Withdrawing the lifeline

We are currently in the midst of an unprecedented[ún'pre-si,den-tid(new,अभूतपूर्व)] early drought that is already affecting at least 10 states. Even if the met department’s optimistic prediction of a better-than-normal monsoon comes to pass, it will be at least two months before there is much relief in most rural areas of the country. Meanwhile, for at least 300 million rural people, in one-third of the gram panchayats in the country, the situation is really dire. Shortage of essential drinking water is only one of many problems; the water scarcity has also affected crops and fodder for animals, and has cut down on both farmers’ livelihood and wage incomes of rural labourers. This rural distress is not only a humanitarian disaster, it also drags down the entire economy because of the dip in rural demand.

In drought situations, public works programmes become not just desirable but absolutely necessary, simply to provide a minimum lifeline to people living in these areas and also to keep the rural economy going. This was understood even by the British colonial administration, which introduced drought relief programmes that were essentially public works that ensured some wage employment and therefore survival of people in affected areas.

In contemporary India, such extra programmes are no longer thought to be necessary because we already have the MGNREGA, now a decade old, which should provide an automatic buffer in such situations. The act — passed unanimously[yoo'na-nu-mus-lee(full agreement,सर्वसम्मति)] by both Houses of Parliament — promises 100 days of employment to every rural household in a year. It is designed to be demand-driven, which means that the government must provide work within 15 days of it being demanded (or pay some compensation for the delay) by those willing to work at the minimum wage. Failure to get such work is supposed to attract a further compensation of half the wages, at least in the law.

Clearly, if this programme were functioning properly, the increased demand for work driven by drought conditions would be met by an increase in public works programmes that would provide work at minimum wages, thereby easing the local conditions and providing some incomes to those very badly hit. The works themselves could be designed to help in managing the drought and reducing the possibility of future droughts. Indeed, the Central government has recognised all this, by increasing the promised days of employment from 100 to 150 per household in drought-affected states.

But all this obviously requires that the money for such public action is available. This, too, is essentially promised by the law, which makes it incumbent[in'kúm-bunt(duty,कर्तव्य)] on the government to provide such employment and, therefore, makes the budgetary resources to be provided for the programme by the Central government supposedly the outcome of such demand. But what is occurring is actually a clear violation of the law, as the Central government has repeatedly capped the spending on the MGNREGA to its own arbitrary allocation and simply refused or delayed the funds transfer to the states. This, in turn, has meant that even in severe drought conditions, state governments simply do not have the resources to fulfil their legal obligations to provide enough employment to those desperate for some work and wages.

The current situation shows just how cynical[si-ni-kul(distrustful,दोषदर्शी)] and feckless[fek-lus(irresponsible,गैर जिम्मेदार)] the government is being. Spending on the programme was down to only 0.26 per cent of the GDP in 2015-16, compared to 0.6 per cent at its peak, and it provided only around 30 days of employment on average, instead of the promised 100 days. This was not because of lack of demand — rather, the Central government simply refused to pass on money to state governments that were asking for it, leading to huge unpaid dues of Rs 12,590 crore. Pressure from the Supreme Court has finally forced the Centre to release this amount after much delay, but this still does not provide any funds for the new spending that is more required than ever.

Ten drought-affected states were among those facing deficits, which made a complete mockery of the decision to allow 150 days of work rather than 100. If the drought-affected states were actually to provide 150 days of work, this would have amounted to an additional spending of around Rs 15,500 crore. This explains why only 7 per cent of households in drought-affected states were actually able to access 150 days of work.

Even worse, the Central government on its own has slashed the labour budget proposed by the states. It continues to ignore the need to pay the minimum wages in each state, despite court strictures. And now it is refusing to pay the material costs that are overdue, arguing that the states should find funds for those. So it is completely disregarding the basic provisions of the law at a time when it is sorely needed.

As a result, delays in wage payments continue. Workers in many states will now be paid for work done in the previous financial year, several months later. Only 1.5 per cent of the compensation for delay that is legally due to them has been paid. Now rural people are once again forced into backbreaking work in the intense heat in the hope of eventually receiving some part of the payment that is due to them, and even such work is inadequate[in'a-di-kwut(insufficient,अपर्याप्त)] to meet their pressing needs, and well below the promised 100 days.

If not now, when should the MGNREGA be taken seriously? What will it take to make this Central government recognise its own legal obligations and at least mitigate[mi-ti,geyt(lessen,कमी)] the current massive rural distress?

Courtesy:indian express

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Blind Faith

No metro city is doing well in school education, but Mumbai and Delhi are easily the worst. One had expected that Delhi would turn the bend when a young political party came to power a year ago. It was anticipated that mistakes would be made before sense and sanity could be established. It now seems that Delhi’s road to learning will remain bumpy like the city’s real roads. We can extend the metaphor, covering the capital’s flyovers. Many of them were completed in a rush to meet the deadline for the Commonwealth Games. In its hurry to improve schools, the new government is ticking one arcane[aa'keyn(secret,गुप्त)] move after another. First it wanted to delete portions from textbooks in order to reduce the curriculum. Now it wants CCTV cameras installed in classrooms and some 90 principals sent to Cambridge for a 10-day training in leadership. Though politically correct, both ideas show desperation to show that something is being done. One didn’t expect that from a young party that has wide, if not deep, social roots.

If CCTVs could improve teaching standards, we would have seen a revolution by now in many schools which invested in this technology more than a decade ago. All they can lend is what we already have in plenty in our schools, namely control. The principals who will visit Cambridge will learn that their British counterparts have greater autonomy and freedom. And that message can’t be a pleasant surprise even if it is received in a cooler climate. Every principal in Delhi knows it already. Not just those serving in government schools, even private school principals are constantly controlled by the Directorate.

The idea that a school head has a mind and should therefore be given the space to exercise it is alien to the Indian system. Our system is based on the importance of controlling others who are placed below you. The hierarchy[hI-u,raa-kee(structure,वर्गीकरण)] that puts the principal on top at school offers the right to be cussed and little else. A British principal selects her own teachers; a Delhi principal can’t select the cushion on her chair. No matter how prestigious a private school in Delhi is, its principal cannot choose to keep her school open on a day the Directorate wants it closed for political reasons. In government schools, you become a principal by seniority. No special criteria are used to decide who can serve as a principal. School administration is regarded as a generalised role associated with a rank attained through age. You attain the rank by ageing as a teacher, implying that when you become a principal, you will stop teaching. This trajectory has a symbolic meaning quite alien to Western schools. Administration is regarded there as a professional job, and so is teaching. And every level is equally respected, both in the system and the wider society. When our principals tell their hosts in Cambridge how the system works in Delhi, perhaps some of the hosts will hear an echo of history. They will realise that little has changed in India since colonial days in the organisation of teaching in schools.

According to news reports, our principals are being sent to Cambridge for “training”. The idea that senior hands can be trained to look at their job or role differently is quite problematic. An 8-10 day visit to Britain can at best give exposure to a different system, but it can hardly impart training. If the exposure arouses interest in how the British system works, that will be nice; but a greater outcome will be achieved if the visit lets our principals notice the problems Britain is facing in managing its schools. Such an outcome might encourage critical reflection, something we just don’t allow. Assuming that the British system is better, an opportunity to examine the factors that make it better can be useful. But a week-long systemic comparison of this kind can hardly be called training in leadership. For that to occur, the participants would need the space to ask questions like these: “What space do I have to take decisions?” “How am I using that space?” “How do my colleagues perceive my role?”

You need leisure to reflect on such matters. You also need to be in your own setting. That’s why one wonders whether the Delhi government first considered an Indian institution for training its principals before choosing to send them to Britain. The decision to opt for offshore trainers is hardly puzzling in our age when patriotism is high but confidence is low. Apart from a lack of trust in our own institutions, there is blind faith in foreign institutions, especially the ones with names like Cambridge and Oxford.

It might have made more sense to send Delhi’s principals to London. A few of the problems that London faces looking after its vast and varied population of children are somewhat similar to those we face in Delhi. Pugnacious[ púg'ney-shus(Aggressive,आक्रामक)] behaviour is one such problem. British teachers are trained not to use physical force to contain aggression. This will surely intrigue our principals. So will the considerable autonomy British teachers enjoy in shaping the curriculum despite the changes that have made Britain’s broadly child-centred system increasingly test-driven.

It will be melancholic[me-lun'kó-lik(sad,दुखी)] indeed if our principals return with mixed feelings about progressive practices that have barely begun to find space in our system. That space is already under menace[me-nis(threat,खतरा)] from CCTV cameras. The Delhi government wants to install them in every classroom.

Courtesy:indian express

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No proof required- GDP debate: RIP

One does not often get a chance to say “I told you so.” As readers of this column know, I have constantly reiterated[ree'i-tu,reyt(repeat,दोहराना)] that the new GDP data are authentic and correct, and there finally appears to be new data, which can put this debate to rest. The controversy over the new GDP data has raged for over a year now, and each month brings a new member of the Doubting Thomas tribe. Briefly, for those lying under a rock, the Central Statistics Organisation (CSO) brought out, in January 2015, estimates of the GDP from 2011-12 onwards using the new method of calculating GDP. Revision of GDP data is a routine exercise, and has been conducted at least four times in the last 50 years. I am sure you never heard of previous revisions and there is a political economy reason for this (more on that below).

The fact remains that this new GDP data have been questioned by all and sundry[sún-dree(mixed,विभिन्न)] .

And the doubters are a list of who’s who — the RBI (including Governor Raghuram Rajan), Chief Economic Advisor Arvind Subramanian, and many foreign investors and prestigious publications (including The Economist, The Wall Street Journal and the Financial Times). And the questioning has varied from polite to downright defamatory. The polite version states that the new GDP data, showing a 1 to 2 percentage point increase in the growth rate than previously estimated, is incorrect because it does not feel right.

The major difference between the old and new was that the new data made a significant departure from previous methods by estimating industrial and manufacturing production from balance sheet data of both unlisted and listed firms (ministry of corporate affairs, MCA, database). These data are now available on the RBI website. And we infer that as the RBI has published these data on its own website, the RBI believes in the “accuracy” of the MCA data. So we need to strike the RBI off the list of Cassandras.

What the RBI website states is that the MCA data “have been compiled based on audited annual accounts of 2,37,398 NGNF private limited companies received from ministry of corporate affairs (MCA), accounting for 23.3 per cent of population paid-up capital.” In addition, the results pertaining[pu'teyn(relevant,उपयुक्त)] to 16,923 publicly listed companies in the MCA database have also been posted by the RBI.

The MCA data show that the 58,256 unlisted firms in manufacturing, accounting for a third of total manufacturing sales, have been registering close to double-digit growth, and a mid-teens average growth in value-added. The weighted average growth in value-added for both listed and unlisted firms was a healthy 13.4 per cent in 2014-15. Using IIP data, nominal growth in manufacturing is between 2 to 4 per cent, with the manufacturing price deflator between minus 1 and 3 per cent. Now you decide — is the “feel” of growth provided by balance sheet data of over 2,50,000 firms better or worse than the IIP data covering, on the basis of a survey, the production of a few hundred odd firms? The difference in the feel is a 10 percentage point difference in manufacturing growth.

What is curious is why these experts (and expert journalists) never once investigated whether the IIP data were correct. The IIP data are based on the Indian economy as of 2004-05; in that year, textiles had a weight of 6.2 per cent in the total value of industrial production, and motor vehicles had only two-thirds of the weight of cars, that is, 4 per cent. I could not find a category for “mobile phones”, but the classification “office, accounting and computing machinery” has a total weight of only 0.3 per cent! The MCA database, by definition, has the “correct” weights in production because they are based on balance sheet data.

Textile volumes have grown at a much lower rate (6 per cent per annum since 2004-05) compared to a 10 per cent-plus rate for the volume of cars and two-wheelers produced in India. The bottom line is that if the IIP data were updated to a 2011-12 base, just the “correction” for motor vehicles and textiles would add 0.3 percentage points to annual IIP growth.

There is yet another indicator — even the old, outdated IIP data are showing a marked acceleration over the last five fiscal years. In 2011-12, the IIP grew at 2.9 per cent. The next two years, IIP growth averaged 0.5 per cent; in 2014 and 2015, IIP has averaged 2.7 per cent. Given that industry is 30 per cent of GDP, this implies that GDP growth in 2014-15 and 2015-16 would be 0.6 percentage points above that of 2012-13 and 2013-14, simply on account of higher IIP growth.

When you point out that one indicator of “feel” — volume of auto sales — grew at 7 per cent in FY16, the highest in the last five years, the doubters just shrug their already drooping shoulders.

So now for a political economy explanation for why the doubters rose en masse. Let me make it unambiguous[ún,am'bi-gyoo-us(clear,स्पष्ठ)] — this explanation does not apply to all serious analysts, just a very large majority. The GDP controversy was ignited by the sharp upward revision to GDP growth for 2013-14 — almost a 2 percentage point increase from 4.7 to 6.6 per cent.

The ruling Congress had suffered a mortifying[mor-ti,fI-ing(humiliating,अपमानजनक)] defeat in the 2014 general election. The common belief or conventional wisdom was that the Congress lost the 2014 election because of two years of the slowest GDP growth in more than a decade — 4.5 and 4.7 per cent in 2012-13 and 2013-14, respectively. Now suddenly, the CSO was reporting that these two years averaged 6.1 per cent growth (5.6 and 6.6 per cent in 2012-13 and 2013-14). That represented very good GDP growth — so why did the Congress lose so badly?

However, there is an alternative interpretation for the election loss of the Congress — while GDP growth was a factor, I believe that the overwhelming reason Narendra Modi’s BJP won a majority in the Lok Sabha was because of high corruption and even higher inflation under Congress-UPA rule. The Congress inherited an average inflation rate of only 4.4 per cent (1998-2004). The Congress left office with an average inflation rate of 7.9 per cent. And the average inflation rate for UPA 2 was 9.8 per cent.

By creating doubts about the GDP data, the hawa-makers hoped to capitalise on the structural change in methodology and prove to all concerned that if only the new GDP data had been released prior to May 2014, the UPA would still be in the saddle. Given that it was not, it must be that the new data are wrong! And the feel-gooders argument goes, the new Modi government was not providing any extra GDP growth. Doubter estimates of GDP growth in 2015-16 — according to the old GDP method — place it around 4.5 to 5 per cent, that is, the same that was registered by the Congress in 2012-13 and 2013-14.

A lot of astute[u'styoot(smart,चतुर)] people bought this snake oil explanation over the last year. Given overwhelming evidence to the contrary, and now with the RBI good ousekeeping seal of approval, perhaps the time has come for the Cassandras to get real.

Courtesy:indian express

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Track these job destruction numbers

As numbers become data and move from being just a random rearrangement of 0-9, they speak volumes about peoples, nations, and their objectives. They form the basis of government policies, and have the intrinsic[in'trin-sik(internal,मुलभूत)] potential to change lives, correct historical wrongs and national trajectories.

The last election results, we were told, were a message from ‘Aspirational India’ and one of the promises made by the incoming government was the creation of sufficient jobs. Unfortunately, despite all the talk about outcome-oriented policies, the latest report from the Ministry of Labour indicates that instead of adding new jobs, the April-June 2015 quarter saw 43,000 people actually lose jobs. This underwhelming performance has set off alarm bells, combined in equal measure with denial, hand-wringing and loud calls for more accurate employment data.

While these numbers must worry us, a report about the government having identified 12,226 manual scavengers across 12 States for rehabilitation under the Swachh Bharat Abhiyan should actually concern us equally, if not more; the report added that a batch of 500 women has already been trained as taxi drivers.

The numbers’ shame

As a nation we range from complete ignorance about the very existence of what Gandhi called a “national shame”, i.e. manual scavenging, to wildly differing official figures. While it’s no surprise that middle-class India is almost oblivious[u'bli-vee-us(unaware,बेखबर)] about the perpetuation[pu,pe-choo'ey-shun(cause to continue,जारी रखना)] of this degrading caste-based occupation, it should be a matter of grave concern that an activity that has been outlawed by Parliament since 1993 has such divergent numbers reported by various arms of the government.

As per the Socio Economic Caste Census 2011, 1,80,657 households were engaged in manual scavenging for a livelihood; the report also recorded 7,94,000 cases of manual scavenging across the country. However, some gaps in the way the government defines manual scavengers leads most activists to believe that these figures are actually a huge under-statement. For example, the instruction manual for the ‘Survey on Manual Scavengers in Statutory Towns’ defines a manual scavenger as a person “being engaged or employed on a regular or frequent basis. A person engaged or employed to clean excreta[ek'skree-tu(waste,मल)] with the help of appropriate devices (like high pressure water jet etc.) and using proper protective gear, will not be deemed to be a ‘manual scavenger’”. Surveys conducted by activists estimate that there are actually over 1.2 million manual scavengers in the country.

A definition that uses gloves as fig leaves, and euphemisms like “conservancy workers”, leads to a large section of our citizens remaining unaccounted for as far as official records are concerned. These include women (98 per cent of scavengers are women because patriarchy is rampant[ram-punt(uncontrolled,अनियंत्रित)] in this strata of society too) and others who are engaged in scavenging and receive food in lieu of payment, or work as contract employees indirectly employed by the Indian Railways (anecdotally the largest ‘employer’ of those cleaning excrement from railway tracks) and the numerous[nyoo-mu-rus(many,बहुत से)] municipal corporations across the country.

Act and reality

With the passing of the Prohibition of Employment of Manual Scavengers and their Rehabilitation Act, 2013, the government is required to ensure the elimination of unsanitary latrines. The Act also prohibits the employment of manual scavengers and the hazardous[ha-zu-dus(dangerous,खतरनाक)] manual cleaning of sewer and septic tanks, and tasks the government with maintaining a survey of manual scavengers and their rehabilitation.

So why is it that despite legislation that has banned manual scavenging, activists who’ve tirelessly campaigned against it, funds being allocated to various programmes run by concerned ministries, and government after government committing itself to eradicating it, a small group of activists led by the Safai Karmachari Andolan still needs to conduct a ‘Bhim Yatra’ across 500 districts in 30 States, to create awareness about the practice of manual scavenging, the deaths in sewer holes and septic tanks, and the court orders and rehabilitation schemes that are in place to help stop this denigrating occupation? Why is it that their journey across the country doesn’t really make the headlines?

Is it because the issue is so far removed from our drawing rooms and we exist in such parallel universes that Swachh Bharat gets our ‘vote’ because a railway track will no longer bring on the gag reflex. But the millions of hands that will have a role in making it happen will continue to be ‘employed’ by the government despite legislation that is meant to secure rehabilitation and compensation? Can the Prime Minister and we really claim to be the only ray of hope in the world economy if even one of our citizens continues to participate in this diminishing and devastating[de-vu,stey-ting(disrespectful,अपमानजनक)] ‘traditional occupation’? Can a nation in a rush to occupy pole position on the World Bank’s GDP ranking allow a single case of manual scavenging to continue? Just one look at the eight countries ahead of us and it’s clear that none of these economies is where it is today by turning a blind eye to what can only be called ‘slavery’ in some form.

Government intentions, policies, legislation and court orders will only go so far in achieving this aim. As the calls for more comprehensive and timely employment data tell us, what gets measured gets done. Isn’t it time we start tracking the job destruction numbers as closely as those of job creation? As a real tribute to Ambedkar on his 125th birth anniversary, Aspirational India must demand the creation of 12 million jobs this year, and an end to 1.2 million jobs. To borrow a phrase from Canadian Prime Minister Justin Trudeau — because it’s 2016!

Courtesy:the hindu

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Hotter, longer, deadlier summers

Climate change is expected to cause an increase in the frequency and intensity of heatwaves. For India, 2015 was the third hottest year on record (since 1901) and the heat claimed over 2,000 lives. This year, the India Meteorological Department (IMD) has issued warnings for northwest and central India (Rajasthan, Punjab, Haryana, eastern Uttar Pradesh, West Bengal, Odisha and Jharkhand) about heatwaves happening sooner than in previous years. Further, government schools have been shut down in Kolkata, parts of West Bengal, Odisha, and Madhya Pradesh on account of heatwaves.

Adverse health outcomes (hospitalisations or death) are a complex interaction of frequency, duration and intensity of a heatwave and population-level factors, which include acclimatisation to the temperature profile of certain geography, poverty, lack of shelter, pre-existing disease, age (children or elderly) and access to health facilities. In addition to heat stroke, extreme temperatures can exacerbate[ig'za-su,beyt(worsen,बिगड़ना)] pre-existing cardiovascular and respiratory illness.

The days ahead

A joint study by the Council on Energy, Environment and Water (CEEW), Indian Institute of Management Ahmedabad and Indian Institute of Technology Gandhinagar found that about 345 districts in India (700 million people) are following a trajectory where average temperatures are likely to rise more than 2°C by the end of the century. The same study also finds that over the next three decades, India may experience increase in annual mean air temperatures of 1°C-1.5°C and substantial increases in night-time temperatures. Higher night-time temperatures are correlated with increased incidence of heat-related illness.

Findings from the first Global Climate Change Risk Assessment (a joint study by CEEW, Harvard University, Tsinghua University and the U.K. Foreign and Commonwealth Office) highlight that hotter summers make it extremely insidious[in'si-dee-us(unsafe,असुरक्षित)] for citizens, especially labourers, to undertake heavy outdoor work. Of course, there remain associated impacts such as higher risks of crop failure. Concomitant consequences[kón-si-kwun(t)s(result,परिणाम)] of farmer financial distress, poverty traps and, in extreme cases, suicides cannot be overstated.

Adaptation measures

If hotter, longer and deadlier summers are to be the new normal under a changing climate, proactive adaptation measures are required. This implies policy intervention and coordination across three sectors — health, water and power.

First, scale up heat-health warning systems (HHWS). At their core, such warning systems include providing weather forecasts in advance, issuing warnings to people, providing readiness of emergency response systems, and preparing doctors and health facilities to handle a sudden influx of patients. Warnings facilitate people in taking appropriate actions against heat-related harm. Though the IMD does issue heat warnings, often the coordination with emergency response systems and health facilities is missing.

Globally, studies show that implementing HHWS results in fewer deaths. The most quoted example is that of France where 4,400 deaths were avoided due to HHWS during the 2006 heatwave. Closer home, Ahmedabad, Nagpur and Odisha have made pioneering efforts in this direction. These systems need to be expanded to other cities across the country.

Second, expedite[ek-spu,dIt(speed up,तेज़ी से निपटाना)] the rollout of the National Action Plan on Climate Change and Health that was launched last year. Preventing temperature-related morbidity and mortality could be a key programme under this mission.

Third, ensure an adequate[a-di-kwut(enough,पर्याप्त)] supply of water. Dehydration is a key outcome of heat exposure which can cascade into life-threatening conditions and ultimately death. Timely access to drinking water can help mitigate[mi-ti,geyt(lessen,कमी)] this escalation. In areas where heat extremes coincide with water scarcity, the risk of heat-related illness remains highest. Areas like Latur, Osmanabad and Beed, which are already experiencing acute[u'kyoot(sharp,तीक्ष्ण)] water shortages, could face large casualties if hit by heatwaves. Water is also required for electricity production that helps provide access to cooler environments through use of fans and air conditioners. Therefore, strategic planning in the water sector is of paramount importance to protect human lives.

Fourth, provide reliable electricity for adequate duration. Access to cool environments remains the mainstay of preventing heat stress. Use of fans, air conditioners or functioning of medical centres is contingent upon electricity supply. Further, many communities depend on electricity to draw groundwater for drinking. This requires planning to meet peak loads in summer, when power outages are most common. In rural areas, where electricity access is a challenge, supplementing power supply of primary health centres with solar-based systems should be undertaken. Chhattisgarh, Maharashtra and Tripura have already deployed such systems.

Finding policy alignment and coordination across these sectors remains a daunting[don-ting(fearful,भयप्रद)], yet much needed exercise. The romance of the seasons may be lost in the years to come. Lives need not be.

Courtesy:the hindu

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Let’s admit we are challenged in one eye

This government is a bundle of nerves. It sees ghosts where none exists. It sees enemies even among friendly and neutral commentators. And it has men and women who are ready to shoot to kill even without orders (under a political version of AFSPA — Angry Friends Special Powers Act).

What did Dr Raghuram Rajan, Governor, Reserve Bank of India, say that deserved a snub[snúb(disrespect,अपमान)] from the Commerce Minister? He said that the estimated growth rate of GDP of about 7.5 per cent makes India the “one-eyed king in a land of the blind”. The government should be flattered that the Governor has endorsed its estimate of GDP growth.

The Dichotomy

Going by GDP growth alone, India is at the top among large economies, not withstanding the dichotomy between the GDP growth rate and other economic indicators. Compare 2015-16 with two years that had almost similar growth rates (see table) and the dichotomy is visible.

Be that as it may, India could well be the fastest growing large economy in 2016 (or 2016-17). Next in line are China at 6.5 per cent (on a base that is five times bigger!) and Philippines at 6.3 per cent. Of the BRICS countries, Brazil (-3.6) and Russia (-1.5) are expected to register negative growth and South Africa a small, positive growth of 0.7 per cent. Crude oil, India’s benefactor['be-ni,fak-tu(helper,सहयोगी)] , has been the spoiler in the cases of Brazil and Russia.

The Other Eye

One eye may seem bright. That is the eye of growth, foreign investment and aspiration. But there is another eye. That is the eye of fiscal stability, employment, education, health care, inflation, poverty ratio and other parameters that are equally important indicators of a healthy and growing economy. In that eye, India has poor vision.

Take, for example, the budget balance. Of the 42 significant countries tracked by The Economist magazine, India’s fiscal deficit (-3.9 per cent) was larger than the fiscal deficit (or surplus) of 33 countries. We still have a long way to go on the road to fiscal stability.

India’s inflation, although declining since November 2013, is still comparatively high. At 5.2 per cent, it is higher than the inflation of every other country tracked by The Economist magazine except South Africa (6.2), Brazil and Turkey (8.3), Russia (8.4) and Egypt (8.8).

Unemployment is a key indicator. Official data for India released in January 2015 puts it at 4.9 per cent, a gross under-estimate because of factors such as under-employment, low workforce participation, gender disparity and informalisation.

The benchmark interest rate (on 10-year government bonds) for India is 7.44 per cent, much above the comparable rates of most advanced and emerging economies. Countries with higher interest rates are the faltering economies — Greece, Russia, Turkey, Pakistan, Brazil, Colombia, Venezuela and South Africa. High interest rates erode competitiveness.

I shall write a separate column on how far behind our peers India is on human development indices.

Pragmatic[prag'ma-tik(practical,व्यवहारिक)] Governor

Dr Rajan was therefore spot on when he under-played GDP growth. He was not disparaging India’s growth rate, he was gently reminding the government that much more remains to be done. I may add my voice and remind the government that in five out of the 10 years of the UPA government, the growth rate exceeded 8.5 per cent. The average for the 10 years was 7.54 per cent (old series). Impressive as 7.5 per cent (new series) may be, there is unfinished work.

Dr Rajan was not obliged to explain what he had meant, but he did explain a few days later and reminded his critics that a central banker has “to be pragmatic and cannot get euphoric[yoo'fó-rik(happy,खुश)] ”. The raj dharma of the Commerce Minister is to devote her whole time and energy to address the problems of India’s trade sector which is marked by a terrible export performance in 2015-16 that was 16 per cent lower than the performance in 2014-15. That black spot alone has consequences[kón-si-kwun(t)s(result,परिणाम)] such as worsening the current account deficit, putting millions of jobs in jeopardy[je-pu-dee(danger,खतरा)] , and driving thousands of small and medium enterprises into the NPA column and possible closure.

While Dr Rajan’s choice of words is being needlessly debated, I think the Commerce Minister’s choice of silence is inexcusable.

Courtesy:indian express

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Why doubling farmers’ income by 2022 is possible

Prime Minister Narendra Modi’s desire to double the income of farmers by the year 2022, that he expressed while addressing a farmers’ rally in Bareilly, Uttar Pradesh, on February 28, 2016, has evoked strong responses from various analysts, experts and the media. The goal has been dubbed as impossible and kafkaesque[kaf-ku'esk(unrealistic,अवास्तविक)]. On the very next day, the finance minister repeated what the PM had said, in his budget speech. This invited an even stronger reaction and criticism. Some commentators have produced calculations that agriculture will require an annual growth of 14.86 per cent per year for the next five years to double the income of farmers, and pointed out that this growth level hasn’t been achieved even for a single year in Indian agriculture. Most commentators ridiculed[ri-du,kyoo(make fun,उपहास उड़ाना)] the possibility of doubling farmers’ income. It seems that critics and sceptics[skep-tik(doubter,संशयवादी)] focused more on five years and ignored substantive aspects of the desire expressed by the PM and the intention of the FM.

The substantive points involve the following questions. Which is the targeted year for doubling farmer income? What is to be doubled — is it output, value added or income earned by farmers from agricultural activities? Is it nominal income or real income that has to be doubled? Does the targeted income include only income derived from agricultural activities or would it also include income from other sources? Clarity on all these points is important to assess the possibility of doubling the income of farmers as envisioned[en'vi-zhund(visualised,विचारना)] by the PM.

While talking about the income of farmers, the PM stated that it is his dream to see farmers double their income by 2022, when the country completes 75 years of independence. The time horizon to reach his dream is very perspicuous[pu'spi-kyoo-us(clear,स्पष्ठ)] in his statement. It is obvious that he is referring to a doubling of farmer income of the agricultural year 2015-16 by the agricultural year 2022-23. The budget speech creates slight confusion about the period for doubling farmers’ income. The FM’s speech first mentions the “focus on doubling farmers’ income in five years” and then, while elaborating on this, he says, “Government will, therefore, reorient its interventions in the farm and non-farm sectors to double the income of the farmers by 2022.” It is evident that both the PM as well as the FM are setting the target of doubling farmers’ income by the year 2022, which is seven years away from the current year. And, if anything is to be doubled by the year 2022-23, it will require annual growth of 10.4 per cent, and not 14.8 per cent, as reported in the media.

Again, it is important to point out that what is sought to be doubled is the income of farmers, not output or value added or the GDP of the agriculture sector. If technology, input prices, wages and labour use could result in per-unit cost savings, then farmers’ incomes would rise at a much higher rate than the rate of increase in output. Another very important source of an increase in farmers’ income is the relative increase in prices of farm products compared to non-agricultural commodities. Past estimates of farm incomes show a significant difference between growth in output and growth in farmers’ income. Between 2004-05 and 2011-12, agricultural output at constant prices increased by 34 per cent while real farm income per farmer increased by 63 per cent. In nominal terms, the output became 2.65 times while farmers’ income tripled in the eight-year period. Therefore, a doubling of farmers’ income should not be viewed as the same as a doubling of farm output.

It is obvious that if inflation in agricultural prices is high, in nominal terms, farmers’ income will double in a much shorter period. Twice over the last 30 years, farmers’ income at nominal prices almost doubled in six years — once between 1987-88 and 1992-93 and then between 2004-05 and 2009-10. Inflation in agricultural prices also leads to an increase in real farm income if agricultural prices received by farmers increase at a faster rate relative to the prices paid by farmers; that is, when terms of trade for agriculture improve. In a situation where non-agricultural prices do not rise, or rise at a very low rate, the growth in farmers’ income in real terms tends to be almost the same as in nominal terms. This is what is being experienced currently. The wholesale price index or WPI-based inflation for non-agricultural prices is declining, whereas the WPI-based inflation for agricultural prices has increased by about 5 per cent in the year 2015-16. This implies that price movements are resulting in a 5 per cent growth in real farm income. Thus, if similar price trends continue, there will not be much difference between nominal and real farm income. Anyway, the government’s intention seems to be to double the income of farmers from farming in real terms.

It is important to look at the possible drivers of income growth for farmers. The first source is diversification of farm activities towards high-value crops and enterprises. National-level data reveals that shifting to high-value crops can more than quadruple income from the same piece of land. The second source is irrigation, which can double productivity. The third source is better price realisation for farmers through competitive markets, value chains and improved linkage between field and fork.

The fourth source is an improvement in the terms of trade for agriculture. The fifth source is technology upgradation. Another important source is the shift of cultivators from farming to non-farm occupations. State-level data shows that agricultural income in real terms, including the effect of improvement in terms of trade, doubled between 2006-07 and 2013-14 in Gujarat, Jharkhand, Madhya Pradesh, Rajasthan and Telangana. Few states, namely Bihar, Chhattisgarh, Gujarat, Jharkhand, Karnataka, Madhya Pradesh, Rajasthan and Telangana, are experiencing a transition towards doubling farmers’ income in seven years while Uttar Pradesh and Maharashtra are showing the potential to do so. In conclusion, if the above-mentioned six measures are implemented unfeignedly[ún'feynd-lee(sincerely,सचमुच)] at the state-level, then farmers’ income can be doubled by 2022-23 in most of the states.

Courtesy:indian express

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Lessons for unifying agricultural markets

The government of India launched the National Agricultural Market Scheme in July 2015 in 585 markets and has, since April 14, started e-trading on the platform. This is in line with the Union Budget’s target to double farmers’ incomes in six years. To be sure, a doubling of incomes by 2022 would require them to grow at an annual average rate of just over 12 per cent. Achieving such a high rate of growth would require multi-faceted reforms in the agriculture sector.

Agricultural and allied sector in India grew at an annual average rate of 1.7 per cent per annum between 2012-13 and 2015-16 (at 2011-12 prices). The gross value added at factor cost in the agricultural and allied sector, which is a first approximation to the income generated in the sector, has shown a growth rate in excess of 10 per cent only in four years between 1950-51 and 2011-12 (measured in constant 2004-05 prices). All these supra-10 per cent growth rates came on the back of negative growth rates ranging from minus 1.1 per cent (1987-88) to minus 11.1 per cent (1979-80).

It is important to note that growth rate of agriculture and allied sectors in India has historically tracked the movement of the overall income growth in the country quite closely. The task of improving growth rates in the agricultural sector in a growing economy is easier than in a stagnant one. As such, this imperative for an unprecedented[ún'pre-si,den-tid(new,अभूतपूर्व)] growth rate will require reforms covering all facets[fa-sit(aspect,पहलु)] of the agricultural sector, such as irrigation, soil health, traditional farming, fertilisers, and extension services among others.

In this context, the e-trading initiative attempts to improve the marketing aspect of the agriculture sector. Reforming agricultural markets in the country is a project that requires serious effort and concerted[kun'sur-tid(joint,सम्मिलित)] action. As the Economic Survey 2014-15 pointed out, India has 2,477 principal regulated primary agricultural markets in the country. These markets governed by APMC Acts create segmentation and lead to inefficiencies in price discovery. There are often complaints of vested[ves-tid(unconditional,निस्वार्थ)] interests of commission agents (arhatiyas) and other middle-men driving a wedge between the farmers and the traders (who are the buyers of the crops).

A similar experiment, called the Rashtriya electronic Market Scheme (ReMS), was launched in Karnataka in February 2014. By December 2015, 100 principal markets were unified by this e-platform. The reforms in the state have succeeded to the extent that an autonomous body — the ReMS Private Limited — is in charge of the entire process of unification and is proceeding according to a definite plan.

But the gains to farmers have remained muted. The software that is used for trading has a provision for including quality parameters of the traded commodities. To actualise this, plans are afoot to start assaying facilities in mandis. Since marketing of agricultural produce affects farmers, commission agents, traders, the APMCs and the government, introduction of these facilities without allaying the concerns of all these stakeholders may not have its impact.

For example, the commission agents in these markets fear that unification will affect them adversely. The farmers can directly enter the details of their commodities in the e-platform and sell to the highest bid-der without any mediation from the commission agents. This creates a very potent impediment[im'pe-du-munt(obstruction,बाधा)] against the forward movement of reforms and a standalone[stand-u'lown(automatic,स्वचालित)] e-product may not have the full desired impact. In some mandis though the assaying facilities were present, they remained in disuse because of apprehensions of loss of income felt by farmers.

Commission agents are the pet whipping boys[wi-ping boy(scapegoat,बलि का बकरा)] for agricultural economists searching for efficiency and unified prices. However, these “middle-men” provide real and substantive services such as credit facilities and crop loans to farmers in a timely manner. The farmers’ dependence on arhatiyas is mutually beneficial to a degree but may not be without elements of rent extraction. Like all things in life, we hit a grey area even in agricultural marketing.

The experience of Karnataka has a few pointers. It succeeded to the extent that an independent body outside the government (ReMSL) tasked with unification generated sufficient revenues and created a positive momentum. However, in the absence of an involvement of all stakeholders the gains are slow and minimal.

Reforms that rely only on technical solutions may not give the desired effect. If implementing unification within a state is a slow affair with frequent stoppages, one can only imagine the difficulties that unification can cause for an inter-state reform measure.

Courtesy:indian express

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Who needs public banks?

In an opinion piece just after the last general elections (‘What holds us back’, The Indian Express, May 23, 2014), I had argued that while the politics of policymaking might have become easier, economic reality hadn’t, and that the new government would need to identify and address the key constraints to India’s growth early on. One of those constraints was the alarming rise in corporate leverage amidst weakening growth and the consequent['kón-si-kwunt(resultant,परिणामी)] deterioration[di,teer-ee-u'rey-shun(worsening,बिगड़ना)] in banks’ loan quality. The government moved glacially, hoping that growth would take care of the problem and only recently realised that the high leverage itself was holding back growth. However, over this period, banks’ credit quality worsened to a point where it now needs, in the words of RBI Governor Raghuram Rajan, “deep surgery” and not “band-aids”.

Much of the public discussions have focused on two aspects of the debt problem. First, finding clever financial engineering solutions to fill the hole in the books of the banks (mainly public-sector banks or PSBs) as the government has committed woefully[wow-f(u-)lee(sadly,उदासी से)] inadequate[in'a-di-kwut(insufficient,अपर्याप्त)] budgetary resources compared to any reasonable estimate of the required recapitalisation needs. But financial engineering doesn’t erase bad debt; it only repackages it. Eventually, there has to be a transfer of real resources to fill the hole created by the bad debt. If the history of debt crises is any guide, it is likely to be India’s households that will pay for it through more financial repression or higher future taxes.

The second has been to use this funding pressure as an opportunity to enforce changes in PSBs aimed at improving their investment choices, purportedly[pu'por-tid-lee(supposedly,कथित रूप से)] because this got them in the mess in the first place. Most of the proposed changes are based on the recommendations of the P.J. Nayak Committee, and they range from greater separation between owners and management to changes in compensation packages that encourage better pricing and assessment of risk. I particularly favour the call for protecting bank managements from legal and criminal charges just because an investment decision turns out to be wrong later. As this year’s Economic Survey rightly exhorts, India needs to learn to tolerate investor mistakes and allow exits.

While capitalising PSBs and improving their efficiency are obviously important, I will argue that neither addresses the elephant in the room. Whether financial engineering provides a lease of life to these banks to live through another debt cycle or management changes are made to hopefully dampen future cycles skirts the more fundamental question: Do we need PSBs?

When Indian banks were nationalised in 1969, the ability of private banks to mobilise resources, that is household savings, was weak and their competence in allocating resources to meet India’s investment needs questionable. Over the next three decades, PSBs played a critical role in better garnering[gaa-nuing(collect,इकट्ठा)] household savings, funnelling them into the formal financial system, and fund the country’s development needs.

But over the last 25 years, successive governments have implemented extensive reforms to liberalise the system that, in turn, has substantially deepened India’s financial markets and allowed private banks and non-bank financial institutions to grow and become important players in the resource mobilisation process.

So do we still need PSBs to mobilise savings? Put differently, it is not a question of making the PSB branch in Churchgate function more efficiently, which is what the P.J. Nayak Committee recommendations intend to achieve; the question is whether there is even any need to keep the branch open.

I am not arguing that there is no role for PSBs. There is. In a country where both rural and urban poverty is rampant[ram-punt(uncontrolled,अनियंत्रित)], goods and labour markets deeply distorted[di'stor-tid(deformed,विकृत)], and where vast swathes of the population remain outside the ambit of the formal financial sector, there are important social and development functions that only publicly owned banks can perform. But these are much more limited functions, that is, those that the private capital market cannot do. Not the universal banking behemoths[bi'hee-muth(big,बड़ा)] that today’s PSBs have become.

So here’s a solution. Rather than tweak compensation packages or spend more taxpayer money to recapitalise, the government should sell all PSBs, as is, to existing and newly licensed private banks. (The investment subsidiaries, such as mutual funds, can be sold to non-bank financial companies.) The private sector is unlikely to have immediate capital to take over their public-sector counterparts simply because of the mammoth[ma-muth(big,बड़ा)] size of the latter, so some form of deferred payments needs to be designed. With the privatisation funds, the government can then capitalise a handful of retail policy banks (as opposed to the wholesale policy banks of today) that have an explicit, but limited, mandate to carry out specific social and development functions that private capital markets cannot. Employees of the disbanded PSBs who are not re-employed by the private banks or by the policy banks can be compensated (even generously) using part of the privatisation proceeds. There are many details to fill in: Should the sale be limited only to local banks or opened to foreign ones as well or should the retail branches be limited only to rural areas and second-tier cities, etc? Then there is the question of amending the various banking laws.

No doubt, the process will be arduous[aa-joo-us(difficult,कठिन)] with significant political challenges. A 50-year-old system necessarily creates its own deeply entrenched[in'trencht(established,स्थापित)] vested interests, including parts of the Central and state governments that fear eventually losing a captive source of budget financing. But that doesn’t mean we should not raise the question especially since one ends up getting a far more efficient financial system to carry out market economy functions, and, at the same time, establish financial institutions whose social functions are explicit, with unambiguous[ún,am'bi-gyoo-us(clear,स्पष्ठ)] accountability.

I am not holding my breath that any of this will happen. By the sounds of it, the government, the regulator, and the market are quite comfortable with some more band-aids. They just need to appear a bit more like deep surgery.

Courtesy:indian express

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The tip of the tip of the iceberg

Out of more than 11 million leaked documents of Mossack Fonseca, a legal firm operating out of Panama, a tax haven, only 36,000 pertain to Indians — 0.33 per cent of the total. This insignificant number contains the names of 500 Indian entities, some of whom have stated that their names have been misused while some others have denied any wrongdoing. Some officials have also argued that the papers need to be studied to distinguish[di'sting-gwish(recognize,पहचानना)] between the legitimate and the illegitimate. This has given a breather to the entities named in the leaked papers. The general impression is that anyone using the tax havens for their financial affairs has something to hide.

The question of legitimacy arises since after 2003 when the Liberalised Remittance Scheme (LRS) was introduced, sending funds abroad for a variety of reasons is not illegal. The amount allowed has varied and at present the limit is $2,50,000. Thus, one could have money in a bank, have a subsidiary, buy shares in foreign companies, etc. The issue remains whether it was legitimately done and if transactions other than the legally allowed ones took place via these instrumentalities. While the names and the year of activity are revealed by the documents, the annual transactions or movements of funds are not known. Thus, even if what has come out in the open was legitimate, what else was done and has not yet been revealed requires investigation.

Liberalisation of fund flows

The Foreign Exchange Regulation Act (FERA), that was in force till 1998, was stringent[strin-junt(strict,सख्त)] and did not allow Indians to take money out of the country or to keep funds outside the country without permission. But after the implementation of new economic policies in 1991, FERA was diluted and easier flow of funds from and to India allowed. The Foreign Exchange Management Act (FEMA) was enacted in 1999 and the Prevention of Money Laundering Act (PMLA) in 2005. What was a criminal act under FERA has now become a civil offence.

Trade account convertibility was introduced after 1991 and, subsequently, current account convertibility; but not capital account convertibility. Thus, after 1991, a limited amount of proceeds from international transactions could be kept outside. Committees headed by S.S. Tarapore twice recommended capital account convertibility in 1997 and 2007. However, due to the Southeast Asian contagion in 1997 and the global financial crisis starting 2007, this was not implemented. So, restrictions on Indians taking capital out of the country have remained.

People want to hold funds abroad for many reasons. They may have earned them from illegal sources or want to hide their trail of ownership for business reasons or if they earn the money abroad or purely as a hedge against risk and/or in expectation of higher returns. The first two involve some illegality. The third may also involve some illegality but the last two may be legitimate activities. However, even in a legitimate activity, some rules may be flouted so that illegality occurs and prosecution is called for. For example, taking out money is not felonious[fu'low-nee-us(illegal,अवैध)] but if more has been taken out via under-invoicing of exports and deposited in one’s account or if the money taken out legitimately was used to set up a company or one has not declared the income for tax purposes from the funds taken out, then prosecution becomes legitimate.

A large number of the well-off Indians have used the tax havens to shift funds out of India. The data from the Panama Papers and earlier from LGT Bank of Liechtenstein and HSBC Bank showed that not only big businessmen but also small ones and professionals have indulged in this activity. Politicians and bureaucrats also moved some of their ill-gotten gains abroad. According to our study, the opportunity cost of such funds for the Indian economy amounts to around $2 trillion between 1948 and 2012. A part of these funds have been round-tripped back to India, especially after 1991. While this may be considered beneficial, the outflow has accelerated during this period, so the country continues to lose capital. The reason is that as the flow of funds has been liberalised, it has become easier to mask the illegitimate flows. The fact is that while 6 per cent of the gross domestic product is leaking out of the country via flight of capital, only 2-3 per cent comes into the country as foreign investment (including round-tripping). Not only is India a net loser, liberalised flows have changed the very notion of what is legitimate and what is not, complicating prosecution and confusing the public. Loopholes deliberately created, such as the Mauritius route and Participatory Notes [instruments issued by registered foreign institutional investors to overseas investors who wish to invest in the Indian stock markets without registering themselves with the market regulator] which encourage inflow of capital also encourage more flight of capital. The inflow of such funds also spawns illegality in the country such as drug trafficking. It leads to speculation in the stock markets and makes them unstable. The benefits of liberalisation do not outweigh the loss to society.

Prosecution easier said than done

Given the scale of flight of capital from India, what has been revealed now is the tip of the tip of the iceberg(small view of big problem,बड़ी समस्या की छोटी सी झलक). Panama is only one of the 90 tax havens. Thus, it is likely that the entire financial operations of those whose names have been exposed are yet to be revealed. Further, out of the lakhs of Indians who could be holding funds abroad, data for not even 1 per cent of them have been leaked in all the cases of stolen data or declarations under the amnesty announced last year.

The stolen data, even though sketchy[ske-chee(incomplete,अधूरा)], leave the reader bewildered[bi'wil-dud(confused,परेशान)]. The salient feature that emerges is that funds are routed abroad via tax havens and use the process of ‘layering’ to hide the trail. Leaked papers further reveal that Mossack Fonseca was connected to various tax havens (such as British Virgin Islands and the Bahamas) and helped its clients hide their identity. If one works out the proportions, the 11 million documents possibly refer to 1,50,000 entities globally. Many of these entities, though not listed as Indian, could have Indian beneficial owners.

So prosecution is not going to be easy unless the government is proactive and finds out the details of the annual transactions of the 500 entities named (even if the accounts are closed now) and also finds out who else has not been exposed because of ‘layering’. The Panama government, and through it Mossack Fonseca, have to be forced to allow access to more data. The government has to investigate those who have been travelling to Panama or meeting Mossack Fonseca agents in India. That is how Bradley Birkenfeld was caught by U.S. authorities which then led to the prosecution of UBS Bank in 2007.

Even if technically one cannot prove that money was taken out or kept abroad illegally, what is the implication of taking money out to a tax haven and not keeping it in India? Inequity rises when the well-off escape taxation and that leads to poor infrastructure and higher indirect taxes. Indian tax rates are now moderate and hardly a cause for people to take capital out. This rising injustice and inequity due to flight of capital has not spurred action because almost all political parties and/or people close to them are involved in this activity. What has happened in Iceland [where the Prime Minister stepped down after his family was named in the Panama Papers], is unlikely to happen in India.

The problem is in India, and not abroad.

Courtesy:the hindu

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What Dalits want

In 1947, we opted for democracy as our political system post-Independence. “Democracy was something that would give the weak the same chance as the strong,” explained Mahatma Gandhi. Like many other democracies in the world, the three famous principles of the French Revolution — liberty, equality and fraternity — have inspired us too. Liberty we secured through a prolonged political struggle; equality we secured through our Constitution. But what about the third?

Bhimrao Ambedkar, the architect of our Constitution had said that his inspiration for liberty, equality and fraternity was Bhagwan Buddha. “What does fraternity mean?” he asked and went on to explain, “Fraternity means a sense of common brotherhood of all Indians — of Indians being one people. It is the principle that gives unity and solidarity to social life”.

Fraternity can’t be achieved through rules and laws in the Constitution. It requires a persistent[pu'sis-tunt(continuous,लगातार)] education of the people through public and private initiatives. In the last seven decades, have we been able to achieve what Ambedkar had described as fraternity?

Indian society is divided into castes and sub-castes. One single biggest challenge to fraternity today is the hierarchical[hI-u'raa-ki-kul(classified,वर्गीकृत)] caste system. Its roots are no doubt very deep. But its distorted[di'stor-tid(deformed,विकृत)] and utterly[ú-tu-lee(completely,पूरी तरह)] discriminatory[di'skri-m(i-)nu-t(u-)ree(unfavorable,पक्षपात)] manifestation today has no sanction in any Hindu dharmashastras.

“Janmana jatih” — caste by birth — is what we practise as the caste system. Although it had its roots in the varnashrama system of ancient times, the varnashrama system never sanctioned any caste hierarchy; nor did it allow any discrimination. In fact, transmigration was said to be the order of the day in that ancient system.

“Ajyestaaso akanistaasa yete — sam bhraataro vaavrudhuh soubhagaya (No one is superior or inferior[in'feer-ee-u(low,तुच्छ)]; all are brothers; all should strive for the interest of all and progress collectively),” proclaims the Rigveda (Mandala 5, Sukta 60, Mantra 5).

But the present-day caste system defies its own great scriptural wisdom and knowledge. It defies our Constitution in that it stands as a stumbling block in achieving fraternity in society. In a way, it has outlived its utility. The varnashrama system had depended on guna and karma — aptitudes and actions — in positioning a person in a varna. Today’s caste system has no connection with the old system. Hence, it should go lock, stock and barrel.

However, caste has not remained just a system. It got entrenched[in'trencht(established,स्थापित)] as an identity. Identities are not easy to erase. There is a need to find innovative ways to tackle this identity question.

Pending that, we shouldn’t lose sight of the immediate. The immediate issue is about discrimination based on caste. Article 17 of our Constitution has effectively and fully sought to abolish[u'bó-lish(leave,त्यागना)] untouchability and enforcing any disability on the basis of so-called low and high caste discrimination. Towards that end, we have also promulgated the Protection of Civil Rights Act, 1955, which made the offence of violating Article 17 punishable.

But has it really ended discrimination? Why is a Dalit, however well-educated and well-placed he may be, forced to hide his identity? Why is it that a leader from among Dalits is always seen only as a “Dalit leader”, which is not the case with other leaders? Hierarchical casteism is entrenched in the social psyche, and that is where the battle is.

Today, we are living in an era of caste assertion. In order for social unity and harmony to be well-maintained, we need to keep the discourse on track. In the mid-1990s, a Dalit sub-caste in Andhra Pradesh started using their caste name as a suffix to their names. This, in their view, was a proud assertion of their identity. This act led to serious discussion among the intelligentsia. Many were worried that casteism was staging a comeback. But a simple and profound question asked by a Dalit intellectual put the discussion to rest. In Andhra, people belonging to several non-Dalit castes use their caste name as a suffix. This has been the practice for long. Never did the question of growing casteism arise when Sharma or Shastry or Reddy was used as a suffix. Why this concern when a Dalit does the same?

This calls for a deeper understanding of the discourse within caste groups. For political correctness, one may declare that there is no discrimination in Hinduism and that a Dalit has an equal right to study the Vedas and become on par with a Brahmin. But the question a Dalit will ask is about this notion of “on par”. Why can’t it be that a Dalit reads the Vedas and still remains what he is? Why should he be doing it in order to become “on par” with some other caste?

This is the real discourse that we need to address. We assume that the Dalit discourse is all about more reservations and more jobs. No doubt, reservations are important and so are jobs. But the hunger today is for four things: Samman (respect and dignity), sahbhagita (participation and partnership), samriddhi (progress and prosperity) and, finally, satta (empowerment).

The government can take care of the last two, but the first two are the responsibility of society. Social and religious organisations have to take responsibility for addressing the Dalit hunger for samman and sahbhagita. That is when social equality is achieved.

Ambedkar was right when he warned the nation about it. “On the 26th of January 1950, we are going to enter into a life of contradictions[kón-tru'dik-shun(opposition,विरोधाभास)]. In politics we will have equality and in social and economic life we will have inequality. In politics we will be recognising the principle of one man one vote and one vote one value. In our social and economic life, we shall, by reason of our social and economic structure, continue to deny the principle of one man one value.

How long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril[pe-rul(danger,खतरा)].”

Courtesy:indian express

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When populism trumps public safety

The Sunday fire tragedy at the Puttingal Devi temple in Kollam, Kerala, which claimed more than 100 lives, raises several questions with regard to public safety management and the role of the district administration in ensuring safety during occasions such as major religious festivals. The chief issue is whether the Kollam administration — mainly the police — was incompetent or merely negligent because of external pressure. A gargantuan[gaa'gan-choo-un(big,बड़ा)] Kumbh Mela that attracts several millions passes off without incident. But a Kollam festival that draws just a few thousands ends in a colossal[ku'ló-su(big,बड़ा)] mishap. How do you explain the contradiction? Is it that the Uttar Pradesh civil set-up is more sensitive and efficient than its Kerala counterpart? Or is it a case of government reluctance[ri'lúk-tun(t)s(unwilling,अनिच्छुक)] to be tough on the eve of Assembly elections?

One of the most complex tasks the Indian administration has to perform is the handling of massive religious congregations[kóng-gru'gey-shun(group of people,भक्तगण)] . Both of us have supervised a large number of festivals. On all these occasions we have had to encounter devotee indiscipline of the worst order, particularly the desire to be the closest to the sanctum sanctorum. Devotee exuberance[ig'zyoo-bu-run(t)s(enthusiasm,उल्लास)] is usually compounded by the lack of control over the event by the organisers, normally a local committee of citizens, some with a dubious[dyoo-bee-us(doubtful,संदिग्ध)] reputation for managing finances and some with high political connections. Public safety, for them, is often low priority. If we have had only as few accidents as have happened over the years, it is because of sheer[sheer(Pure,नीरा)] chance rather than professional crowd control.

Festivals and fireworks

The distinctive feature of many Kerala festivals is that they cut across religions, and are looked upon as more of a social event. The fireworks display is the most exciting feature of religious festivals in Kerala. In fact, it is a huge draw for foreign tourists. While it began as a Hindu phenomenon, over the years, a few Christian groups also started emulating[e-myû,leyt(follow,अनुकरण)] it. The practice usually is of simultaneous release into the skies of dazzling high-decibel firecrackers by rival teams. Each of the competing groups is finally assessed by the variety of fireworks they are able to assemble, the colour of their display, the number of layers they are able to climb in the sky and the intensity of the sound produced. Many who have witnessed the Thrissur Pooram (to be celebrated in the next few weeks) and the Thiruvambadi festival would vouch for the excitement that the display generates.

In the Kollam horror, there are reports that the local administration had turned down the request for a fireworks competition between groups which are regular participants in the festivities and come from various other temples in the region. If this was so, why was the order not implemented?

The site of the temple was a heavily built-up residential locality, and most of those who lived in the immediate neighbourhood were stoutly[stawt-lee(strongly,दृढ़तापूर्वक)] opposed to an excessive use of fireworks during the annual festival. Reports suggest that a local resident — an elderly woman — is known to have appealed to the district collector against allowing fireworks because they posed a threat to her house nearby every year. There is therefore reason to believe that the festival organisers were least sensitive to local feelings, and their only concern each year was to do better than the previous occasion.

This exuberance is not peculiar[pi'kyoo-lee-u(unusual,अनोखा)] to the Kollam temple or to Kerala. All over the country such mindless enthusiasm to expand the scope of a festival every year is a feature that the local authorities have to contend with and bitterly oppose, but not always successfully. Any stern[sturn(strict,सख्त)] order limiting the festivities is always resisted, sometimes with the support of the local ruling party. The overruling of a district collector or superintendent of police is a common occurrence. The administration in Kollam eventually permitted a mere display of fireworks instead of the competition.

No State government in India would like to antagonise[an'ta-gu,nIz(act in opposition,दुश्मनी मोल लेना)] even the smallest of religious denominations. This is the tragedy of our polity. There are no signs that this appalling situation will change even in decades.

Lessons not learnt

Both stampedes and fireworks at festivals have caused a large number of casualties in our country. Perhaps these account for far more than what we have suffered at the hands of terrorists. The stampedes at the Mahamaham Festival in Tamil Nadu (1992; 50 casualties), the Nashik Kumbh Mela (2003; 39 casualties) and Mandher Devi temple in Satara, Maharashtra (2005; nearly 300 casualties) come readily to mind. Consider these along with the fire accidents in Delhi’s Uphaar cinema (1997; 59 deaths) and Kolkata’s AMRI Hospital (2011; over 90 deaths) to convince yourself that we either do not have a uniformly stringent[strin-junt(strict,सख्त)] fire safety policy, or the wisdom and courage to enforce it if we ever had one.

We have learnt only few lessons from these gory happenings. The routine appointments of commissions of inquiry and suspensions of police personnel are a knee-jerk[nee-jurk(natural,स्वाभाविक)] response to what is becoming a human rights violation by the state in neglecting fundamentals to regulate religious assembles and to strictly implement safety measures on public occasions or inside public buildings. You have to watch movies at the so-called multiplex cinema houses in our principal cities to understand the dimensions of potential horrors. Many of these premises have narrow, steep staircases to substitute for lifts and escalators in the event of a fire. Also, they have entries and exits solely on one side of the auditorium, enabling conditions for a classic stampede. Local authorities are grievously callous[ka-lus(insensitive,सवेंदनाहीन)] on such matters and are known to give licences to cinemas and restaurants for an unspecified bribe that is shared by many at the top and in the lower rungs of the administrative hierarchy.

The tragedy is there is hardly any open debate in the country on safety at our public premises and gatherings in open spaces. There is a near paralysis in the civil administration on such vital matters, attributable mainly to acute[u'kyoot(sharp,तीक्ष्ण)] political interference. The situation is so bad these days that an organiser of a public function can go to a government official to either flaunt his religion — minority or majority — or his proximity to the ruling party in order to browbeat the official concerned into permitting even the most objectionable event. The Kollam tragedy is a manifestation of this disease that afflicts our polity. Such tragedies will continue to occur if public safety policies are not delinked from religion and politics, and the greed which dictates the response of many public officials, both petty and senior.

A final word about police practices and accountability. Many senior law enforcement officials continue to believe — wrongly — that throwing in a large number of policemen at a temple or a public meeting addressed by celebrities is a guarantee against chaos[key-ós(disorder,अव्यवस्था)] or disaster of the kind we saw at Kollam. Numbers deployed can help only to an extent. It is the quality of deployment, combined with the severity of adherence[ad'heer-un(t)s(following,समर्थन)] to the standard operating procedure which would eventually win the day.

Courtesy:the hindu

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Sort out the tax maze

The Panama Papers reveal that countries with much simpler tax laws, lower costs of compliance and a stronger administrative capacity to enforce laws than India have not been able to prevent the use of tax havens. In India, tax rates are higher, the system is complicated and capital controls restrict foreign financial transactions. Tax havens are more likely to be used not just for felonious[fu'low-nee-us(illegal,अवैध)] activity but even for legitimate businesses.

The government has ordered a probe into the leaks. But there are thin lines between the legal and the illegal. The difference between tax evasion and tax avoidance is one such line. Tax evasion involves not paying taxes on your income and is illegal. Tax avoidance, on the other hand, is about managing your taxes across different tax jurisdictions to take advantage of differences in tax rates, such as corporate tax rates, in tax treatment of different kinds of income, such as capital gains, and in tax treaties among countries. Tax havens such as Panama, the British Virgin Islands and the Bahamas try to attract business by offering low tax rates and easy compliance.

Officials from OECD countries on the Panama list are under public pressure because they have been advocating that tax avoidance, though legal, is cheating. A number of OECD initiatives have been taken to reduce tax avoidance: An agreement on Base Erosion and Profit Shifting (Beps) aims to prevent companies from choosing low-tax jurisdictions to book profits in. The Automatic Exchange of Information (AEOI) framework will facilitate information flows among signatories. The Foreign Account Tax Compliance Act (Fatca) targets non-compliance by US taxpayers and compliant countries have to provide customer information to the US government.

In addition to tax avoidance, as tax havens have laws to ensure greater confidentiality of companies and banking secrecy legislation, the companies may be used for money laundering. In general, there is a widespread perception that offshore companies are conduits for money laundering, illegal transactions, tax evasion or parking unexplained wealth. While offshore companies may be used for illegal purposes, law-abiding[lo-u,bI-ding(lawful,क़ानूनी)] citizens may hold them for making investments in other countries to help navigate the complex maze of tax treaties and multiple jurisdictions involved in managing tax liabilities. Hedge funds that manage money in multiple countries often use tax havens to reduce compliance costs arising from different tax treaties among jurisdictions.

The Indian case is more perplexing[pu'plek-sing(confusing,अस्पष्ठ)] than those of OECD countries. It has been made complicated by a set of tax laws that makes compliance more costly than in the OECD. We rank 157 in the ease of paying taxes. Further, the effective tax on profit is higher: The corporate tax rate and the dividend distribution tax put together make the tax rate on profits nearly 50 per cent. The capital gains tax makes financial transactions even more unattractive. This regime is made more tortuous[tor-choo-us(complex,जटिल)] by an onerous[ó-nu-rus(heavy,भारी)] set of capital controls.

As a consequence[kón-si-kwun(t)s(result,परिणाम)], companies operating globally have every incentive to set up companies in such jurisdictions.

There are some cases in which the actions are clearly illegal. The first, for example, is when the underlying activity is criminal,drug or arms trade. These activities are covered under the Prevention of Money Laundering Act. As a member of the Financial Action Task Force, India works with other member countries to prevent the use of the proceeds of crime.

The second is when there are cases of tax evasion: A person does not declare to the tax authorities in her home country her income, which is paid into a bank account of her company in Panama, and no taxes are paid. Here, a distinction between tax evasion and avoidance is relevant. If taxes have been paid in the tax haven at its lower tax rate, then there may be no illegality. When India introduces the General Anti-Avoidance Rule (Gaar), some of these activities may become illegal.

The third case is if there is a violation of capital controls. This is an India-specific issue. Under the Liberalised Remittance Scheme (LRS), every Indian resident is allowed to invest $2,50,000 abroad every year. In 2004, the limit was one-tenth of this. Money remitted abroad is from income on which tax has already been paid. If the amount invested abroad exceeds the amount allowed by the RBI, it is a violation of the law.

Fourth, the illegality may be the non-declaration of assets held abroad. A provision in the Finance Bill introduced in 2015 made it criminal not to declare foreign assets in annual tax returns. If the assets held in tax havens have been declared, then it is not illegal to hold them.

OECD countries have simpler tax laws with lower tax rates and lower compliance costs than India and no capital controls. The focus of the authorities is to broadly keep business in the country and to tax the income of its residents. Yet, the Panama Papers show that even with much simpler systems and more effective enforcement, it is a challenge to prevent illegitimate cross-border flows.

In India, it is not just entities engaging in crime and tax evasion that have offshore companies. Reports suggest, for example,

that many Indian technology start-ups are moving their headquarters to offshore locations due to our complexities. These muddy the waters as both legal and illegal activities move abroad.

Looking forward, first, rationalisation of capital controls should be a top . Many government reports have laid out the path forward. Second, India must move to a simple tax regime with lower compliance costs. The blueprint is ready in the Direct Taxes Code. When countries with simpler laws and better enforcement are not able to prevent violations of the law, we cannot hope to do so with our labyrinth[la-bu-rinth(complex system,भूलभुलैया)] of capital controls, maze of tax laws and much weaker tax administration.

Courtesy:indian express

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