be run that way,  or it will fail to shoulder its social responsibility as the largest and low-cost carrier of people across the country and economic responsibility as the largest frieght mover. The promises of last budget remain unfulfilled, and this budget does promise too much. India News Today feels that there are not enough finances, will or capacity with the railways to complete the numerous projects Mamta announced today.

Rail safety gets lip service as always and accidents do happen with higher death rates; passenger amenities at railway stations remain as bad; there is hardly any plan to tackle huge summer and festival rush; the scenes of thousands travelling on roof-top and bulging out of train doors will increase rather than lessen; touts will loot passengers as always, under the nose of top officers; the poor who travel in second class will continue to be treated like third-class citizens; pilferage, bribe-seeking and outright thefts of goods will continue to happen and so will the numerous ways of short-changing honest passengers, businesses and railways by rail staff and their accomplices.

If Mamta were really serious about making railways 'people friendly, she should have at least made the reservation system transparent and tweak services. It will not cost much but will generate more income for railways - the money going into cheats' and unscrupulous contractors' / vendors' pockets would go into railways' coffers.

Pl click here for India News Today's highlights of the railway budget and Mamta's quotes.

Rail Budget 2011-12: highlights

For record, I am giving some major highlights of the Rail Budget presented by Mamta Banerji today [25th February, 2011]:

Mamta Banerji

• No hike in passenger fare and freight rates.
• Plan outlay of Rs. 57,630 crore proposed.
• Rs. 9,583 crore provided for new lines.
• 1300 km new lines, 867 km doubling of lines and 1017 km gauge conversion targeted in 2011-12.
• Bridge Factory in J&K; Diesel Locomotive Centre in Manipur. Centre of Excellence in Software at Darjeeling; Rail Industrial Parks at Jellingham and New Bongaigaon [West Bengal]; 700 MW gas-based power plant at Thakurli in Maharashtra.
• 56 new Express Trains, 3 new Shatabdis and 9 Duronto trains to be introduced.
• AC Double Decker service on Jaipur-Delhi and Ahmedabad-Mumbai routes.
• New Super AC Class to be introduced.
• A new portal for e-ticketing to be launched.  Booking charges: Rs. 10 for AC classes and Rs.5 for others.
• Pan-India multi-purpose smart card “Go India” to be introduced.
• 236 more stations to be upgraded.
• 2 new passenger terminals in Kerala and one each in Uttar Pradesh and West Bengal.
• Feasibility study to raise speed of passenger trains to 160-200 kmph.
• Anti Collision Devise (ACD) sanctioned to cover 8 zonal railways.
• GPS Based ‘Fog Safe’ device to be deployed.
• All state capitals in the North-East except Sikkim to be connected by rail in next 7 years.
• 18,000 Wagons to be procured during 2011-12.
• A scheme for socially desirable projects, ‘Pradhan Mantri Rail Vikas Yojana’  proposed.
• 10,000 shelter units proposed for track side dwellers in Mumbai, Sealdah, Siliguri, Tiruchirapalli on pilot basis.
• Concession to physically handicapped persons to be extended on Rajdhani and Shatabdi trains.
• Freight loading of 993 MT and passenger growth of 6.4 % estimated for 2011-12.

Quote-unquote

We have taken a two-point approach ... on the one hand by sustainable, efficient and rapidly growing Indian Railways, and on the other, by an acute sense of social responsibility towards the common people of this nation.... Mamta Banerji while presenting the rail budget

 Pl click here for India News Today's quick take on rail budget.

Highlights of the economic survey 2010-11

For the sake of record, I am giving below some of the highlights of Economic Survey 2010 – 11. presented in Parliament on 25th February, 2022:

• The economy us expected to grow at 8.6% in 2010-11 and 9 per cent in next fiscal.
• Economic fundamentals: strong with savings and investments up, exports rising rapidly and inflation falling.
• Growth has been broad-based with rebound in agriculture, continued momentum in manufacturing and private services.
• Agriculture is likely to grow at 5.4% in 2010-11.
• Industrial output grows by 8.6% ; manufacturing sector registers 9.1% growth.
• Exports in April-December 2010 are up by 29.5 %.
• Imports in April – December 2010 are up by 19%.
• Trade gap has narrowed to US $ 82.01 bn in April-December 2010.
• Net Bank Credit rises 59%/
• Social programme spending has been stepped up by 5% of GDP over the past 5 years.
• 9.7% growth of GDP achieved [at market prices].
• Inflation is expected to be 1.5% higher than what it would be 'if we were not on growth turnpike'.
• Production of foodgrains us estimated at 232.1 mt.
• Forex reserves are estimated at $297.3 bn.
• Gross Fiscal Deficit stands at 4.8% of GDP down from 6.3% last year.

Let Shourie bare it all!

Arun Shourie on India News

Shourie seems to be passing through ashwathama hatah (अश्वथामा हत:) movement in his life. Remember the episode in Mahabharata, when Yudhishtira had to tell a truth couched in a way that would hurt Dronacharya, his master on the enemy side. He had to suffer for the adulteration he made to the truth, but it achieved a public good.

Let Shourie tell everything about the norms created during his times [and are being used as defence by Raja to justify his own misdeeds]. It is difficult to doubt personal integrity of Shourie. He was executive editor of Indian Express and took the paper to its peak in terms of journalism with his relentless exposes of corruption at high levels.

If Shourie can establish why his actions, when he was Telecom Minister under Atal Bihari Vajpayee, were in good spirit, were necessary at that time of evolution of telecom industry, and did not unduly benefit some people or business interests, it will help in focusing the investigations where the focus should be.

Whatever wrong was done, if it was indeed done, during Shourie’s time does not absolve Raja and the present UPA government, but the truth needs to be known. To that extent, Shourie’s deposition before CBI should not only clean him of the muck Raja has thrown on him, it should establish the personal culpability of Raja. Shourie should tell much more than he is asked to do by CBI. He should bare all he knows and thinks about the 2G policies and their implementation over the years.

Pranab dada on black money: no name to tell, another committee...

Pranab at news conference: India News

Pranab Mukherjee says, there is black money stacked abroad, but the government has no names to tell. Why, he says, he is not bothered about names. Hasan Ali just slipped out of his mind.
He also says, there is no proper legal framework in place to deal with black money and that another committee will be set up 'to get studies conducted to estimate the quantum of illicit fund generated by Indian citizens.'  He may also b;ring in an amnesty scheme for tax evaders.

To be fair to any government of the day, it is very difficult to estimate, unearth and get back black money from abroad. But the point is, are the successive governments serious and sincere about it? Are they at all serious about corruption? Have treaties been followed properly where they exist? Forget the black money abroad, what has been done to clean the domestic systems? How have the IAS Joshi couple amassed a billion rupees of ill-gotten money [if you do not remember, they were raided recently by IT guys]? How did the 2G, Adarsh, CWG scams take place in the first place and what has been done to punish the guilty?

During the Press Conference held on [25th Jan 2011] specifically on this issue – on the direction of PMO – Pranab gave details of the ‘five-pronged strategy’ that the government is following to tackle this. The strategy includes:

• Joining Global crusade against ‘black money’;
• Creating an appropriate legislative framework;
• Setting up institutions for dealing with Illicit Funds;
• Developing systems for implementation; and
• Imparting skills to the manpower for effective action.

Well, for once, let’s believe in the government’s sincerity. Let's hope that under Supreme Court pressure, the government really works full throttle to unearth black money in India and abroad. But will this five-pronged strategy work even if it is implemented in letter and spirit?

Perhaps no, till the government works at least on three more prongs:

• Changing people’s mindset. Unless we attack at the root of corruption, black money will keep getting generated and traded in and out of the country. You will reduce the incentive and increase risk in corruption, but unless you make corruption despicable to people, you cannot reduce it below acceptable levels.

• Making election funding transparent and reasonable. If people come to politics with the main motive to make huge moneys, favour their kins and get all types of amnesties and powers to curb action against themselves, and if there is no disincentive to do so, we will not be able to bring probity in public life. Election malpractices and discretions, amnesties and powers to public servants are in fact one of the biggest source of corruption in India. 

• Bringing about large-scale reforms in bureaucracy and government systems. This needs to be tackled at all levels: induction/ recruitment, training, sensitisation, system building, use of new technology, strong disincentives and punitive action, and so on. Volumes have been written about administrative reforms but no government is willing to implement them.

But who listens? India News Today has been doing its bit on exposing and talking against corruption. [Do click here to get older posts.]

Kapil Sibal’s defence of Raja: how low will Congress sink?

What Kapil Sibal said yesterday in Raja’s defence is utterly specious and devoid of credibility. What he said might be technically arguable, because a lawyer of his stature is not likely to be wrong there, but the type of politics and governance the Congress is displaying is despicable for more reasons than one.

One, when it is a fact that Raja gave only one hour or so for submitting bids that required filling longish documents and submitting drafts, what does it show other than blatant favouritism by twisting procedures? Is it not an impropriety to predate a press release so that only your men know of the bidding? Does any amount of argument that Raja had not been asked against first-come-first-served by PMO or that NDA ministers also followed the same procedure make the loot pardonable? Does any amount of corruption that people in NDA government might have indulged in [that is what Kapil Sibal, Manish Tiwari, Jayanti Natrajan and other Congress spokespersons harp on on television] make Raja’s decisions right? 

What Sibal is saying is that Raja murdered an innocent because NDA beat up an innocent too, and that’s why Raja did no wrong.

Two, why are we hankering on presumptive vs substantive loss to the exchequer and the correctness of CAG calculations? Do these matters of detail take away the sting out of the massive crime and breach of public trust that have been committed? 

Is the Congress trying to say that Raja murdered the innocent with only four stabs but the opposition and CAG are saying that he stabbed the guy ten times, so Raja did no wrong?

Three. The more the Congress tries to argue in favour of Raja’s actions, the more it makes light of the impropriety most of the political masters in India indulge in. In a Minister or public authority’s role you are not a lawyer or a businessman; in fact you should not even act as a party-politician when you are taking a public decision. You are there to make right policies, implement them rightly and take actions only with people’s good in mind. You should be ready to sacrifice personal gains for the general public good. You should, by your conduct, lead the bureaucracy under you and those who follow you otherwise. Do any of you politicians remember the oath you took at the time of taking charge as a Minister? 

Four. For the sake of parliamentary functioning, Congress is supposed to take the leadership role. By joining issues instead of extending its hand, it will further alienate the opposition. Will it gain by doing so? Will the country gain? Will the democracy gain? The sole responsibility for letting parliament run smoothly rests with the ruling party, like the running of a household traditionally rests with the father. If the houses do not run smoothly, dear Manmohan, Sonia, Sibal and your likes, you are to blame, not the opposition.

A party that tries to search for facts and issues to browbeat the opposition, instead of introspecting, saying sorry, taking corrective action and compensating with better governance is a morally sick party. Prudence too says, such a party will not prosper politically in the long run.

India News Today maintains its earlier stand on 2G scam, because happenings of late are only proving it right. Do see our earlier posts:
Parliament logjam
Overscamming NDA: Sonia style
High time you resign, Sardarji
Sonia, Rahul, Manmohan, your words sound hollow
Shame on you, Raja... more shame on you, Manmohan

post mortem ahoy!

Indian governments, federal and provincial both, excel in the profession of killing and doing a good post mortem.

They let the health of administration and law deteriorate till it almost goes to coma. All through [as is alleged about private medical centres], they pretend to treat the patient and revive it, to keep fleecing the public. Then somebody, maybe the media or the judiciary or a good samaritan among the NGOs, finds out that the patient has died. Sometimes the patient falls on the ground when he loses his life, and the world comes to know of the death. Then starts the excellent post mortem  and the patient is forgotten, till the death of the next patient is discovered by the public.

Take the case of 2G scam. The government first let Raja take charge of the portfolio when another DMK guy left. Why? Because they smelled good money in the Communications Ministry. Then Raja did all the loot, the fact known to people in his ministry, followed by PMO and Cabinet Secretariat. Nobody did anything, why? Because it suited everybody. Then murmur started, then 3G came, then CAG exposed Raja's misdeeds. Top people in the government and the ruling parties, instead of taking any action, started defending Raja and criticising CAG and anyone else who raised finger at Raja. More pressure from the Supreme Court also did not matter, till dropping Raja became a political virtue for the UPA. What is happening right now? Raja goes unhurt except for losing his throne. Where goes the money taken by him and his cronies? In months and months that have passed, do you think Raja and party would have not destroyed most of the evidence against them, and put the money where it cannot be touched? Even the opposition demand for JPC is being denied, letting Parliament not function. PM is now saying, parliamentary standoff is bad for the country and its image, but would not agree for the JPC! The JPC would also not be able to do anything but embarrassing the government a bit. Whatever happens, the toll is taken. The post mortem is going on and the huge loot will be forgotten like all earlier ones.

Take just one more case, that of fall of a building in Delhi, which killed about 70 people. There was blame game between the Municipal Corportation of Delhi [run by BJP] and the Delhi government [ruled by Congress]. One guy, the owner of the house, was held. This unlucky guy will face charges in the court and will be jailed. The MCD / administration / police officials who allowed him to build floor after floor without taking permission and without taking precaution and those who kept on taking monthly bribe from him just to keep their own mouths shut will all go scot free. Some samples were taken for analysis that will only prove that sub-standard material and engineering were employed, what else? Some compensation was paid to survivors or the dead ones' families; people were evacuated from adjacent houses and it takes some steam out. MCD have excelled in post mortem: they have declared over a thousand flats in that colony illegal! What about the whole city, that has similarly been built illegally? What about the people who are, were and will be responsible for ensuring that no illegal constructions take place? Rest assured, if there is a massive earthquake in Delhi, a major part of the mega city will turn into rubble. Why |Delhi, entire India is built that way.

I can't devote more space to this. The post is already too long for a blog. But let me remind you of some major recent scams that we seem to have forgotten: fodder, Harshad Mehta, Telgi, Satyam, hawala, IPL, scorpene, cash-for-votes, paid news, MCI, Kargil medals, army land scam...

cleaning the river called India

Business Standard is too serious a paper to be taken lightly; on week days it does seldom plays with words unlike the bigger  economic paper, the Economic Times. So, when it runs two editorials, Can Ganga clean government? and Can government clean Ganga? one below the other, India must take note.

Business Standard has rightly called for immediate removal of A Raja from the Union cabinet. It has argued that the UPA government at the Centre would not fall by removing him, nor will the succession politics within DMK undergo a major change. If Sonia and Manmohan are not removing him, can we surmise that they have some big stake in Raja's continuance? Sorry, that was not what the editorial said, that is India News sentiment. [And I have been after poor Raja for a bit too long, see this!]

Talking of cleaning the river Ganga, one agrees with the paper that mere money, technology and governmental effort are never going to clean the river. It is people's river [like all natural rivers] and must be treated that way; it is the people who will clean it by doing right things and shunning wrong actions. But perhaps the coordinating role has to be the government's. If the government can ensure that, other things will follow. As for money, do we need World Bank money or massive [and always non-functional] sewage treatment plans to clean Ganga, the river that washes sins? Dear government, only if you had taken the pains to reach people for money, labour, ideas, etc, the holy river would have been pure by now.

sonia, rahul, manmohan, your words sound hollow

It was comic to hear Congress spokesman Manish Tiwari when he tried to explain that Sonia had indeed talked of corruption in her speech at the All India Congress Committee [AICC] session. He was responding to media's refrain that Sonia, Manmohan and Rahul, the three most important functionaries of Congress did not talk of corruption in public life that has been in the news for the last couple of months. The fact is, whatever Manish says in their defence, none of them spoke of corruption.

My view is, even if they had delivered their speeches only on corruption, that would make no difference unless they show any sincerity in punishing the mighty who have indulged in massive corruption and are still holding important portfolios. Raja broke all rules to favour a few in 2G spectrum distribution and is said to have cost the exchequor a humungous sum of Rs. 2,00,000 crore [Rs. 2000 billion] - despite CAG's and Supreme Court's stinging remarks, he is not only untouched he continues to hold the post of a union cabinet minister. The list is swelling by the day: Prasar Bharti chief Lalli, CVC Thomas, ex-CEC Navin Chawla, Maharashtra CM Chavan... And what we come to know of is only a tip of the iceberg. I have been naming them ad nauseum.

So, only big words will come out of the holy mouths of Sonia, Rahul and Manmohan and these words now sound hollow. If not for the sake of the country, for the sake of the party and for their own sake, they must take a stand. If their strategy is to not act tough and keep the corrupt on the tenterhook so as to make them pawns that can be sacrificed in political game when the right time comes, they are doing it at the expense of the country's economy and social-political health. A nauseatingly meek PM, a powerful lady who thinks only politics and a powerful man who delves only in symbolism are not a good combination for the country.

corruption country called India

I have been avoiding a new post related to corruption, just to look more tolerant of deviations in the society. But the events in the last two-three days have made me speak out my mind on other fora and this blog.

What do you call it, when the Chief Minister of a state [to be more precise, the Revenue Minister who becomes CM later] bends rules to get certificates to a private housing society? The society grabs prime land in the name of housing for the martyrs, top bureaucrats become members of the society by throwing all norms to the wind, top defence brass and politicians or their kins are given flats, rules relating to environment etc are bent to suit the society, even land from the neighbouring areas is usurped to help the society in many ways. Everything wrong is done, less by a fraudulent official turned builder and more by the highly influential cream of the society who are supposed to lead by example. Now CM Ashok Chavan says he will get everything probed and his kins will return the flats!!

In another instance, another cabinet minister of the same state, allows his wife to grab over 20,000 square feet of prime land of a trust. Here too, all rules are bent to favour the lady. Rane, like Chavan, holds a press conference to show to the world how clean he is.

The Supreme Court asks the Central Government to explain how a cabinet minister who is charged with swindling billions of rupees, in what is called 2G spectrum scam, is still holding his post? No wonder, the honest PM is bound by coalition dharma too tight to act against the Minister, A. Raja.

A leading NGO has called the Shunglu Committee that has been set up on the instance of the Prime Minister to probe into the Commonwealth Game frauds an eyewash. Even with all the limitations of the Committee is taking and all the cover-up that has already been done over months, new skeletons are being reported almost everyday.

As if cracking a poor joke, the Central Vigilance Commission observed national vigilance week and made a call to the people to be honest. It also announced that it had opened its website to the people, allowing them to lodge complaints. Well done, you the great CVC, Mr. P. J. Thomas - is your own record clean?

Earlier corruption related posts including those on Raja and Thomas here.

quote-unquote
You (the government) have done nothing on the complaint. The nature of the complaint is serious, but the minister continues till today. One year has gone by. Is that the way the government functions?" the court said. Putting the CBI under the scanner, it asked, "How long will it take to complete the probe? Ten years? It's only slipshod...you are dragging your feet.: rough rendition of what Supreme Court observed on 2G scam on 29.10.2010

hunger, India and Bharat

The latest global hunger index brought out by International Food Policy Research Institute is holding mirror before us once again. It has put India at 67th position among 84 nations it studied and ranked for hunger. [It has not ranked highly developed countries and those getting very low hunger incidence.] India’s position is higher [=worse] than its neighbouring nations in the South Asia [except Bangla Desh] and is equal to strife-torn Darfur and the closed communist country North Korea.

Earlier, the World Human Development Report showed us the mirror.

The IFPRI Global Hunger Index takes into account proportion of malnourished people in the population, underweight children in the age group 0-5 years and child mortality in this age group.

I will not discuss the reasons of such a poor performance by India, but juxtapose it with some other realities of India:

• India has been growing at the rate of 8-9% per year year after year for many years and is likely to grow at over 9.5% this year.
• India is commended for its handling of global recession, and is at present one of the fastest economies in the world.
• The number of Indian millionaires and billionaires in global list is going up year after year.
• India can boast of flashy infrastructure built in recent years with public money: a dozen ultra-modern airports, numerous flyovers without consideration for long-term traffic, expensive government buildings. Add to it the glossy high-rise glass towers and elite residential townships developed by the private sector. Only yesterday, papers talked about the newly built ‘house’ for Mukesh Ambani that has two roof-top helipads and closed parking space for 160 cars! Today, the papers talk of over 150 Mercs being sold in Aurangabad in one lot!
  
• India spent huge sums on Commonwealth Games – directly and indirectly, making it among the costliest games if you consider $-Re price parity and the quality and future utility of the infrastructure created.
• The consumption of cars, consumer durables and high-end fashion items is on the rise in India. India is supposed to be the world’s biggest free market.
• The turnover of Indian stock and commodities markets, though small by western standards, runs into thousands of billion rupees a day.
• India is craving for a permanent seat in the Security Council and is a member of G-20.
• India runs some of the world’s biggest welfare schemes: Sarva Shiksha Abhiyan for elementary education, Integrated Child Development Scheme [ICDS] for child development, and the recent Mahatma Gandhi National Rural Employment Guarantee Scheme [MNREGA] and National Rural Health Mission. India has had the world’s largest family planning programme and has been running numerous schemes for maternal health, promotion of girl child, poverty alleviation, housing and what not.
• The gender ratio is unfavourable to women in most parts of the country.
• India has huge granaries, world’s biggest food grain procurement system, and the largest ration system [Public Distribution System] – all in the government sector. Government agencies also waste huge quantities of food grain because of corruption and poor storage facility.

guest chat: shame on you, Raja... more shame on you, Manmohan

In yesterday's Times of India, there was this item: 'Majority of 2G licences given by Raja illegal: CAG'. Earlier, we had reports that the 2G scam might be one of the biggest, if not the biggest, in Indian history. Janata Party chief Subramanian Swamy's special leave petition (SLP) in the Supreme Court is also to come up for hearing this week. The petition seeks minister’s prosecution alleging that his actions in awarding second-generation (2G) licences in 2008 had caused an estimated loss of Rs.70,000 crore [Rs. 700 billion] to the government exchequer.

Raja is supposed to have acted against the Department's guidelines, personally cleared awards to companies that did not have any experience or wherewithals to roll out 2G, gone for first come first served basis and not through the fair route of inviting tenders, hurried dates of submission of interest to suit some companies and so on. Each of these acts is liable to action, and collectively they represent a systemic loot.

Now, who else do you want to show that Raja was personally and collectively culpable for the scam? Not CAG - the highest audit body? Tomorrow, you will also protect Raja behind some stonewalling law against a Minister's prosecution. Even if you do not do that, you are already committing sins of the worst type a supposedly honest Prime Minister can ever do: turning a blind eye on it all.

You might say that we should not sit in judgement; agreed, and we are not demanding that he be hanged or stoned to death and that too before a court or enquiry commission proves his guilt. But let the government at least ask Raja to go. Any one day delay in his departure means the government is losing people's faith in it.

I am not talking about the legality of the case but the level of corruption within the government run by Manmohan Singh and patronised by Sonia, and the level of tolerance for such corruption. If for political reasons, Manmohan does not dare to act against Raja even mildly, he must resign himself. What is there for him to lose except the frills that being a Prime Minister brings? If he were what his image has been so far, ie an honest person, he should have resigned over many such cases. He too has turned into a shameless creature whose appetite for power is only growing by the day.

As a frustrated Indian, I can only say, shame on you Raja and his DMK. But shame and spit on you, Manmohan and Sonia.

commonwealth games: finally some action

It comes as a much needed comfort that finally the government has taken charge of the games and things are fast improving. There is no time left for any big and systemic change and hence the works will mostly be cosmetic and yet they are very very important for boosting the morale of the nation. India also, deservedly, needs to give a message to the world: ‘you had till today seen how we goofed up because we believed in the capabilities and sincerity of some self-serving guys, and now you see how India can pull it off from the most desperate situation in no time.

One also hopes that the ceremonies and sports events are held smoothly, some records are broken, Jats are pacified and athletes don’t fall ill.

[But the wish also comes with these conditions: Government must (i) thoroughly investigate the inaction and corruption, (ii) take stern action against the guilty, and (iii) do these in a short time. If the government does not heed these, India will not forgive it.

food rot, supreme court and a government sitting cosy

Media had developed fatigue over the issue of rotting foodgrains and people at large had turned cynical. But when the Supreme Court barked yesterday, the issue has again become alive.

Things and the way the government functions have not changed over years; they did not change since I wrote this post a month ago. They are not supposed to change from today.


It is not the role of the Supreme Court to run the country, it is for the government to do so. But when the government does not do the right things and in the right way, the cout intervenes. When the government does not even provide correct figures of foodgrain damage, the court appoints its own team. When the court issues an order [can see the wordings here], the minister says, they are not bound by the order since it is in the form of a suggestion. Now the court snubs the minister and opposition raises a hue and cry in parliament, but what happens?

I'll tell you. There will seem to be some action: some statement from the government side on what it has been and will be doing. Some action against lower-level FCI officials. A letter to States, an all-India level meeting, a monitoring committee, new guidelines on storage, Sonia's NAC will meet and discuss Food Security Bill and advise the government, the Group of Ministers will take a marginal decision... The Centre and states will blame each other. There will be hardly any silos when the next crop comes in about a month and even if storage capacity is increased [as claimed], food will continue to be stored unscientifically. On a larger horizon, agriculturists and companies depending on farm produce will keep making their decisions based on guesswork in absence of a policy guidance. Enormous sums will keep getting wasted on unnecessary subsidy, grain damage, transportation and so on. Country would not benefit from export of grains at high international prices. Private investment will hesitate to come into the farm sector...

What I am saying is not a gross generalisation and frustration with the system. I will soon give you the statistics and bare facts to enable you to see for yourself the rot in the system.

direct tax code: main features

The Direct Tax Code was presented in parliament on 30th August 2010. Even after its becoming an act of law, it will be put into operation only from 1st April 2012. Some of the main provisions of the Code, as it stands now, are given below:

Income tax slabs for individuals:

• Up to Rs. 200,000 – no tax
• Rs. 200,000 – 500,000 – 10%
• Rs. 500,000 – 1000,000 – 20%
• Above Rs. 1000,000 – 30%
• No surcharge or cess over and above the tax.
• No special slab for women; no tax up to Rs. 250,000 for senior citizens

Deductions allowed for individuals:

• Up to Rs. 100,000 in specified savings such as provident fund and NSC
• Up to Rs. 50,000 in respect of expenditure on children’s schooling, health insurance premium, medical reimbursement etc
• 
  
• Up to Rs. 150,000 in respect of interest on house loan for self-occupied property; pre-construction interest deductible
• Standard deduction for income from house: 20%
• No deduction for instalments paid for repayment of housing loan

Other important provisions for individuals:

• No tax on interest earned on PF deposits.
• No tax on receipts from new pension scheme, annuity schemes, pure life insurance schemes
• No capital gain tax on shares held for over one year and for which STT has been paid
• Short term gain on shares [held for up to one year] are given deduction of 50% and then taxed at 5, 10 and 15%as per relevant slab
• Holding period for classification as long term reduced to 12 months

Corporate tax:

• 30% for domestic and foreign companies; no surcharge or cess.
• Minimum alternate tax [MAT] at 20% on book profits
• Certain tax benefits are allowed to SEZs
• Wealth tax introduced for companies
• Tax audit limits enhanced
• More regulatory powers and new rules for taxation of foreign subsidiary, cross-border transactions, investment abroad, etc

My comments on the Code can be seen here.

the direct tax code: mere tinkering with tax provisions

India will soon have a new tax law, one with fewer exemptions and lower tax rates. It is called the Direct Tax Code.

The Direct Tax Code in its present form brings in hardly any substantial reform to the Indian tax system as was expected.

With numerous exemptions and provisos, the Indian tax law has become highly convoluted and unfriendly, and also prone to tax evasion. It was expected that the Direct Tax Code would provide a tax-payer friendly, straight and simple tax regime. However, the Code, as placed in the form of a bill in parliament, goes hardly beyond what can be achieved during the annual budget exercise.

The draft Direct Tax Code will now be debated in parliament and will become a law, which will be implemented only from 2012. The government says, we have given time for tax lawyers to study it, the international economic scenario is not yet stable, etc but the fact is that the government was not itself ready to implement it from the next financial year. There may yet be some changes in the Code till it is finally enacted, but you can't expect much: we are talking about reform, not playing with some exemption here or some limit there. We have missed a big opportunity to reform the direct tax system. The positive sentiment created over the last many months in favour of reforms has been wasted.

Who is the gainer? Not the taxpayer or the government, but those interested in status quo.

Main features of the Code can be seen here

what the Members of Parliament get and how much they cost a citizen

I have been chatting on current happenings in India – issues, events and so on. But I found the blog lacking in giving some interesting information about India as and when it comes out in the form of a new official document, a survey, a report. Though I have already talked of two surveys so far, I used them to draw inferences, not as information capsules.

So friends, I am going to start India chat info nuggets with this one on MPs’ salaries and perks in India. The information is based on newspaper reports and other public documents.

An MP gets the following salary and perks after the recent raise:

• Basic salary: Rs. 50,000 per month
• Office allowance: Rs. 45,000 pm
• Constituency allowance: Rs. 45,000 pm
• Interest free loan to buy vehicle: Rs. 5 lakh
• 1,50,000 free phone calls a year
• Road mileage from home to airport @ Rs. 16 per km, up to Rs. 8,000 per year
• 50,000 units of electricity in a year
• 4,000 kilolitre water in a year
• Furniture worth Rs. 60,000 per term and non-durable furniture worth Rs. 15,000 per term
• 34 free J class air tickets
• First class railway ticket for visiting constituency and Delhi any number of times; also unlimited free tickets to spouse
• Accommodation in prime Delhi location: rent for flat comes to over Rs. 1 lakh per month. Senior MPs get bungalows whose rent is computed to be no less than a few crores. Maintenance is done free by CPWD and MPs are charged a notional sum.
• Pension Rs. 20,000 per month with an increment for every year served as an MP beyond one term
• Free washing of sofa covers, curtains etc.
• Daily allowance of Rs. 2,000 for signing register in the House for which elected, as mark of attendance, during session
• Facilities of subsidised canteen, sitting fee and other provisions for being memeber of many committees

MPs also have a constituency fund of Rs 2 crore a year for carrying out development works in their constituency.

With Nagpur as the central reference point, the package of an MP per year comes to Rs 57 lakh in terms of pay and perks, plus Rs 30 lakh to Rs 9 crore a year as rental for residence.

In terems of cost to country in PPP $ terms [it means, $ value if it purchased the same amount of goods and services in different countries], Indian MPs are a much bigger burden to the citizens than the legislators in the US, the UK and France! Do look at the figures below [courtesy TOI]

Country cost to country How many times an MP costs as
(PPP $ per year; in thousand $) compared to per capita GDP
US 1658 35
UK 320 9
France 281 8
India 217 68
Singapore 208 4
Japan 200 6
Italy 191 7
Pakistan 46 17

[with inputs from reports in some papers, especially the Times of India]