Know your English

“Heard you had a great time watching three movies with Sujatha yesterday.”

“I had a good time talking to Sujatha. There was a lot of catching up to do. As for the movies… well, I didn’t really care for them because none of them were interesting.”

“Were interesting? Shouldn’t it be none of the movies was interesting?”

“Nowadays, even among native speakers, you’ll find that a lot of people use a plural verb after ‘none of’. This is particularly true in informal contexts. People who love grammar, however, insist that ‘none of’ should be followed by a singular verb. For example, none of the students was willing to help the teacher.”

“So, you’re saying it’s okay to say none of the students were willing to help the teacher?”

“That’s right! Especially, in informal contexts.”

“None of the bands that I really like are participating in this weekend’s festival.”

“At the meeting, my boss said that none of my ideas was any good.”

“That must have hurt. Your boss plays in a band, doesn’t he?”

“That’s right! I’m attending this weekend’s event just to score some brownie points with him.”

“Brownie points? What are you talking about?”

“When you do something because you want to score or earn brownie points, you do it because you think people will praise you for it.”

“In other words, you’re not really interested in doing it. You’re doing it for selfish reasons. You just want to please someone.”

“That’s right! You want to get the approval of someone influential. For example, some students want to score brownie points by helping their teachers.”

“What about you? In your case, you try to earn brownie points by giving your boss’ wife roses on her birthday.”

“That’s so very true. Mala tried to earn brownie points with her brother-in-law by offering to proofread his two hundred page manuscript.”

“Really? I’m sure that he’s excessively grateful to Mala for...”

“Excessively grateful? You mean exceedingly grateful, don’t you?”

“What’s the difference between ‘exceedingly’ and ‘excessively’?”

“When you say that someone is ‘exceedingly grateful’, you mean that he’s very or extremely grateful. I’m told that some of Bala’s cousins are exceedingly rich.”

“I didn’t know that. How about this example, then? We deserved to win the championship. Our team played exceedingly well in the final.”

“That’s a good example. The dropout rate in some universities is exceedingly high.”

“That’s true. In schools, the dropout rate among girls is exceedingly high. Now tell me, what does ‘excessively’ mean?”

“When you say that someone is excessively polite, you mean he’s being way too polite.”

“In other words, he’s going way beyond the normal limit of politeness. He may be embarrassing the person that he’s talking to.”

“Very good. Can we go outside and talk? The music is excessively loud.”

“How about this example? Not many people want to live in the U.K. because they have to pay excessively high taxes.”

“That’s one thing you don’t have to worry about right now! Paying taxes.”

Courtesy: the hindu

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A Union budget for the village

Last year in February, Prime Minister Narendra Modi had exhorted voters to vote for his party in the Delhi assembly election, claiming that his victory in the general election had brought luck to the country. Unfortunately, the voters of urban Delhi were not convinced and the BJP received a drubbing[drú-bing(defeat,हार)]. The situation in rural India is no different, judging by the election results of the least urbanised state of Bihar some months ago.

That the economy is in crisis is no longer a matter of speculation. All indicators, except the mysterious GDP growth estimates of the Central Statistical Office, have been pointing to the worsening of the economy. Not to be left behind, even the Sensex was trading at its lowest since the government took over. The declining export figures and falling manufacturing numbers confirm what was already known to most people tracking the economy. The worst hit in this national crisis are the poor and vulnerable[vúl-nu-ru-bul(weak,कमज़ोर)] in rural areas. The rural economy has been under stress. But the extent and long duration of the distress have surprised many. To be fair, a large part of this has been due to the slowdown in the global economy and the corresponding fall in prices of most primary agricultural commodities. The back-to-back droughts — only the third instance in the last hundred years — haven’t helped the situation. While luck has certainly not been on the side of the rural poor who voted overwhelmingly to bring the NDA to power in 2014, a large part of the blame must be shouldered by the government for not only ignoring the warning signs but also aggravating an already fragile[fra,jI(-u)l(breakable,भंगूर)] situation in rural areas.

The failure of the government was evident not only in its denial of the existence of a crisis in rural areas but also the cutback in funding for most rural programmes in the last budget. The worst cutbacks were reserved for agriculture and rural areas, with reduced spending on some pivotal[pi-vu-t(u)l(crucial,निर्णायक)] interventions such as the Rashtriya Krishi Vikas Yojana and the winding up of the Backward Regions Grant Fund. This was accompanied by reduced expenditure on irrigation schemes, such as the Integrated Watershed Management Programme and Accelerated Irrigation Benefits and Flood Management Programme. As if these direct cuts were not enough, the sharp reduction in expenditure on other programmes and the neglect of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) meant that whatever little support rural areas were getting in terms of public expenditure also dried up. There is a massive demand for MGNREGA work but the sudden awakening of the government in the last few months is certainly too late and too little.

The farmer was not only worried about falling output prices but also the increase in input prices and the non-availability of crucial inputs such as fertilisers. The price of diammonium phosphate had increased from Rs 10,000 per tonne in 2010 to Rs 25,000 per tonne by 2014. A similar increase has been seen in the case of the open-market urea price. This, coupled with shortages in urea and complex fertilisers, has meant that even basic inputs have been out of reach for average farmers. With the government using the opportunity of falling petroleum prices to shore up revenues by raising excise on petroleum products, even a significant reduction in diesel prices did not materialise for farmers.

The distress is now evident to anybody who has been tracking the rural economy. While this is obvious in the case of farmers, given the rise in farmer suicides across states, the worst sufferers are casual agricultural as well as non-agricultural labourers. One of the strongest indicators of the distress in the rural economy and among the poor is the wage rate growth. The latest data from the Labour Bureau suggests that the wages of unskilled casual workers have declined in real terms between November 2013 and November 2015 by 2.14 per cent per annum. This is the first time in the last five decades that the wages of casual workers in rural areas have declined in real terms. Part of the reason for this decline is the worsening of the agrarian situation. But it has also been aggravated[ag-ru,vey-tid(worsen,बिगाड़ना)] by lack of demand from the non-agricultural sector. The last five years before 2013 had seen a sharp rise in wages in real terms, at 6 per cent per annum, driven by rising rural demand and also an increase in government spending in different forms. Rural areas have not only seen an unprecedented[ún'pre-si,den-tid(new,अभूतपूर्व)] slump in demand — this can be gauged by the fall in two-wheeler and durables sales — but they have also been hit by the decline in employment generation through public programmes.

The extent of stress in the rural economy is not just about wages and incomes. It is about making the rural economy an engine of growth — and also making growth inclusive. Falling incomes are not only going to hurt the economy in the short run. They will also likely reverse the process of development in rural areas that had been seen in terms of rising access to education, particularly among women, and nutrition. Unfortunately, there has been no recognition of the extent of distress in the rural economy, let alone concrete measures to correct it. While an increase in financial spending will certainly be required to revive sagging rural demand, the situation also requires political commitment to make growth inclusive. It may not be too late to do so, but the government should keep in mind that luck favours the brave. For this government, the time to take brave decisions is now.

Courtesy: indian express

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A costly exhibition

The thrust of the 2015 railway budget was to make the Indian Railways (IR) a prime mover of the economy. The emphasis was on removing operational bottlenecks and consolidating[kun'só-li,deyt(strengthen,सुदृढ़)] infrastructure development to decongest saturated routes and, thus, reduce the logistics component of product costs, which, in India, are among the highest in the world. This year’s budget was full of generalisations and nothing specific was spelled out in this thrust area.

The IR’s finances are in disarray[dis-u'rey(disorder,अव्यवस्था)] . With core sector growth at just 1.9 per cent, there is no way the IR can achieve the targeted incremental freight loading of almost 8 per cent. This calls for serious financial prudence[proo-d(u)n(t)s(intelligence,समझदारी)] but the railway ministry doesn’t seem to have realised this. If the 2015 budget was the apogee of farsightedness, 2016 is an apology for having developed cataract.

Dismal[diz-mul(depressing,निराशाजनक)] core sector growth has, in a way, saved the IR from facing the challenge that faster growth would have thrown up. But this challenge will come up tomorrow. It is necessary to prepare for it.

At the very end of the budget speech, the railway minister spoke of certain “missions” he is contemplating[kón-tum,pleyt(think,सोचना)] to improve freight operations. The vague[veyg(unclear,अस्पष्ठ)] nature of these statements does not inspire confidence in the ministry on the subject of financial management. These need to be elaborated on, now.

The budget was good for what it did not do — it did not raise freight rates. Our freight rates, among the highest in the world, make our products uncompetitive. Over the years, these high freight rates have diverted railway traffic to roads. In fact, discounting for the fuel component in freight charges, the rates should have been reduced this year. Passenger fares do not add much to the kitty but keeping them stagnant is also not good in the long run. A marginal increase was, perhaps, called for.

The minister has rightly pointed out the need to augment[og'ment(increase,बढ़ाना)] transportation capacity. Finances can be improved only by increasing the volume of traffic and tilting the scales in the IR’s favour. We also need to improve average speeds of trains. Most tracks and rolling stock are already fit for speeds above 100 kmph for passenger services and above 75 kmph for goods services. However, average speeds of passenger services are around 40-50 kmph and those of freight 20-25 kmph. This is because we don’t have the capacity to run them at optimum speed. Increasing capacity by doubling/ quadrupling lines would in itself improve speeds. This has to be the thrust area.

This will need resources. But, the IR seems to be going on a big-ticket shopping spree that has nothing to do with capacity augmentation. Warren Buffett says if you buy things you don’t need, you will have to sell things that you do need. That seems to be the case with the IR, going by the slew of disjointed measures spelled out in the budget. And all this expenditure when the railways is borrowing money at exorbitant[ig'zor-bi-t(u)nt(exceeding,बहुत ज्यादा)] interest rates. One day, these debts will have to be paid back. It is a very costly exhibition that the minister is trying to put up. Such extravagance[ik'stra-vu-gun(t)s(excessive spending,फ़िज़ूलखर्ची)] may make for good photo-ops, sound bites and breaking news.

But do we need all this right now? When the IR is bankrupt? The issue is not technology. It is priority and timing. Technology for technology’s sake is not what an organisation dealing with logistics should opt for. Where will we run coaches at 200 kmph when even the existing sectional speed is not being achieved? Till we don’t have the capacity to run, buying such technology is like buying a Ferrari for Chandni Chowk.

And this when it is impossible to get into an unreserved compartment. People still travel on rooftops and footboards and get killed every day.

The talk of “semi-high-speed corridors” makes as much sense as someone being “semi-pregnant”. In any case, they are being financed by a foreign source and would be executed by a foreign company. Where does the IR come into the picture?

And where are the locomotives? We don’t have engines to run even our existing fleet of freight and passenger vehicles.

With increased capacity, we will need many more locomotives. The budget does not indicate a comprehensive strategy for these issues.

The budget makes apparent the fractured nature of the railway organisation. Different expenditure-driven departments simply play their own tunes. The force of technology vendors seems to have rendered[ren-du(provide,देना)] the core activity — transportation — into a sideshow. The minister has spoken about restructuring, but this has been in the works for long. Let us wait and see if the IR can become a professional transportation organisation. Or will it remain an inauguration organisation?

Most of the budget speech was a repetition of the long list of measures taken to improve passenger amenities[u'mee-ni-teez(comfort,सुविधा)] . Good work has been done on these issues in the last one year. But that was last year’s speech. Why repeat them? Further, why should all this be part of the budget at all? How is catering a budget item? How can you talk about providing coal to power houses in the same vein as providing pizza to passengers? In fact, it is high time the rationale of having a separate rail budget was examined.

There was too much talk about what is being said on social media. Craving publicity too much is an indication of political insecurity. But cosmetics and publicity will not take the country or the organisation far. Putting the IR back on track calls for hard work. Tweeting does not help much.

The hapless[hap-lus(poor,असहाय)] minister looked overwrought throughout the speech, as if in a hurry to get out of the predicament[pri'di-ku-munt(situation,दुर्दशा)] his position seems to have placed him in. There was none of his usual humour; clearly a man at his wits’ end. From the business-like no-nonsense man of last year to the tragic figure of this year, Suresh Prabhu has certainly covered quite a distance, downhill.

Courtesy:indian express

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Quantifying the caste quotas

It is only when Jats, Gujjars or Muslims demand reservation, and particularly when these demands become aggressive, that our political system suddenly wakes up and takes notice. However, this notice is simply confined to ascertaining[a-su'teyn(find,पता लगाना)] whether the specific group demanding reservation is worthy of it or not. Little attention is paid to re-examining the global picture or viewing the conundrum[ku'nún-drum(puzzle,पहेली)] of reservation holistically. Neither any established principles of positive discrimination[di,skri-mu'ney-shun(favoritism,पक्षपात)] nor the required data are available to tell us who deserves preferential policies and why.

The proportion of individuals identifying themselves as Other Backward Classes (OBCs) has steadily grown over the years. The National Sample Survey Office data show that in 1999-2000, about 36 per cent of the population fell in the self-identified OBC category; by 2011-12, this proportion had grown to 44 per cent. If combined with about 9 per cent of the Scheduled Tribe (ST) and 20 per cent of the Scheduled Caste (SC) population, the total proportion eligible for reservation comprises 73 per cent of the Indian population. If new claimants to the OBC category are added to this group, easily 80 per cent of Indians would be eligible for reservation of some kind. It would be impossible to provide effective benefits to this large a group. Thus, some choices within these categories will inevitably[i'ne-vu-tu-blee(necessarily,अनिवार्य)] need to be made.

The shrinking pie

The external conditions which initially led to reservations have changed tremendously. Economic growth has resulted in a decline in poverty numbers from 37 per cent of the population to 22 per cent, which, in principle, should bring down the number of people seeking reservations, but over the same period, rewards to government jobs have grown sharply. Wage increases associated with the Sixth Pay Commission and the expected implementation of the Seventh Pay Commission have made government jobs highly attractive. Not surprisingly, many groups historically tied to the land are now seeking favourable treatment while seeking entry into non-farm work. Simultaneously, access to government jobs has been declining for all groups. The India Human Development Survey (IHDS) by University of Maryland and National Council of Applied Economic Research shows that although in 2004-05 15.3 per cent of men aged 22-39 with education level of class 12 or more had a regular salaried job in the government or public sector, this proportion fell to 11.7 per cent by 2011-12. This is because government jobs have stagnated while educational attainment has increased rapidly. Thus, it is not surprising that more claimants for these scarce jobs are aggressively staking their claims.

If India can conduct a full Below Poverty Line Census, providing data for a caste group should be feasible[fee-zu-bul(possible,संभव)].

This brings the nation face-to-face with a serious dilemma[di'le-mu(uncertainty,दुविधा)]. Like Abhimanyu, we have entered the Chakravyuh without having an inkling of how to get out of it. It is thus imperative to consider some sensible exit strategies.

First, we must try to identify the contours of the problem. Since the First Backward Classes Commission headed by Kaka Kalelkar submitted its report in 1955, several attempts have been made to identify backward castes, resulting in frequent discordance between these lists. Lack of consistency and clarity lead to ambiguity[am-bu'gyoo-i-tee(unclear,अस्पष्ठता)] in the entire process of reservation, leaving communities like the Jats dissatisfied. This is exacerbated[ig'za-su,beyt(worsen,बिगड़ना)] by the lack of credible recent data. Since the 1931 Census, the only effort at collecting data on different castes and their socio-economic circumstances was undertaken by the Socio-Economic Caste Census (SECC), 2011. The National Commission for Backward Classes claimed, in a report dated February 2015, that these data are neither available nor usable for the purpose of establishing the economic condition of various castes. I am inclined[in'klInd(prepared,तैयार)] to think that this is a correct assessment. If we cannot use the SECC data, then how can we access more accurate data?

Revising the numbers

Just before 2001 and 2011 Censuses were conducted, there were vociferous[vow'si-fu-rus(noisy,कोलाहलपूर्ण)] demands for including data on caste in them, demands that were, however, not met due to the lack of a preparation period. The present phase in the planning cycle of the 2021 Census is the ideal time for ensuring that comprehensive data about caste and religion for all the groups, including forward castes, backward castes, and SCs and STs, are included in this Census. Surely 90 years is a long enough period for India to have changed, and we may want to rely on more recent data while developing our preferential policies.

Second, these data should allow us to re-evaluate the eligibility of groups for inclusion in reserved categories every 10 or at least every 20 years. Much of the social stratification in India is linked to the occupational status of the various castes. With the changes in the economy, we can expect both the link between caste and occupation to weaken and the economic fortunes of various occupations to change considerably. Some of the unrest among the Jat and Patel communities is associated with the poor performance of agriculture in the country. It may well be that they are economically worse off than individuals engaged in other occupations. The opportunity for re-examination of the caste-wise economic status would facilitate the setting up of a structure for the redressal of grievances. However, since this is likely to be a massive exercise, simple criteria based on the housing census combined with the caste data from population enumeration could easily be used. If India can conduct a full Below Poverty Line (BPL) Census where each household is identified as ‘poor’ or ‘non-poor’, providing data for a caste group should be feasible.

Third, we must find a way of ensuring a churn in the number of individuals eligible for benefits to ensure that these benefits reach the widest segment of society. Albeit the creamy layer criteria exist, they are almost impossible to implement. With the advent of the Aadhar card, one way of ensuring that the same families do not capture all the benefits is to ensure that each time someone uses their reserved category certificate, their Aadhar number is noted down and linked with the certificate. Further, it may be stipulated that the reserved category certificate can be used only once in 20 years, thus allowing for the benefits to reach even the sections that have hitherto[hi-dhu'too(till now,अब तक)] been excluded from their ambit. This would ensure that the same individual is not permitted to obtain both college education as well as a government job by using the same eligibility criterion, nor can one obtain an initial posting as well as promotion using the same criterion.

The key to dealing with the quota quagmire[kwag,mI(-u)r(mire,दलदल)] lies in shuffling people in and out of the eligibility criteria and ensuring that the benefits are not concentrated among certain groups and/or individuals. All these principles are consistent with the democratic ideals and vision of social justice envisaged[en'vi-zi(imagine,विचारना)] in India’s Constitution. It may be possible to achieve a consensus across the political spectrum for adopting a non-political and pragmatic[prag'ma-tik(practical,व्यवहारिक)] approach to reservations. If we expect to phase out the reservation policy 100 years after Independence, the time for finding a long-term solution is clearly upon us, and we need to act now.

Courtesy: the hindu

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FM’s fiscal deficit dilemma

Why are bond yields[yee(-u)ld(output,मुनाफा)] so closely clustered around each other — with only a 6 basis point difference between the highest and lowest among the 14 states that participated in the October 13 auction?

The forthcoming Union budget would be presented at a time when there are strong headwinds from the global financial markets and debilitated[du'bi-lu,tey-tid(weak,कमज़ोर)] global growth. This is reflected in the continued deceleration in India’s exports growth. There are other factors — such as low international oil prices, which declined by about two-thirds since the last budget, the very low current account deficit, 7.6 per cent GDP growth in the current financial year (FY15) and domestic inflation below the target — that should provide some headroom for prudent[proo-d(u)nt(wise,बुद्धिमान)] fiscal policy in the budget. In addition, recently, the stock markets have declined sharply, which is partially attributed to bulging NPAs in the banking sector. Following these mixed developments, there are expectations that the forthcoming budget would ensure balance between growth and fiscal prudence[proo-d(u)n(t)s(intelligence,समझदारी)].

On growth, two issues need to be understood. Despite India being the fastest growing economy in the world today, do we still need growth-revival policies? For this, one has to understand what is the potential growth of India and what is the level of growth India wants to achieve. In the past, the Planning Commission used to address both these issues, under the five-year plans, by providing medium-term perspective on growth aspirations and the drivers through which one could achieve such growth targets. In the absence of the commission’s guidance, there appears to be some institutional vacuum in this regard. So is 7.6 per cent GDP growth below potential, more so when the external demand has been subdued for a long time? This is an empirical[em'pi-ri-ku(experimental,अनुभवजन्य)] issue that needs to be addressed through long-term GDP and investment data. The adoption of a new GDP methodology and the lack of its back series make such estimates quite unenviable[ún'en-vee-u-bu(difficult,कठिन)]. As far as the data is concerned, despite the investment rate decelerating from 33.4 per cent to 29.4 per cent over the last four financial years (FY13 to FY16), the real GDP growth rate has accelerated from 5.6 per cent to 7.6 per cent. While this trend may be misunderstood for declining ICORs (Incremental Capital Output Ratio — a declining ratio indicates efficiency gains and vice versa), it could also pose a question on the way the new GDP is estimated.

Be that as it may, the issue is this: What can be done in the budget to push growth closer to the 9-10 per cent, which India achieved before the 2008 financial crisis? In this regard, there was an interesting discussion among economists and analysts (even RBI Governor Raghuram Rajan jumped in) on whether to relax the fiscal deficit target or not, as prescribed in the revised Fiscal Responsibility and Budget Management (FRBM) Act, 2003, announced during the last budget as part of the Medium Term Fiscal Policy (MTFP) statement. Under the act, the Central government fiscal deficit, as a percentage of GDP, was fixed at 3.9 per cent for FY16, and 3.5 per cent (FY17) and 3.0 per cent (FY18) as rolling targets. But this is only half the story. Within the MTFP there are other sub-targets; the effective revenue deficit needs to be brought down to zero by FY18, with revenue deficit at 2 per cent. In other words, the capital expenditure (which is the difference between fiscal deficit and effective revenue deficit) should be increased from 1.9 per cent of GDP in FY16 to 3 per cent by FY18. Our own analysis in the past suggests that these targets are internally consistent with high growth, provided all the targets are achieved and not just the headline target of fiscal deficits. Deviation in any of these targets could not only result in contraction of economic activity but also put pressure on public debt and its servicing.

So can the government relax the MTFP targets in the budget to revive growth? There are three issues here. One, while it appears to be confident of achieving the fiscal deficit target, it is not clear whether it will achieve the revenue deficit target of 2.8 per cent and effective revenue deficit target of 2 per cent. In fact, it is not luculent[loo-kyû-lunt(clear,स्पष्ठ)] whether the concept of effective revenue deficit still exists. If not, the pressure to sharply reduce the revenue deficit to zero by FY18 could be huge.

Second, fiscal consolidation would be expansionary only when there is expenditure switching from consumption to investment activities. What is happening currently is a reverse mechanism that is leading to lower growth. Data (between FY13 and FY16) shows that consumption expenditure (both private and government, as a ratio of GDP) is increasing while investment rate (both public and private) is decelerating. Hence, to revive growth, there is a need to shift the demand from consumption to investment. Any relaxation in revenue deficit should also show up in fiscal deficit, thus ensuring no compression in capital expenditure targets.

Third, it is very important to review midway the downside risks in achieving the fiscal deficit targets. For example, in

the current year, apart from nominal GDP growth assumption, all other assumptions, such as oil prices, inflation, exchange rate, etc, have been off the mark. As such, the FRBM targets need a relook.

To sum up, there is no doubt Finance Minister Arun Jaitley faces a dilemma[dI'le-mu(uncertainty,दुविधा)] with regard to the fiscal roadmap. However, in the context of the presumed output gap, and with deviation in revenue deficit target, sticking to the fiscal deficit target is riskier than relaxing it a little in order to prop-up growth. Further, the crowding-out impact of a slightly higher fiscal deficit (especially due to higher capital expenditures) on private investments, in the context of stressed banks, is expected to be weaker than anticipated.

Courtesy:indian express

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A carrot for the honest

The government is in discussions with the Reserve Bank of India (RBI) to allow more free ATM transactions, so we hear. The thought does have merit, since withdrawing money from an ATM costs banks less than encashment at the bank branch. But it is about time a real comparison was made of debit card usage at ATMs and in electronic transactions and direct policy moves suitably.

In other words, would it not be more cost-effective if the same card is used to go cashless? You’ll find that the gains go beyond saving the mere Rs. 20 it costs the bank when you draw money from an ATM. In real terms, this would help reduce the flow of cash into the economy. For, quite possibly, stacks and stacks of those currency notes that today constitute black money may well have originated from perfectly legitimate transactions made by honest taxpayers themselves! If only these payments were made in cashless form, they would have been automatically accounted for and would have also beefed up the government coffers in multiple ways — with additional sales tax, service tax and other forms of tax collections.

Incentivising cashless transactions
Now, how do you nudge the honest taxpayer into putting his debit card to trenchant[tren-chunt(effective,प्रभावी)] use for the larger good? And what about the trader who sells grocery and other products — will he play along?

Under the current scheme of things, the seller of goods obviously has a lot to lose by accepting the debit card. For one, he stands to pay a merchant discount rate (varying from 0.75 per cent to 1 per cent), and this eats directly into his margin. More importantly, he also knows every such transaction is accounted for and, therefore, liable to be taxed. Suppose a sales tax concession is offered for such point-of-sale payments to go electronic as has been suggested in some quarters. Even then the shopkeeper would not be motivated — he’d much rather save the entire tax than claim a small indirect tax rebate for supporting the cashless drive.

What, then, is the answer? Perhaps it lies in giving a diminutive[di'mi-nyu-tiv(small,छोटा)] incentive to the taxpayer to use his card or mobile. A carrot to the honest. For example, the government could grant a 5 per cent income tax rebate for taxpayers who make more than 85 per cent of their payments in cashless mode. The irremissible[i-ri'mi-su-bul(required,आवश्यक)] percentage of cashless transactions for rebate eligibility could be even higher for very high income groups. A routine bank statement/certificate stating percentage of cash debits separately should suffice to claim the rebate. Personal banking statements are already being used to show interest income accrued and tax payable/deducted, so administering such incentive would involve no extra encumbrance[en'kúm-brun(t)s(burden,भार)] either on the banks or the taxpayer.

On balance, a net gain

That brings us to the question of loss to the exchequer. Let’s do the maths. As per Department of Revenue’s website, Rs. 1.71 lakh crore was collected as personal income tax in 2011-12, registering an average compound annual growth rate of 14.81 per cent for the period between 2006-07 and 2011-12. Applying the same growth rate, the estimated collection in 2015-16 would be Rs. 2.96 lakh crore. Assuming that the government chooses to pay 5 per cent rebate and 25 per cent of taxpayers qualify, the payout is still only Rs. 3,700 crore. Based on published studies and reports, the total cost for ATM operations is roughly around Rs. 18,000 crore. Even if this shift to cashless transactions were to reduce ATM transactions by just 25 per cent, it would still save the banking sector around Rs. 4,500 crore in ATM costs alone. And if we were to top up these savings with a staggeringly[sta-gu-ring-lee(hugely,अत्यधिकता)] conservative estimate of 1 per cent resultant increase in sales tax/value-added tax revenues across States, that would be another Rs. 4,400-plus crore. Need there be a more compelling pitch for the tax rebate?

Revenue-wary policymakers can fine-tune eligibility percentages and the percentage of rebates to play it really unhazardous[ún'ha-zu-dus(safe,सुरक्षित)]. Since the rebate has to be earned over a year, the human inclination[in-klu'ney-shun(tendency,इरादा)] would be for taxpayers to switch to cashless transactions as a matter of habit. And merchants who hesitate to honour a card will find themselves being pushed to do so.

Hopefully, savings in ATM subsidies for the relatively affluent[a-floo-unt(rich,समृद्ध)] could get suitably channelled to give adequate[a-di-kwut(enough,पर्याप्त)] incentives for establishing an operating infrastructure in rural areas for accepting electronic payments and providing cash-out facilities. Virtually all households have a bank account, and a big chunk of them have a RuPay card too. What is the whole point of pumping out direct benefits to the newly opened bank accounts if it can’t be converted into purchasing power in the hands of the poor?

Income tax rebate for cashless transactions could well trigger a series of coordinated policy tweaks that could help boost revenues for the government, productivity for the economy and an effective infrastructure for direct benefit transfers and financial inclusion.

Courtesy:the hindu

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No option but to engage

Prime Minister Narendra Modi’s sudden Christmas Day detour from Kabul to Lahore at the instance of Pakistan Prime Minister Nawaz Sharif appeared to be the public manifestation of a serious new approach to dealing with Pakistan. It was a breathtaking development which was greeted with howls of derision from the Congress. When Congress MP Anand Sharma pronounced the Prime Minister’s approach to Pakistan as “frivolous[fri-vu-lus(trivial,तुच्छ)], unpredictable, and full of abrupt[u'brúpt(sudden,अचानक)] U-turns”, he seemed remarkably out of step because Mr. Modi had at last engendered hopes for an honest engagement; the misstep of the precondition that the Pakistanis should not be in dalliance with the Hurriyat while talking to New Delhi seemed less of an obstacle. Yet, more than a month after the Pathankot attack, it would appear that there is something to be said for that criticism after all. Consider this: the government was alive to the ever-present risks inherent in engaging Pakistan — terrorist attacks, increased firing across the Line of Control, attacks on our interests in Afghanistan, an uptick in the use of both political and armed proxies in Kashmir, as we have just seen in Pampore.

Fifteen years after the attack on the World Trade Center, there is little the world does not know about Pakistan’s Deep State and its proclivities in using terrorism as a tool of statecraft. On this Islamabad holds no surprises any more, only a strong sense of déjà vu[dey-zhaa voo( The experience of thinking that a new situation had occurred before,पूर्वानुभव भ्रांति)] . As surely as winter recedes, the prospect of more jihadis stirring from their hibernation awaits us. Just because the Pakistani Army chief Raheel Sharif has made it clear that he wants to retire when his term ends, and without seeking an extension, does not mean that the Army has turned over a new leaf. We do not need to wait for Pakistan’s former military ruler Pervez Musharraf to confirm that the Inter-Services Intelligence (ISI) trains terrorist groups such as the Lashkar-e-Taiba and Jaish-e-Mohammad (JeM) before it becomes the gospel truth[gós-pul trooth(an unquestionable truth,पूर्ण सत्य)] . When he was running Pakistan, Gen. Musharraf referred to such terrorists as “freedom fighters” and kept telling Indian High Commissioners in Islamabad that the work done by these “freedom fighters” was vital as it helped India focus on the need for dialogue on Kashmir.

Nothing that 26/11 plotter David Headley says through video conferencing is likely to embarrass Pakistan or Washington for that matter. Even as Islamabad brazens[brey-zun(face with shameless,बेशर्मी)] it out, if New Delhi keeps waiting for its neighbour to act effectively against JeM leader Maulana Masood Azhar, whom Mr.Modi’s political predecessors delivered gift-wrapped and beribboned to the Pakistan through a high-level gift-bearer, it could be a long, long wait. The “protective custody” that Pakistan’s Adviser to the Prime Minister on Foreign Affairs Sartaj Aziz claims is most likely a linguistic fudge. The question remains: what should New Delhi do in the meanwhile?

Message in a battle

The first thing to do is to read the Pathankot message properly. It is not entirely about seeking “revenge for Afzal Guru” even though his name has lately begun to pop up in the strangest of places, whether it is in snatches of a lecture given by a Pathankot attacker en route to the airbase or in bloody graffiti in Mazar-e-Sharif. The message is that such attacks will continue irrespective of whether we engage or not. The more important message is that there are serious gaps in our security that we continue to remain blind to and which still remain a serious cause of embarrassment, namely potential attackers continuing to practically jaywalk into fortified[for-tu,fId(strong,मजबूत)] locations after it becomes known that the attack is imminent[i-mu-nunt(close in time,आसन्न)] and still manage to conduct attacks at will and with impunity[im'pyoo-ni-tee(free from punishment,दण्डमुक्ति)] . It defies logic to blame Pakistan for this state of affairs.

Then there is the matter of the quality of evidence India has listed that suggest point of origin of the attacks. It is unlikely that Pakistan will be impressed with India’s forensic diplomacy, mainly because it requires more pressure than the kind New Delhi can unilaterally mount on Pakistan. India should not let itself be misled by incremental steps such as registering a first information report like Pakistan just did. This is more tokenism. The Pathankot attack, moreover, was not in the same league as some of Pakistan’s more atrocious[u'trow-shus(brutal,भयानक)] terrorist depredations. It was a modest attack that could have ended differently had India thwarted[thwor-tid(unsuccessful,व्यर्थ)] it in time.

Staying the course

India’s international well-wishers are probably already telling the country after the usual patient hearing that the window of opportunity that was opened by Mr. Modi’s surprise visit to Lahore should not be allowed to close. Pakistan’s own investigations into the Pathankot attack are not likely to meet a fate different from that fallen on the Mumbai attacks. The world has already moved on from Pathankot. Mr. Modi should look at the sale of more F-16s to Pakistan, a major non-NATO ally, as another aspect of the reality that confronts policymakers in New Delhi: the longer India continues to remain nonplussed over Pathankot, the sooner it will find itself in an area of diminishing[di'mi-ni-shing(decreasing,कमी)] returns. It will also give rise to speculation that India’s Pakistan policy could well be based on whimsy[wim-zee(fanciful idea,सनक)]. India cannot change the national interest of the U.S., for example, to suit itself, but it can always define its own national interest better.

Surely, Mr. Modi could not have initiated engagement with Pakistan on the presumption that all sections of the establishment in Pakistan want peace with India all of a sudden. He must have proceeded after due consideration, with serious intent. If there has been an interest discerned[di'surn(recognize,जानना)] on the part of Pakistan to exploring the prospects of negotiating a durable engagement, it would make sense to test that intention fully, not half-heartedly. Ignoring Pakistan is not an option. It makes little sense to adopt an on-again-off-again strategy that smacks of ad-hocism[ad'hókism(specific,तदर्थ)] . It would be prudent[proo-d(u)nt(wise,बुद्धिमान)] not to look upon Pathankot as yet another instance where India’s hopes have been dashed by Pakistan. There could well be temptation to pay Pakistan back in the same low intensity proxy coin. Pakistan has refined its strategy over many decades and it would take India a long time to get where its neighbour is today in the dirty tricks department and by the time its gets there, Pakistan would have gone even further ahead down the same road. That much is logical as well. It is even uncertain if that strategy will effect a desired behavioural change. At the end of it, Pakistan would have dragged India down to a level where there is a hyphen as well as a strong moral equivalence.

Mr. Modi’s outreach to Mr. Sharif was for most part welcomed, especially in the Kashmir Valley, where ironically Bharatiya Janata Party and Peoples Democratic Party (PDP) are renegotiating an alliance. That there could be misgivings within the PDP is another symptom of a critical synaptic lapse. Missing in action most notably in the Prime Minister’s Pakistan policy is Kashmir. It can be argued that there is a sense of drift in the Valley that if left unaddressed would complicate matters.

Having committed to attending the SAARC summit in Islamabad which is only months away, Mr. Modi knows that talks with Pakistan will have to resume well before that. His work on Pakistan has been made easier by his predecessor Manmohan Singh, and before him, Atal Bihari Vajpayee. Both worked behind the scenes to achieve greater clarity on possible ways forward on a number of outstanding issues. Mr. Modi needs to give a sustained engagement a chance and enlarge the peace constituency while he is at it. Having invoked the spirit and legacy of Mr. Vajpayee in Kashmir, he has yet to take baby steps in that direction. He might as well make a virtue out of necessity.

Courtesy: the hindu

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A fine balance on the Budget

It is Budget time again, and a lot of things have been written and spoken about what the Finance Minister should and can do. Indeed, every section of the community has expectations. No one wants to pay more in taxes and everyone wants more and better public services. While everyone wants to bequeath[bi'kweedh(leave,वसीहत)] considerable wealth to their progeny, myopia[mI'ow-pee-u(nearsight,निकटदृष्टि)] sets in while it comes to government borrowing even as it involves a burden on the future generations.

Even in the best of times, Budget-making is a very difficult exercise in India. Given the depressing global environment, marked slowdown in domestic manufacturing and increasing expenditure demands, the challenges this year look formidable[for-mi-du-bul(alarming,विकट)].

The spend-or-save dilemma[di'le-mu(uncertainty,दुविधा)]

The revival of investment climate requires structural reforms besides substantially increasing public investment since private sector investment is stagnant. At the same time, the government will have to leave enough savings for the private sector to borrow at a reasonable rate of interest which requires it to contain its claim on the household sector’s financial savings.

In India, aggregate tax-to-gross domestic product (GDP) ratio is just about 17 per cent. Gross tax collection at the Union level is just a little over 10 per cent and after devolution, the Union government gets just about 6.5 per cent. With the non-tax revenue collections amounting to about 2.5 per cent, the total revenue available to the Union government is less than 10 per cent of GDP. This year, in addition to meeting competing demands from various departments, the Finance Minister is saddled[sa-d(u)ld(burdened,बोझित)] with the problem of recapitalising the public sector banks which are saddled with huge non-performing assets, provisioning for pay revision and meeting additional requirements for “One Rank One Pension (OROP)”.

It is therefore not surprising that the discussion has veered around the need to increase government expenditure even if this requires violating the fiscal deficit target. While the Chief Economic Adviser in his mid-year review and subsequently in various fora has strongly argued for increasing public investment by pausing once more on the fiscal deficit target, the Reserve Bank of India (RBI) Governor as well as the vice-chairman of NITI Aayog have emphasised the need to conform to the targets. The stance the Finance Minister will take in the Budget will be keenly watched.

Indeed, this is a major dilemma, but breaching the deficit target to increase expenditure is only an easy route riddled[ri-d(u)ld(full,भरा)] with serious repercussions[ree-pu'kú-shun(indirect result,अप्रत्यक्ष परिणाम)]. The problem is that at a time when the financial saving of the household sector is just about 7.6 per cent of GDP, even if the government conforms to the fiscal deficit target of 3.5 per cent, with the total deficit of the States at 2.5 per cent, the consolidated deficit will be about 6 per cent; the States have to take the additional burden of over 1 per cent of GDP under UDAY (Ujwal DISCOM Assurance Yojana). Additional borrowing will leave very little room for the RBI to reduce the interest rates, and even if it is forced to, the banks will find it difficult to transmit it to the borrowers simply because they will not have enough money to lend.

Furthermore, interest payments at the Union level are estimated at about 50 per cent of the net tax revenue and 40 per cent of its net revenues. With nominal GDP growing at lower than the real GDP, further addition to debt will increase debt-GDP ratio at a much faster rate. More importantly, there is the question of credibility. The government has paused four times since the Fiscal Responsibility and Budget Management Act was passed in 2003; it has redefined the targets and more often than not, it has observed the targets by breaching it. Credit rating agencies will be keenly watching the stance.

Raising additional resources

Surely it is important to increase public investment to revive the investment climate, particularly when the global environment is fragile[fra,jI(-u)l(breakable,भंगुर)] and exports are declining. Injection of additional expenditures through pay increases and the OROP provision will increase consumption demand. The way to increase public investment is to find other resources.

First, there is no strategic objective served by the government continuing to hold the stocks of blue chip companies under SUUTI (Specified Undertaking of the Unit Trust of India). Offloading this could yield[yee(-u)ld(give,देना)] about Rs.60,000 crore.

Second, the volume of taxes held stuck in disputes is Rs.5.8 lakh crore, and over 60 per cent of it has been in the last five years. Creating a mechanism to resolve the disputes, even if only 20 per cent of this is recovered, could fetch the government over Rs.1 lakh crore and, more importantly, it will create a more favourable investment climate. The Kelkar committee has provided useful guidance for reviving the public-private partnership projects, including the ways to deal with legacy issues and immediate implementation could untangle significant investments. As it is, the road sector has shown a good performance and the implementation of the Kelkar committee’s report can give it a further fillip.

Tax and expenditure reforms

On the taxes front, the Finance Minister in the last Budget has indicated that he will phase out tax preferences for the corporate sector and reduce the rate of tax to 25 per cent in the next three years, and his actions on these will be keenly watched. More importantly, the government will have to show its seriousness in introducing the Goods and Services Tax by rationalising the excise duty and service tax structures. This requires, in the case of excise duty, pruning of the exemption list, reducing the threshold[thresh,hówld(limit,सीमा)] from the prevailing Rs.1.5 crore, limiting the list of items taxed at low rates to essential commodities and reclassifying them into general rate category, and unifying the rates of tax to two. In the case of service tax, the exemption list will have to be increased from the prevailing Rs.10 lakh and items in the negative list and exemptions will have to be pruned further. It would also be useful to merge the cesses and surcharges with the basic levy and make the general rates of excise duty and service tax uniform. I do not see much change in the personal income taxation though there may be marginal increase in exemptions and savings incentive.

On the expenditure side, the government will have to expand the JAM (Jan Dhan-Aadhaar-Mobile) initiative and move over to cash transfers wherever feasible, particularly on items like gas and kerosene subsidy. The subsidies in 2015-16 are budgeted at Rs.2.43 lakh crore and actual outgo will be lower on account of low oil prices. Food and fertilizer subsidies continue to proliferate, and it is important to rationalise and target them. Increasing the price of urea is important not only to contain the subsidy but also to promote balanced nutrient intake. Unfortunately, the Union government has continued to expand centrally sponsored schemes rather than limiting them to a few meritorious[me-ri'to-ree-us(worthy,सराहनीय)] services where the minimum standards of services must be ensured across the country. Perhaps, the Finance Minister should discontinue the less important schemes and fund those that are important adequately[a-di-kwut-lee(sufficiently,पर्याप्तता)].

Courtesy:the hindu

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No Proof Required: Believe it, GDP data is right

Ever since the new GDP data was released in January 2015, most economists, in the government and outside it, have been more than sceptical[skep-ti-ku(distrustful,संशयवाद)]. With the release of the advance estimates of the GDP for fiscal year 2015-16 (FY 2016), which showed the GDP growing at 7.6 per cent, the crescendo[kri'shen-dow(increasing,बढ़ता हुआ)] of criticism has reached new heights.

I will show below that this criticism and/ or scepticism is completely unwarranted, and that those who have seriously questioned the GDP data owe apologies to the Central Statistical Office (CSO) for doubting the authenticity of the data and the integrity of the statisticians.

The setting up of a GDP review exercise in India (under the “guidance” of the UN and the IMF) is a pre-planned exercise and conducted every decade or so. In May 2014, India had a national election in which there were only two themes — first, high inflation and low growth, and second, corruption. One of the major consequences[kón-si-kwun(t)s(results,परिणाम)] of the new GDP series was that the growth in the year preceding the election, FY14, was jacked up from a previous 4.7 per cent estimate to a respectable 6.9 per cent (later revised to 6.6 per cent).

There are four reasons that explain the presence of the doubting Thomases. First, India’s growth could not be just inches below China’s; it had to be several feet below. Second, India couldn’t, by definition, grow faster than China. There has been a rapid decline in China’s GDP growth rate, from double-digit levels that prevailed for 32 years (1980-2011) to a sudden drop since FY12. The new GDP numbers for India are 6.6 per cent in FY14 (below China’s 7.3 per cent) and 7.2 per cent in FY15 (way above China’s 6.9 per cent). Hence, the only safe conclusion was that the data was not telling the truth.

The third important reason for doubt was purely political. The CSO was being told, according to some doubters, by the Narendra Modi government, in that ever so conspiratorial way, to massage the data.

The fourth reason may be the most important explanation. For quite some time now, the world has been gripped by deflation, or at least declining inflation. India’s GDP deflator (implicit price index), too, has been falling. It touched a historic low of negative 1.0 per cent in FY16. Given this fact, herewith some vehement[vee-u-munt(strong,मजबूत)] evidence that GDP growth for FY16 may even be higher than that claimed by the CSO.

Nominal non-food bank credit has been creeping up in FY16 and places the real credit growth in the first quarter of FY16 as the eighth fastest rate in the last nine years and the highest rate since Q2 of FY11. Further, few have marked that quantity of oil imports is up a healthy 8.3 per cent. This is the seventh highest April-December rate since the beginning of the high growth period in FY04, and near identical to the average growth rate of 8.5 per cent for the same period.

None of these statistics however, are convincing for the real doubter. The Wall Street Journal, in an article dated February 10, boldly headlined “5 charts that show India might be overstating its growth”. The article asserted that growth was “nowhere near as strong as the data suggest and that other performance indicators show the economy is still struggling to gain momentum. The government made some major changes in the way it measures GDP in January last year, which resulted in a bump in growth rates and presented a much rosier economic picture”.

A major item on everyone’s list (excluding the faineant[fey-nee-unt(lazy,आलसी)] economist’s citation of low export growth, again, an item messed up by disinflation) is that manufacturing is much weaker than what the data indicate. Prior to the GDP revision, India relied on the Index of Industrial Production (IIP) to estimate growth in manufacturing. Since last year, the CSO has moved to the Ministry of Corporate Affairs (MCA) balance sheet database for an aggregate of over 5,00,000 companies (versus a few hundred contained in the IIP data). Surely, a big improvement in coverage.

However, till date, there is no explanation for this, and I believe there cannot be an adequate[a-di-kwut(enough,पर्याप्त)] explanation why the CSO has refused to release these data. Unless the MCA database is released, regardless of the evidence, the CSO data will be (correctly) treated with suspicion: Hah, you are not releasing the data because you have something to hide.

The IIP data shows a 3 per cent real growth for manufacturing between April and December while the CSO data suggests that real growth was 9.5 per cent and nominal growth was 8.1 per cent. Growth in value added is what the GDP accounts measure — and nominal value added growth is approximately equal to a weighted average of profits and wages. Labour compensation accounts for a significant proportion (almost 90 per cent) of total output, and this has grown at an 8.5 per cent rate in FY16; median profits for a sample of 120 manufacturing companies (BSE 500) rose by 18 per cent. This suggests that value added, in nominal terms, has grown at a 9.5 per cent rate.

The CSO estimate is based on 70 per cent balance sheet growth for organised manufacturing and 30 per cent for the unorganised sector; for this latter component, IIP growth is the proxy used by the CSO. The CSO price deflator for manufacturing is minus 1.4 per cent. Hence, our estimate of real manufacturing growth is (0.7 x (9.5 + 1.4) + (.30 x 3)) or 8.5 per cent vs CSO 9.5 per cent — close!

So I end this discussion with two pleas. First, the CSO should release the MCA database. Second, the harsh critics of the new GDP data should tender an apology to the CSO.

Courtesy: indian express

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To grow or not to grow

The coming Union Budget is a huge challenge for the government. The world economy is facing the severest stresses since the financial crisis of 2008. In 2015-16, the Indian economy will grow at 7-7.5 per cent, less than the 8.1-8.5 per cent projected earlier. On present trends, growth in 2016-17 will not be any higher than in 2015-16. India’s public sector banks (PSBs) are in their worst shape in over a decade. The stock market has declined to the level seen before the Narendra Modi government assumed power in 2014. Against this background, the promise of an early return to the growth path of 8 per cent has faded. The Budget must do what it takes to ensure an early return. As the animal spirits of businessmen are weak, government spending must take the lead.

The change since 2008

Following the financial crisis of 2008, the government knew what to do. It opted to provide both fiscal and monetary stimuli — as governments the world over did. This was the obvious thing to do then because there was space for both types of stimuli. Growth revived strongly in India after the crisis (although we had to reckon[re-kun(guess,अनुमान)] with higher inflation down the road).

The situation today is different. The space for fiscal stimulus is limited by the commitment on a fiscal consolidation path given by the government. The space for monetary stimuli is limited by the monetary policy framework agreed to by the government and the Reserve Bank of India, which commits the RBI to a time table for meeting specified targets for inflation.

As a result, the government today faces critical choices. Should it opt to accelerate growth in the present situation? If so, should it do so through fiscal stimulus or by creating conditions for a monetary stimulus? And how should it go about restoring the health of PSBs so that credit growth is not undermined?

The answers must be determined by the conditions on the ground. India’s growth is estimated to be below its growth potential. Two sources of aggregate demand, exports and private investment, are weak at the moment. Greater public investment is clearly the answer.

In the coming year, the government is not in a position to reduce costs significantly enough (by pruning subsidies drastically, for instance) or to raise revenues sufficiently (by disinvestment or a buoyancy in tax revenues). Something must give. This has to be the fiscal deficit target of 3.5 per cent for 2016-17.

Many economists oppose any departure from the stipulated path of fiscal consolidation. They say it will undermine investor confidence in the Indian economy. They warn that FIIs will flee the Indian market, and this will devastate[de-vu,steyt(destroy,बरबाद)] the markets and the rupee.

One doubts that the situation is as grim as that. Foreign investors will see the case for boosting growth in the present international environment. They know that India’s macro-economic indicators are in better shape than those of most emerging markets. Rational investors will focus on the quality of spending, not the size of the fiscal deficit itself. As long as the departure from the fiscal deficit target is on account of higher investment spending (which is growth-inducing), they are unlikely to take a harsh view of matters.

The Brazil comparison

In his recent C.D. Deshmukh memorial lecture, RBI Governor Raghuram Rajan makes a stronger argument against any relaxation in fiscal consolidation. He believes attempts to boost growth can end up delivering even slower growth in future. He cites[sites(mention,उल्लेख)] the example of Brazil that went down the path of fiscal stimulus only to end up with a shrinking economy last year. India’s consolidated fiscal deficit of the Centre and the States, he points out, is rivalled only by that of Brazil.

It is possible to exaggerate[ig'za-ju,reyt(overstate,बढ़ाचढ़ा कर कहना)] the comparison, and hence the dangers to macro-economic stability, of a limited fiscal stimulus at this point. Brazil is a commodity exporter and is a loser in a context in which commodities prices have been hammered down. India is a net importer of oil and hence a potential gainer. India’s public debt to GDP ratio has declined over the years and is today below 70 per cent, which looks a lot better than that of many advanced economies, including the U.K. and the U.S.

Not least, as the Mid-Year Review of the Finance Ministry points out, the fiscal multiplier — the increase in GDP per unit of government spending (or borrowing) — tends to be high in times of economic contraction. Any increase in the fiscal deficit will tend to be offset by an even greater increase in the GDP. This should cause the ratio of fiscal deficit to GDP to decline.

There’s a third argument against a fiscal stimulus at this point, that sticking to the 3.5 per cent target will make it easier for the RBI to drop its policy rate by, say, 25 basis points. We can thus facilitate growth through a monetary stimulus rather than a fiscal stimulus.

One wishes matters were as simple. First, it’s not clear that with retail inflation climbing to 5.7 per cent in January, the RBI will oblige with a rate cut soon. Second, we have seen that RBI rate cuts over the past year have not translated into commensurate reductions in lending rates. Of the 125 basis points in rate reduction since January 2015, banks have passed on only about 50-60 basis points.

There are many reasons for this. Banks face high deposit rates because of high regulated rates on government savings instruments. They have to postulate['pós-chu,leyt(contend,संघर्ष)] with huge pressure on profits because of high non-performing assets, hence they need to maintain high margins (the difference between lending and borrowing rates).

Moreover, banks have traditionally priced their loans using the average cost of funds. When the rate of incremental borrowing falls (following a policy rate cut), it does not much impact the average cost of funds and hence the lending rate. The RBI has recently asked that banks link their lending rates for new loans to the marginal cost of funds. It will be a while before the impact of this change kicks in.

It is not the cost of loans alone that is the problem today. The volume of loans is also an issue. PSBs have seen their net worth being battered in recent days. This follows the RBI’s determination to get banks to recognise and provide for non-performing assets in full here and now. It has made clear its objective of cleaning up banks’ balance sheets by 2017.

This is a laudable objective. However, for banks to be able to lend freely, they need an adequate[a-di-kwut(enough,पर्याप्त)] buffer of capital over and above the regulatory minimum. This can happen only if there is a substantial infusion of capital into PSBs by the government. The infusion of capital will have to be higher than the Rs.70,000 promised over four years under the Indradhanush plan. There is a case for relaxing the fiscal deficit target on this count too. Only then can credit revive strongly and private investment pick up.

The Modi government came to power on a promise of delivering faster growth and more jobs. We have seen two years of growth below 8 per cent. It’s hard to see the political authority reconciling itself to another year or two of the same growth rate — that would wash out most of the tenure of the present government. A departure from the fiscal consolidation path is the best answer to flagging growth. The peril[pe-rul(risk,जोखिम)] to macro-economic stability can be managed.

Courtesy:the hindu

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From sabhas to fishing villages

No two people are truly equal within society’s multi-layered segmentations[seg-mun'tey-shun(partition,विभाजन)]. Once we move into the realm of communities, these differentiations only become more complex. Within this reality, it is utopian[yoo'tow-pee-un(idealistic,आदर्शवादी)] to expect the world of the arts to remain untouched. We often use the cliché “art transcends all boundaries” with aplomb[u'plóm(confidence,आत्मविश्वास)], oblivious[u'bli-vee-us(unaware,बेखबर)] to the fact that it really does not. For art to be a cultural and social enabler, it has to be redesigned as an artistic conversation that is equal and mutually inspiring.

A socio-cultural conversation

It is from this position that I began thinking about an art festival that explores spaces alien to my own privileged, elitist, classical world; one that questions my sense of artistic superiority and respectfully celebrates the people and the art that inhabit these spaces. I took this idea to Nityanand Jayaraman, a social activist. He saw in this a completely different angle, an opportunity to highlight the hidden urban fishing village of Urur Olcott Kuppam, invite Chennai to visit and enjoy the village, and use that experience to challenge stereotypes about fisherfolk. Soon, many others joined us with their own stories of why this was important, all of us converging at the need for a socio-cultural conversation. Thus was born in 2014 the Urur Olcott Kuppam Vizha.

But we have been asked difficult questions by the people from our side of the fence. Why are you forcing the classical on people? They have their own art; do they really want or need this?

First, there is an inherent cosmology underlying this line of questioning, namely, that the ‘classical’ and other art worlds are not meant to share an orbit. Next, there is a tone of condescension[kón-di'sen-shun(disdain,नफरत)]: the art forms of the two groups and indeed the groups themselves are not socially equal, so just ‘let them be’. In this reaction is a resistance to allowing ‘others’ unbridled[ún'brI-duld(uncontrolled,अनियंत्रित)] access to the classical on their own terms. It has to be accepted that the spaces that these art forms occupy right now are intimidating private clubs. There is no “you are not welcome” board hanging outside; yet the insider defends the ‘pure’ with his mere glance. But the kuppam too is not an easy environment. Many feel distinctly uncomfortable and threatened entering those quarters. The Urur engagement pushes for the overcoming of these feelings by its open environment where people share aesthetic[ees'the-tik(beautiful,सौन्दर्यपरक)] experiences that overcome the sharp boundaries of ‘us’ and ‘them’.

This is most certainly not a conversion project. The festival features diverse art forms that belong to varied spaces and societies. And a crucial aspect of this experiment is that the art forms that belong to the fisherfolk’s spaces are presented on an equal footing. Due to this levelling, the nature of our reception changes. ‘Higher’ art becomes informal, natural and accessible, while the ‘lower’ become serious, valuable and respected. This inversion demolishes artistic walls and creates uninterrupted access for all sides. And inbuilt in this openness is the right to enjoy, celebrate, reject and mock any art, be it Villu Pattu (musical storytelling) or Indie blues. But we cannot get here unless we break open the existing frameworks. Another question that some people who did not come for the festival ask is: “So now do ‘they’ want to learn classical music and dance?” I am never asked whether “we” want to learn Paraiattam or Gana (art forms associated with subaltern communities). The ‘lower’ may or may not aspire for the ‘higher’, never the other way round!

Discovering differences

But there has also been another kind of criticism, this time from the world of social activists. They have challenged our initiative as being one that only reiterates[ree'i-tu,reyt(repeat,पुनरावृत्ति)] socio-cultural separations. Why is Paraiattam or Gana music not being featured at the highbrow classical stages? Why are you not gheraoing those spaces, demanding for the presence of subaltern art forms? This criticism cannot be wished away. But to get there with respect and not be recipients of tokenism, we need more people from the powerful communities to come and experience art beyond their own contexts. This will hopefully spur a change. And therefore such experiments do not reiterate hierarchies[hI-u,raa-kee(structure,वर्गीकरण)]; instead, they force those who own these hierarchies to understand people and their lives with a different set of eyes. And this is only a beginning and does not negate the possibility of another kind of experiment emerging in the higher echelons of art.

Through 2015, this initiative spurred many debates beyond art — about people, spaces, livelihoods, environment, security, sharing and ownership. The engagement itself continues to be a learning process where we constantly discover differences. This has taught us to understand participation with greater nuance. While the children of the village are enthusiastic performers in the festival, the adults come as onlookers: laughing, smiling and enjoying the art. But then one wonders, is there not an inequality that exists in the way ‘they’ perceive ‘us’, the upper class? Yet, in their own way, they have been more than supportive of the festival and are happy being the hosts once again this year. How do we use this embracing to overcome perceived barriers, while accepting inherent limitations?

This socio-cultural experiment has led to numerous[nyoo-mu-rus(many,बहुत से)] questions and few answers; that is what keeps it alive. We continue to seek direction. On the way, we stumble, fall, dust ourselves and keep trying. This is only an attempt, a sincere one which continues. We need many more, each charting a different path, evolving a new vocabulary for human interaction.

Courtesy:the hindu

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Deal with english

Hello readers,

we are here to present most awaited guidance to students who are unable to find out the right way for preparation of English section. We are providing ultimate points that can be followed for instant improvement.

1. First of all we would suggest you to fix at least 2-3 hours for English section, because without having understanding we cannot create interest in preparation.
2. Note down your daily vocabs and learn them with your morning tea/coffee time (fresh mind, better memory).
3. Revise these vocabs on every weekend (for strong vocab power).
4. Read our blogs on regular basis and try to understand the actual meaning and note down difficult vocabulary (preferable before sleeping).
5. Focus specially on verbs, adjectives, adverb and conjunctions.
6. you can spend your some time in errors, sentence improvement, and grammar rules(we will provide soon) .
                     These are all golden rules that can make your paper scoring in English part and can put you higher in merit.


               All the best and GOD BLESS EVERYONE!!!!!!!!!!!!!!!!!

Written by deepika

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We, the people of South Asia

This is turning out to be a year of Constitutions in South Asia. Prime Minister K.P. Sharma Oli of Nepal is in India with a newly amended Constitution that seeks to allay opposition to the previous draft, whose adoption four months ago led to widespread and violent ethnic protest in Nepal’s plains. Earlier in the year President Maithripala Sirisena unveiled plans for an amended Sri Lankan Constitution which would “heal the wounds” of the four-decade-long Sinhala-Tamil conflict that ended seven years ago. Here in India, last year we held the first parliamentary debate for decades on our own Constitution, prompted by fear of its erosion, and the debate rages on.

Unlike the debate in India, which is focussed on upholding the Constitution, the changes being proposed in both Nepal and Sri Lanka arise from peace processes and aim to accommodate diverse ethnic and group aspirations. Constitution-drafting has taken an inordinate[in'or-du-nut(excessive,अत्यधिक)] amount of time in Nepal, eight years thus far. Its successive iterations[i-tu'rey-shun(repeated,पुनरावृत्ति)] reflect different stages of Nepali peacemaking, from ideological reconciliation to integration of the Maoist army to a democratic republic to pluralism, gender equality and devolution. The task has been especially difficult because of the complex and seemingly contradictory elements that the Constitution has to incorporate — Nepal as a secular socialist state with a Hindu identity, more equitable power-sharing between hill people and plains people, upper and lower castes, linguistic and cultural groups, inclusiveness, social justice and devolution. The last challenge was how to satisfy the demands of the Madhesis, plains people of the Eastern Terai who share a border and common familial and cultural bonds with Bihar. Whether they will be satisfied with the new amendments remains to be seen.

Sri Lanka’s process of constitutional change began last year with the Amendment 19 which reduced the powers of the Presidency, transferring them to the Prime Minister and Parliament. The amendment was hailed as a return to the parliamentary democracy of the original Constitution, and was to pave the ground for further change that would acknowledge Tamil aspirations. On January 9, 2016, Mr. Sirisena announced that the Sri Lankan legislature would begin drafting and debating Amendment 20 to grant greater devolution to provinces and districts, and Prime Minister Ranil Wickremesinghe convened a session of the “Constitutional Assembly” to kick-start discussion of the amendment over the weekend. If passed, it will go a large part of the way towards reassuring the Tamil community that it will not be even more vulnerable[vúl-nu-ru-bul(weak,कमज़ोर)] after the defeat of the Liberation Tigers of Tamil Eelam (LTTE). But ethnic and majoritarian opposition to the amendment has begun even before it has been drafted, and whether Sri Lanka’s new government will be able to push it through is ambiguous[ am'big-yoo-us(unclear,अस्पष्ठ)].

Constitution as a unifier

Yet the governments of both countries have a magnificent opportunity today to unite their people around a national agenda. The soul of a constitution lies in its vision of the kind of society that the country will seek to build through its institutions. The powerful and inspiring debates that fed the drafting of the Indian Constitution united its people in a common endeavour, as the films, literature, music and other records of the time show. That we are currently engaged in debates on how best to defend our Constitution testifies to the enduring strength of what was achieved in those years, despite the constitutional corrosion of subsequent decades.

Mr. Sirisena appears to have seen the opportunity. “We must ensure reconciliation and harmony so that we will never go back to war,” he said in Parliament. “I believe now, through our past acrimonious[ak-ru'mow-nee-us(bitter,कड़वा)] experiences, we must prepare ourselves for future challenges.” Certainly, Sri Lanka could not ask for more propitious[pru'pi-shus(favorable,अनुकूल)] circumstances; the defeat of the LTTE created the space for the country to embark on lasting reconciliation and may be the first time since Sri Lanka’s independence that such an opportunity has presented itself. That it has taken six long years to emerge is sobering but also underlines that it is not an opportunity that can be missed.

By contrast, the Constitution-drafting process in Nepal has degenerated into hard bargaining instead of vision. The key issue remaining is demarcation of provincial borders — while the main political parties would prefer to use geographical and economic criteria for demarcation, the Madhesis and some of the Maoists prioritise ethnic and cultural criteria. The issue will now be dealt with by a Commission to decide provincial borders within three months, but politically the two sides appear to be inching towards agreement that the criteria can be combined.

India’s own States’ reorganisation in the 1950s and 1960s did much the same, using ethnic and cultural criteria as a base while ensuring that economic and geographic factors were not ignored; similar principles were followed in the subsequent creation of new States. Indeed, the problem does not lie in internal demarcation since all citizens will have freedom of movement and residence; it lies in uneven administrative, growth and development capacity, the absence of which gives rise to chauvinism[show-vu,ni-zum(blind patriotism,अंध देशभक्ति)] and conflict. This will be the bigger problem for Madhesis and in several other of Nepal’s provinces, and it would be wise to expand training and preparation programmes for local and provincial administrators as soon as possible.

Vision and implementation

Many of the stresses to our own Constitution stem from gaps in governance and weak imposition of the rule of law. In the past decade we have seen open flouting of the Constitution by those sworn to uphold it — for example, State-wise legislation that restricts the rights of Indians to buy property in the mountain States, or Members of Parliament asserting that religious laws stand above fundamental rights — and worse. As I write, Delhi is roiled by police attempts to slap sedition charges on a JNU student leader on what is now turning out to be fake evidence, while allowing extremist lawyers to physically attack protesters. Rather than castigating['kas-tu,geyt(scold,फटकारना)] the police for their clearly partisan behaviour and ensuring the charges against the JNU student are dropped, the Home Ministry has sought to justify them and the Lieutenant-Governor has remained silent.

A Constitution is only as good as its implementation, goes the tag. However, it is more. A really good Constitution holds up the mirror to government and enables the public as well as leadership to identify shortfalls. Our Constitution was a post-war one, like the current Nepali and Sri Lankan drafts, and it was bound by similar imperatives of post-war reconstruction, reconciliation and unification. But it also held out the vision of what we would like to become, that is to say it envisaged[en'vi-zi a(imagine,विचारना)] time when post-war tasks would have been completed, as they were in large part decades ago. What we face today are tensions arising from the failure to move to the next stage of implementation of the Directive Principles of the Constitution, to provide common citizen rights across the country.

Lessons from India

Our experience holds out both good and bad examples for drafters of the Nepal and Sri Lankan constitutional amendments. The two countries are moving to the parliamentary democracy that has stood India in good stead, and they too are exploring devolution as a means of reconciliation and unification. Nepal is looking at a more federal model resembling ours; Sri Lanka at something between federal and our Panchayati Raj institutions. On the negative side, we have made only slow progress in creating uniform delivery of rights and justice, partly because law and order falls under the State administrations, which have little incentive to work together and with the Centre, partly because the civil services are not insulated from political interference, and most of all because the carefully structured formula of Central training and States’ forces, for example in the police, did not work because of large variations in political and administrative culture across States.

The point to be drawn is that sometimes too much detail in a Constitution hinders rather than helps administration and may even detract from the rights that form its core vision. Our own Constitution-drafters did have doubts on whether they were acting wisely in laying down so many details on what would be under the Centre’s purview and what under the States’, but felt they had little choice given they had to bargain with close to 600 Indian princes to get them to join the new India. Nepal faces a similar problem on a much smaller scale and our example might prove illuminating for all sides in that country. Sri Lanka is fortunate in facing only small elements of this problem — their legislature has a rare opportunity to combine reconciliation with vision. As a devout believer in our own Constitution, I can only wish them the very best in their invigorating[in'vi-gu,rey-ting(refreshful,स्फूर्तिदायक)] national endeavour.

Courtesy:the hindu

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Restoring goodwill in India-Nepal ties

This week, Nepal Prime Minister K.P. Sharma Oli will undertake his first official visit to India. While both sides are keeping expectations low, his visit offers a welcome opportunity to have a frank chai pe charcha and clear the air about the recent differences which had led to some harsh exchanges. Briefing the Nepali Parliament, Mr. Oli said his visit “aims at removing recent differences between the two countries and strengthening the historic bilateral ties”. Given the background, he emphasised he would further Nepal’s relations with India based on “principles of equality, mutual respect and benefit”. He also announced that before embarking[em'baak(enter,प्रवेश)] for India on February 19, a high-level political committee will be set up to review the provincial boundaries in a three-month time frame. This was intended as much for the agitating Madhesi groups as for Delhi.

Mr. Oli is no stranger to India. During his long political career, he has built good relationships with a number of Indian political leaders. In ideological terms, he has moved far from his early days as a Naxalite leader during the 1970s when he was in prison for nearly 14 years. Following the advent of multi-party democracy in Nepal in 1990, he emerged as one of the young leaders of the Communist Party of Nepal (Unified Marxist-Leninist). During his stints as Home Minister and later as Foreign Minister, he enjoyed a reputation of being both decisive[di'sI-siv(crucial,निर्णायक)] and pragmatic[prag'ma-tik(practical,व्यवहारिक)].

Recent misunderstandings

Mr. Oli’s differences with India arose in the run-up to his election as Prime Minister. Following the 2013 elections, UML had supported Nepali Congress (NC) in its bid for the post of the Prime Minister on the understanding that after the new Constitution was promulgated['pró-mul,gey-tid(publish,लागू करना)], NC would support his claim to the post. Neither the UML nor he personally was receptive[ri'sep-tiv(acceptive,ग्रहणशील)] to Madhesi demands on ‘federalism’ and ‘proportional representation’. Consequently[kón-si-kwunt-lee(resultant,परिणामस्वरूप)], he reacted negatively to Indian suggestions that the new Constitution take on board Madhesi reservations to create a broad consensus, rather than be pushed through by majority in an increasingly polarised environment.

NC Prime Minister Sushil Koirala, who passed away this month, wanted to introduce certain changes which could have addressed Madhesi demands but Mr. Oli was a man in a hurry and saw this as a delaying tactic. He wanted NC to deliver on the original understanding. Finally Koirala resigned as Prime Minister but the NC, instead of supporting Mr. Oli’s candidature, renominated Koirala to the post. People close to Mr. Oli maintain that Koirala’s candidature was backed by India. Mr. Oli built alliances with the Maoists and other parties by generous promises which helped him defeat Koirala, thus becoming Nepal’s 38th Prime Minister last October.

Meanwhile, the continuing Madhesi agitation had claimed more than 50 lives and brought life in the Terai to a complete standstill[stand,sti(deadend,गतिरोध)]. Mr. Oli blamed India for supporting the Madhesis by imposing an ‘unofficial blockade’ even as India urged[urged(urjd(force,मजबूर)] him to resolve political issues so that stability and security could be restored and normal movement of goods resumed. For the first time, India and Nepal traded harsh words, in Geneva, in a multilateral forum. Mr. Oli used the plank of Nepali nationalism to bolster[bówl-stu(strengthen,मजबूत)] his coalition and blamed India for his troubles. Like others before him, he also flaunted the China card by sending delegations to China to develop alternative supply routes across the Tibetan border, the limitations of which soon became apparent.

Losing control

In hindsight, it is evident that nobody had expected the Madhesi agitation to last this long, consequently, nobody had prepared an exit option. What began as a protest took on the character of a movement and even the Madhesi Morcha leaders were unsure how to find a respectable compromise. New voices emerged, including some who raised the banner of an independent Madhes. Prolonged shutdown of businesses and schools in the Terai increased the hardship for the local population.

Mr. Oli had earlier turned down the NC’s proposals for amending the Constitution and after stoking anti-Indian rhetoric, he could hardly be seen seeking compromise under Indian influence. Instead of reaching out to the Madhesis by visiting the Terai where casualties had occurred, he raised the banner of Nepali nationalism and as a sign of his unhappiness with India, suggested that his first foreign visit would be to China, in a departure from tradition. Missing in this was the realisation that Nepal is a highly diverse society with over a hundred different ethnicities and as the Prime Minister, he needed to begin acting as a unifying figure.

Whenever Nepal’s domestic politics gets polarised, India gets blamed for interfering in Nepal’s internal affairs and anti-Indianism rises. Indian suggestions that outstanding issues be resolved on the basis of consultation and dialogue did not go down well as the Madhesi agitation intensified. A point of view that a pro-Madhesi stance would help the BJP in the Bihar Assembly elections gained currency. Mixed signalling added to misgivings. The enormous[i'nor-mus(big,बड़ा)] amount of goodwill generated by Prime Minister Narendra Modi’s maiden visit to Nepal in August 2014 and India’s generous support following the devastating[de-vu,stey-ting(destructive,विनाशकारी)] earthquake in April 2015 eroded rapidly, raising questions about the ‘neighbourhood first’ foreign policy. Many opinion-makers in Kathmandu were sympathetic to Madhesi demands which were also shared by Janjatis and Tharus; however, the overt identification of Indian support ended up isolating the Madhesis politically.

Eventually, pragmatism prevailed. Mr. Oli realised that without some amendments to the Constitution, Madhesi demands could not be addressed. He took India into confidence, sending his Foreign Minister twice to Delhi to share the proposed amendments. Even before the amendments were adopted, the Indian authorities responded positively and some alternative routes and crossing points were used to facilitate movement of trucks into Nepal. The agitating Madhesi Morcha leadership began to realise that the agitation had run its course and could not be sustained indefinitely; a compromise was therefore necessary.

Time to turn a new page

Ideologically too, Mr. Oli is the one UML leader who has always been sceptical[skep-ti-ku(doubtful,संशयी)] of the Maoist agenda though he had to do a deal with them when the NC backtracked on its earlier understanding. He was aware that Prachanda had already started hinting that a more acceptable leader was needed to deal with the political instability and for improving relations with India. After the death of Sushil Koirala, the NC is pre-occupied with its convention, scheduled for early March, to elect a new President and other office-bearers. The competition seems to be between former Prime Minister Sher Bahadur Deuba and NC Vice President Ram Chandra Poudel. Mr. Oli enjoys good relations with both and would do well to bring the NC on board eventually to increase his support base and form a national unity government.

Domestically, Prime Minister Oli’s challenge now is to get the post-earthquake reconstruction activity going. After a highly successful international conference last June where a collective pledge of $4.4 billion was made, delivery has stalled. Before the earthquake, Nepal’s economy was expected to grow at 4 per cent; after the destruction caused by the quake, the political instability and the shutdown in the Terai, growth estimates for the current year are close to zero.

India had pledged[plejd(promise,वादा)] $1 billion of reconstruction aid, of which 40 per cent was grant and the balance in the form of soft loans. This was in addition to the $1 billion assistance announced during Mr. Modi’s visit, bringing India’s total commitment to $2 billion over the next five years. During the forthcoming visit, the modalities for identifying projects and efficient disbursements need to be worked out. Mr. Oli is also expected to visit Bhuj, which is held up as an example of efficient post-quake reconstruction. The two Project Development Agreements for hydropower generation signed by GMR (for Upper Karnali) and SJVN (for Arun III) during the last eighteen months will add 1800 MW to Nepal’s current generation of 800 MW and need to be fast-tracked.

Mr. Oli’s visit provides an opportunity to close the chapter on the rather unproductive politics of recent months and revive the ‘neighbourhood first’ policy that Mr. Modi had presented in 2014, of a friendly and caring India, sensitive to Nepal’s concerns, and munificent[myoo'ni-fi-sunt(generous,उदार)] in seeking mutually beneficial partnerships.

Courtesy: the hindu

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