Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

Rich getting richer: 120k Indians hold a third of national income.

fiogf49gjkf0d
Last year may have been a cruel year for much of the country with slow growth and doubledigit food inflation, but India’s high net worth individuals (HNWIs) prospered — just over 1,20,000 in number or 0.01% of the population their combined worth is close to one-third of India’s Gross National Income.

HNWIs, in this context, are defined as those having investable assets of $ 1 million or more, excluding primary residence, collectibles, consumables, and consumer durables.

According to the 2009 Asia-Pacific Wealth Report, brought out by financial services firms Capgemini and Merrill Lynch Wealth Management, at the peak of the recession in 2008, India had 84,000 HNWIs with a combined net worth of $ 310 billion. To put that figure in perspective, it was just under a third of India’s market capitalisation, that is, the total value of all companies listed on the Bombay Stock Exchange — as of end-March 2008. The average worth of each HNWI was Rs.16.6 crore.

levitra

Double dip ahead

fiogf49gjkf0d
The real estate market in India is heading for what looks like a double dip. After correcting somewhat from the sharp setback suffered in 2008, with some sectors managing to exceed previous peak prices in 2010, the sector entered 2011 with cautious optimism. But halfway through the year, the outlook has turned distinctly sombre. The current economic deceleration is pouring cold water on demand for office space, always driven by the overall economic climate. The retail segment has yet to absorb the excess supply that has characterised it since the last slowdown. But it is the bread and butter affordable-to-middle volume part of the residential segment that has suffered a clear setback with successive policy rate increases raising interest rates and equated monthly instalments (EMIs) and the promise of more to come. Banks, which had already turned cautious about lending to developers on receiving the signal from the banking regulator, are likely to become even more careful. Private equity, the only hope for cash-strapped developers facing sluggish demand, is unlikely to throw out a lifeline, since they do not relish being locked into a medium-term plateau if not trough.

It’s ironic that there is an astronomical unmet demand for livable urban space among all except the very rich, and it is a colossal failure of both the government and developers that an enormous business opportunity, which can make everyone better off, is not being created out of it. Despite the abolition of the Urban Land Ceiling Act in most parts of the country, there is no perceptible increase in urban land supply which can make possible large additions to affordable housing. This is because urban planning is not promoting mixed development sufficiently, nor is urban infrastructure being built keeping in mind transportation links between new residential areas and job centres. Even under these circumstances, the middle class would pay through the nose for a place to live in the hope of capital gains over time. But there are dampeners galore. Not satisfied with raising EMIs, banks are turning more cautious in the face of regulatory exhortations to be mindful of rising non-performing asset levels. Plus, there is a mountain of anecdotal evidence of how buyers are short-changed by developers.

A Bill to codify customer rights and offer recourse through the creation of a regulator has been hanging fire for a decade. Developers are opposing it tooth and nail and political leaders are in no hurry to upset them. Developers have a point when they say that the need to secure multiple sanctions delays projects and adds to costs. But the existing crop of developers has got into the business with its eyes open. It is popularly believed that they are both repositories and launderers of politicians’ black money. Thus, entrenched corruption at the grass roots (those who process the multiple sanctions required) and protection from top are blocking change and reform. With the central government appearing paralysed by fear of decisive action on such issues, it can only be hoped that some of the more confident and politically secure chief ministers will take the initiative for policy reform.

levitra

PM-in-hiding

fiogf49gjkf0d
Twenty years ago, Manmohan Singh was a man with a mission. After his first Budget as finance minister, he barged into a post-Budget press conference called by his officials, to personally explain what he was doing. He gave lengthy interviews; he spoke from virtually every available platform, to get across the need for change. Later, when Narasimha Rao announced a series of Independence Day handouts, Dr. Singh gave an interview to say that the country could not spend its way to prosperity (Sonia Gandhi, please note). And towards the end of the Rao government’s tenure, when the atmosphere became thick with deal-making, he spoke out courageously against crony capitalism.

The contrast with today could not be more striking, as the country seems to have a prime minister-inhiding. You see him seated at meetings, looking a trifle lost, or mouthing homilies at government functions (the MAFA syndrome — mistaking articulation for action). Other than that, he is both invisible and silent. This is no way to lead.

If his government is paralysed by inaction, and tarred comprehensively with the corruption brush, it is because Dr. Singh has not been true to his instincts, and too timid as the head of the government. Dayanidhi Maran as a stripling minister wrote to him in 2006, complaining that spectrum pricing should be left to him, not handed over to a group of ministers. Dr. Singh meekly acquiesced. Mani Shankar Aiyar wrote to him two years before the Commonwealth Games, i.e., before the bloated and wasteful spending began, to complain about Mr. Kalmadi’s budget-inflating habits. Yet Mr. Kalmadi was allowed to go his merry way till the damage was done.

When A. Raja cocked a snook at him, what was the response? Dr. Singh’s private secretary made the telltale request that the prime minister’s office be kept at arm’s length. In other words, he knew that skullduggery was going on, but wanted to turn a blind eye. On the spectrum scandal, he himself has explained that once two of his ministerial colleagues were in agreement, he did not think he could intervene! And now it transpires that a former secretary in the finance ministry (E. A. S. Sarma) wrote repeatedly to the prime minister, over two years, warning him of undue favours being done to private gas concessionaires like Reliance and Cairn, at the cost of the exchequer. He never got even a routine acknowledgement. Was Dr. Singh too scared to ask Murli Deora?

So the prime minister cannot say that he did not know. In every case, he was informed, and he chose to do nothing. This is not because he was corrupt; even his worst critics will not say that. Perhaps he felt there was no choice in a coalition other than to turn a blind eye to some goings-on (he once said something like “I am not in the business of losing my government’s majority”). But if an honest and public-spirited man allows scamsters around him to flourish, the stage comes when personal honesty is no longer a valid defence. And belated action under public and court pressure provides no absolution.

levitra

Stop appointing retired officials as Regulators — Recommendation part of Moily’s 10-point agenda to curb corruption

fiogf49gjkf0d
Law Minister M. Veerappa Moily wants the government to stop the practice of appointing retired bureaucrats as regulators. The proposal is part of a 10-point agenda prepared by him to improve governance and curb corruption.

The agenda has been discussed with the advisor to Prime Minister Manmohan Singh on public information, infrastructure and innovations, Sam Pitroda, and Planning Commission member Arun Maira and has been submitted to the Prime Minister.

Moily, who was also Chairman of the second Administrative Reforms Commission, has pointed out that in view of the experience of the existing statutory regulators with retired officers and judges, the job of regulators should be restricted to serving officers and judges in order to improve accountability.

He has stressed this would need to be supplemented through a carefully planned capacitybuilding exercise at periodic intervals, which will bring in domain expertise and enthusiasm in the regulatory system, which is currently lacking. Other recommendations in the 10-point agenda includes a legislation on the lines of US False Claims Act, providing for citizens and civil society groups to seek legal relief in the cases of fraudulent claims against the government.

The proposed law would allow any citizen to bring a suit against any person or agency for a false claim against the government. If the false claim is established in a court of law, the person or agency responsible will be liable for penalty equal to five times the loss sustained by the exchequer or society.

Bringing in the Right to Service, various steps for improving urban land management, measures for improving administration in areas dominated by Naxals and tribals, a performance-related tenure of the government functionaries for making them more accountable, codification of guiding principles in a Civil Service Law, suggestions on functioning of Lok Pal and Lokayukta and unity of command and enforcement and accountability are also included in the 10-point agenda.

For ensuring integrity in appointment to public offices, Moily has suggested that charge-sheeted persons should not be considered for appointment. “This principle should be made applicable for persons contesting elections, also.”

levitra

Managing the Mudrochs — Media markets must remain competitive and open

fiogf49gjkf0d
The latest controversy in the British media, triggered by unethical professional practices by journalists at Rupert Murdoch’s News of the World, holds important lessons for the Indian media, and not just because Mr. Murdoch has a significant presence in India and seeks more. The most important lesson is that public policy must prevent the emergence of all powerful media moguls like Mr. Murdoch. The extent of concentration in the Indian media, at both the national and regional level, has grown alarmingly. Regrettably, such growth in size and revenue has not always contributed to good journalism, as we now see in Britain, and as is obvious in India. Unlike in many other branches of business, in media there is no evidence that with size of business and operation comes either quality or reliability.

The dominance of one business group in one segment of the media is dangerous, so is the increasing control of such dominant players across different segments of the media, namely, print, television and radio. While the Government has not come forward with the promised broadcast Bill yet, the new FM radio policy has shied away from more stringent curbs on cross-media ownership. The ‘play safe’ policy of auctioning licences to the highest bidder has been preferred obviously because of the controversy surrounding telecom licences, but there is a downside to ‘transparent auctioning’ in the media business. It can privilege the powerful. Companies with deep pockets end up pocketing licences in the name of so-called transparency. A more confident government would have laid down other criteria too, including restricting cross-media ownership.

The sharp practices by Mr. Murdoch’s men and women in Britain draw attention to the hubris of a media intoxicated by power, made worse by the direct control that owners often exercise over editorial content. The consequent blurring of lines between the business bottom line and the editorial line is an assault on the idea of media as the ‘fourth estate’ in a democracy. The Indian media has its Murdochs in every language publication and news channel. While the dominance of one or two media groups in each state and language market has not come in the way of a thousand flowers blooming, it has forced a large number of smaller players to become pawns in the hands of other business persons with deep pockets.

The Niira Radia tapes controversy in India drew attention to some of the unsavoury aspects of a nexus involving professional journalists, owners, politicians and business persons. This is only the tip of the iceberg. In various Indian states, the situation is worse with many Indian language media groups. The number of powerful politicians and business persons owning and openly controlling as well as manipulating the media is on the increase. The controversy surrounding former Union Minister Dayanidhi Maran is an example of the media baron-politician-business person nexus. The Murdoch murk in Britain is a reminder of what could happen in India in the absence of regulation, rules of the game and codes of conduct aimed at preventing such unfair professional and business practices.

levitra

Will the SIT on black money solve the problem?

fiogf49gjkf0d
It is fundamental indeed that the Constitution empowers the Supreme Court to make orders necessary to ensure that public interest is served. The Parliament and State Legislatures are given powers to make laws and courts are constituted to enforce them. There is no possibility of a conflict of interest or of the jurisdiction of Court and Legislatures if they keep their functions strictly within the limits prescribed by the Constitution or the laws made under it.

Why, then, is there discord or murmur when courts issue orders commanding the authorities to enforce laws and in cases in which such authorities, particularly executive authorities, fail to act in national and public interest? It will not be correct to say that in making such orders Courts encroach on the jurisdiction of either the Legislature or the executive authorities who are empowered to act for enforcing such provisions.

No one can say depositing money and transactions and deposits in a foreign bank in violation of laws should be ignored and such violators allowed to go free without being punished and that it will not affect national security and public interest. Against this background, let us appreciate the value of the appointment of the Special Investigation Team (SIT) by the Supreme Court to ensure that laws are implemented and black money is brought under proper action.

The point that the appointment of an SIT is innovative is uncalled for and misconceived. The Court has appointed an SIT, for example, to investigate the Gujarat riot cases. This is the first time, however, that the Court has appointed an SIT in a case associated with finance and black money. This has been done in the interest of the State and public interest. When the authorities concerned have failed to act, setting up an SIT is a noble cause and a step that urgently needed to be taken. Arguments that there are agencies assigned for such work and the Court should have exercised discretion to direct any such authority to take steps instead of appointing an SIT are also uncalled for. The Bench of Judges that has passed this order was also conscious of this fact. The SIT is constituted by taking officers from all such relevant agencies. Since any such agencies have limited powers, one or the other agency alone may not be able to locate and find black money, fix responsibility for violations and prosecute.

No one should feel hurt if a Court asks authorities to act in the interest of the State and public interest. After all, the Court has issued such orders only when others designated to act failed to do so. Such orders are a welcome relief in the prevailing situation.

levitra

Wrong move — The point is to go after the tax evader, not squeeze taxpayers further.

fiogf49gjkf0d
The Finance Ministry’s move to subject high networth taxpayers (HNIs) to intense year-round scrutiny is simply absurd. It should stop harassing those who duly file their income tax returns. The Government should drop the proposal to create a dedicated cell to monitor those who report earnings over Rs.1 crore per annum, spending more than Rs.10 crore a year or having assets in excess of Rs.100 crore. Instead of squeezing more from those who already file returns and pay taxes, the Department should go after those who remain outside the tax net. This is eminently feasible with rigorous analysis of annual information returns (AIR) that identify potential taxpayers by examining expenditure patterns. Today, the Department is behind the curve in mining information gathered through the tax information network (TIN). Audit trails break-up as the permanent account number (PAN) is found missing in several large financial transactions gathered through TIN. This is untenable. Every transaction should be tagged by a PAN and the unique identifier should be made mandatory for all those who make high-value purchases. A fool-proof PAN and robust TIN, not a dedicated cell for HNIs, will enable the Department to identify tax evaders. Selective focus on HNIs is a bad idea that would only duplicate work for the Department that already has a system in place to scrutinise income tax returns, selecting cases through the computer-assisted scrutiny system (CASS) that also captures information provided by banks, credit card companies, mutual funds through the AIR. A 360-degree profile of every taxpayer can be easily created with creative and intelligent use of information technology.

Last year, around 10,600 tax-filers reported annual incomes over Rs.1 crore. The number dropped to 1,257 for those with an yearly income of over Rs.5 crore. Hardly surprising, given that less than 3% of people file tax returns in India. The base of income tax should be widened to raise the level of tax collection to GDP. The best way to do that is to expand the coverage of AIR. Also, moderate income tax rates, simple and transparent tax laws will improve compliance and stop generation of black money.

levitra

Charitable trusts under I-T scanner

fiogf49gjkf0d
Enhanced scrutiny, modified auditors’ report and new return form part of exercise to curb misuse of tax exemption. The Income-tax (I-T) Department has launched a comprehensive exercise for tightening the administrative mechanism for charitable institutions.

Scrutiny of cases where misuse of tax exemption has been noticed and modifications in reporting procedures to capture their activities, funding patterns and income are among measures taken for streamlining procedures. The Directorate of Exemption has already identified a substantial number of cases, which are being selected for scrutiny. These cases pertain to the new proviso added to section 2(15) of the Income-tax Act, applicable from 2009-10.

The new norm disentitles tax exemption to any trust or society, engaged in the advancement of any object of general public utility, if it collects fees or other charges for services rendered in the nature of business, commerce or trade.

The Directorate has suggested a criteria for selection of cases during the current year. It includes quantum of refund claim, quantum of investment, gross receipts and income from business and profession.

Modifications in Form No. 10-B associated with the auditors’ report for charitable institutions has also been planned to get full details of activities of these entities. The proposed modified features include disclosure of nature of charitable activities and places of primary business.

Further, complete information with regard to donation by both internal and external donors with details of Foreign Contribution Regulation Act (FCRA) approvals would also be required in this format.

Details of exemption claims made simultaneously under different provisions, yearwise break-up of accumulation and utilisation of funds, information in respect of cash transactions, Tax Deducted at Source (TDS) compliance and other business transactions would have to be furnished once the Central Board of Direct Taxes (CBDT) approves this new form.

A new income tax return form for public charitable trusts is also being prepared by the Directorate to facilitate comprehensive reporting of their income and expenditure. It would facilitate e-filing and help in selecting cases for investigation and would also provide details of foreign, anonymous and corpus donations, donation in kind and FCRA approvals.

levitra

Choosing head of IMF: Self goal

fiogf49gjkf0d
A lot of people talk about India rising. It is after all the second-fastest growing economy, a member of the G20, a pillar of BRICS, and a claimant to permanent membership of the Security Council. However valid the revivalist narrative might be, there has always been a vulnerable underbelly to the story of India Shining: massive poverty, and ‘under-development’ on many fronts (the largest number of poor people, the largest number of malnourished people, the largest number of illiterates, the largest number of blind people. . . .). You can sense the unstated position in many minds around the world that India is running ahead of itself, that it is confusing potential with achievement, and that its leadership role in world affairs is yet to be demonstrated. The less charitably inclined will also have been muttering ‘arriviste’.

If the country needed a wake-up call, it has got it in the run-up to choosing a new managing director of the International Monetary Fund. First, there was the small matter that its favoured candidate for the post was over-aged — a fact ignored for several days amidst expectant speculation. It now turns out that China, while seeming to go along with the BRICS position that the choice should not automatically go to a European, has done a deal while quietly offering support to the French candidate. There is a precedent worth recalling: the election of the United Nations Secretary-General. The Government backed Shashi Tharoor’s candidature when he had little hope of winning because the US preferred a candidate from another ‘risen’ country with whom it has a military alliance, South Korea. India, in comparison (and rightly so), seeks strategic autonomy in international relations.

Such tactical mistakes are not without cost. If it turns out that China has in fact done a deal, securing the No. 2 position at International Monetary Fund (IMF) for its national as quid pro quo for supporting Christine Lagarde, then India has scored an own goal. From the perspective in New Delhi, a European or American would have been preferred in that position, rather than a Chinese. Indeed, the Prime Minister is known to have argued in the past that having a European at the head of the IMF has served India well. What might happen in the IMF could be a precursor of other things to come. Pushing for re-ordering the global order, and a declining role for the West, means that the default country that gets to fill the power vacuum will be China — which after all has an economy thrice as big as India’s, a much greater role in world trade, a pivotal place in the currency market, and much else.

BRICS solidarity is also a double-edged sword. In the Doha Round of trade talks, the rich countries have been able to drive a wedge between ‘emerging markets’ like India and the more numerous poor economies, by pointing out that the two groups’ interests are not synonymous. In a recent meeting of the World Trade Organisation, some of the fiercest criticism of BRICS positions came from poor countries in Africa. In short, India should be careful about what it wishes to achieve in international affairs and how it leverages group dynamics; it might well get what it asks for — only to discover that the earlier arrangement was more to its advantage.

levitra

The Finance Minister must focus on the fiscal challenge

fiogf49gjkf0d
Finance Minister Pranab Mukherjee must devote his energies to improving fiscal management if his budgetary arithmetic has to be prevented from going awry. The danger signals are all up. His Ministry has now acknowledged the Reserve Bank of India’s earlier warning that economic growth in fiscal 2011-12 is likely to be lower than budgeted originally. A sharp deceleration in the denominator will mean a sharp increase in the fiscal deficit-to-gross domestic product (GDP) ratio. The timely arrival of the monsoon augurs well for the economy, which may surprise the markets and policy makers. But this cannot be taken for granted. Moreover, reports of investment deceleration suggest that some kind of a crowding-out of private investment may already be happening as a result of persistently high government borrowing. The most worrisome aspect of recent fiscal trends is the sharp increase in the Government’s subsidy bill. Total subsidies — food, fertilisers and petroleum — have been persistently high and as a percentage of GDP went up from less than 1.5% till 2007 to close to 2.5% in 2008-09 and above 2.0% in 2009-10. While Mr. Mukherjee has budgeted for a lower ratio this fiscal, there is little evidence so far that he will be able to meet his budgetary targets — not with the continued foot-dragging on petroleum and fertiliser subsidies and pressures to increase food subsidy.

The only thing that has saved the Union Government’s fiscal strategy so far, especially in the face of sluggish revenue receipts, is the less-than-budgeted defence expenditure. It was widely expected that immediately after the state Assembly elections were wrapped up the Government would attend to the extant fiscal challenge. Apart from the heroic increase in petrol prices, no other action has been taken. On the other hand, it appears that the Finance Ministry may not be able to meet the disinvestment target it had set. While no one expects last year’s bonanza to be repeated this year, even budgeted amounts may not be forthcoming if the overall approach to macroeconomic management remains lack lustre.

The delay in tax reform — with the introduction of a Goods and Services Tax still on hold and the apparent inability of major political parties to focus attention on issues pertaining to revenue mobilisation and revival of growth — is raising fresh concerns about the sustainability of even 8.0% economic growth. With the international economic environment remaining precarious and far from stable and with regional security re-emerging as a major policy concern, the gathering clouds do not bode well for growth, revenue generation and fiscal correction. It is not our intention to sound needlessly alarmist, but the time has come to ring a warning bell. India’s macroeconomic authorities must focus on fiscal stabilisation and Mr. Mukherjee has to provide the leadership as Finance Minister.

levitra

America’s political deficit

fiogf49gjkf0d
S&P finally wakes up to fiscal mismanagement in US Credit rating agency Standard and Poor’s (S&P’s) decision to shift the long-term credit outlook for the United States from stable to negative is yet another reminder that the aftershocks of the global financial crisis of 2008 are yet to dissipate. This should serve as a warning that unless the US administration and Congress can handle the fiscal consequences of the myriad stimulus measures put in place to fight the global recession, another financial crisis could be in the making. S&P’s specific concern is that “US policy-makers might not reach an agreement on how to address medium- and long-term fiscal challenges.” The challenge in this case is to reduce the US debt burden from close to 100 per cent of GDP, which is likely in 2011, to more manageable levels in the medium term. S&P’s scepticism appears to stem more from its assessment of the US’ current political situation in which partisan point-scoring seems to stand in the way of sensible policy making. In short, the rift between the Republican-dominated House of Representatives, which wants to put the burden of consolidation on spending cuts alone (particularly state-funded medical insurance, Medicare), and the Democrat-controlled Senate, which wants to use a mix of higher taxes and spending reduction, could compromise any workable plan of fiscal consolidation.

This, however, is not yet an outright downgrade of US sovereign debt and it is unlikely that the US government will default on its credit obligations in the near future. However, if concerns about fiscal health intensify (US treasury credit default swap spreads have been rising steadily), the status of US treasury bonds as the ‘default’ safe haven (and by extension the US dollar) in times of rising risk aversion will come into question. Europe’s travails rule out any European alternative. The only viable safe haven appears to be gold and German bonds, since Germany’s robust growth (and, consequently, its fiscal health) seems to be miles ahead of its moribund neighbours. One could argue that emerging markets like India and China, despite their immediate inflation problem, should get the safe haven status. Their underlying growth momentum (cyclical corrections notwithstanding) remains strong and their fiscal health, at least in comparison with the Western world, certainly looks to be in the pink. On the other hand, emerging markets could face other problems. Where US treasury yields to rise on the back of fiscal anxieties, it could turn off the spigot of cheap dollars that have been flooding these markets. Asset prices in these markets could see a sharp correction. Commodity prices that have ridden the wave of easy liquidity could also be hit. The worst-case scenario would be one in which rising interest rates and a heavy fiscal burden could drive the US economy down and that, in turn, would pull the global economy back into the throes of a recession. Though this seems a tad unlikely at this stage, one cannot simply wish the likelihood away. The world expects better leadership from US politicians, but S&P is clearly doubtful if this would be forthcoming.

levitra

Tragic state of our Universities — University of Pune’s Institutes run sans approved teachers

fiogf49gjkf0d
The University of Pune (UoP) said it will stop 48 colleges affiliated to it to conduct first-year admissions for 2011-12 after the administration came in for intense grilling from senate members over 125 affiliated colleges functioning without a single approved teacher. Worse, 24 of these colleges do not have approved principals either.

A Supreme Court order had asked colleges to have full-time approved principals and teachers in place or face punitive action like a ban on admissions to first year of courses in the 2011- 12 session. Seventy-seven of the 125 colleges have secured court relief against possible action. The university will stop admissions in the 48 other colleges.

At the meeting, senate members raised questions on how exams for students from these colleges were conducted, who assessed their papers and what action the varsity was taking to ban first-year admissions in the 48 colleges.

They also demanded a panel to probe how the local inquiry committees recommended continuation of affiliation for the 125 colleges. Director of UoP’s board of college and university development W. N. Gade and controller of exams S. M. Ahire could not placate the senate, which wanted to know if answer papers were assessed at the colleges lacking approved staff.

Ironically, the university was recently accorded the highest ‘A’ grade by the National Assessment and Accreditation Council. The university’s approval of teaching staff makes students of affiliated colleges eligible for exams. Without approved teachers/principals, a college cannot be an exam centre. Students then take their exams in the nearest college with approved staff. If the college is unable to accommodate more students, it assigns two approved teachers to the college to be ‘custodians’ of the varsity’s exam material, including answer papers.

The norms are ambiguous on who should assess answer papers of colleges lacking approved teachers.

(Source: The Times of India, dated 28-3-2011)

levitra

Shunglu Committee Report reveals scale of waste — Don’t bury it

fiogf49gjkf0d
Winning the bid to host a major international sporting event is a welcome occasion in most parts of the world. But if many Indian citizens receive such news with trepidation, the Shunglu committee’s investigation of the Delhi Commonwealth Games explains why. Contractors made Rs.254 crore in ‘undue gains’ and Rs.900 crore were lost through mismanagement if not outright corruption. What should have been the harbinger for urban renewal became a developmental fiasco. Ready a year before the Olympics, London’s Velodrome shows how things should’ve been done during Delhi’s Commonwealth Games, where preparations continued even as athletes arrived. Finding it difficult to dismiss the public perception that there was ‘method in the madness’, the report alleges that the tendering processes and long delays arose from a nexus between authorities and contractors. The report’s stinging critique of public bodies — such as the DDA, MCD and PWD — extends to naming individual bureaucrats and public figures including Delhi chief minister Sheila Dikshit and lieutenant-governor Tejendra Khanna.

(Source: The Times of India, dated 28-3-2011)

levitra

Welfare law delusion — After passing legislation the Court has to prod the executive at every step for years to enforce them

fiogf49gjkf0d
Whenever a socio-legal problem flares up, one can bet on two things to happen. Bollywood will make a film on it; and law-makers will pass legislation to solve it. Both will soon fade from public memory. There are several social welfare laws that are passed and forgotten. Two of them are meant to protect unorganised construction workers.

The construction industry is said to be the second largest one after agriculture. It is labour-intensive, employing 20 million and it is estimated that every Rs.1 crore invested on construction project generates employment of 22,000 unskilled man-days and 23,000 skilled or semi-skilled man-days. Recognising its importance, Parliament passed the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the Building and Other Construction Workers’ Welfare Cess Act, 1996.

The government stated in the preamble that construction works are characterised by their inherent risk to the life and limb of workers. The work is also characterised by its casual nature, temporary relationship between employer and employee, uncertain working hours, lack of basic amenities and inadequacy of welfare facilities. Although the provisions of various labour laws like the Minimum Wages Act, Contract Labour (Regulation & Abolition) Act and Inter-State Migrant Workmen (Regulation of Employment & Conditions of Services) Act are applicable to building workers, there was no comprehensive central legislation for this category of workers. The two enactments were aimed to improve matters.

After nearly 15 years, the central and state governments have done little to implement these laws. Ten years after the laws came into force, a public interest petition was moved in the Supreme Court pointing out the non-implementation of the provisions of the Acts (National Campaign for Central Legislation on Construction Labour v. Union of India). The Court passed several orders over the years asking state governments to implement the main provisions of the law. There was little response. Last week, the Court took a tough stand and summoned five top labour officers in the country to be present in the Chief Justice’s Court and explain the lapse.

The dubious honour goes to the Union Labour Secretary, the Director General of Inspection, Government of India, and Labour Secretaries of Nagaland, Meghalaya and Lakshdweep.

The Court stated that many among the 36 states and Union territories have not taken even the initial steps. They have not appointed ‘Registration Officers’ before whom the employers of workers have to register their establishments. They have also ignored their obligation to constitute state welfare boards.

(Source : Extracts from M. J. Antony’s article in Business Standard, dated 23-3-2011)

levitra

Anna Hazare’s movement combines new and old ideals

fiogf49gjkf0d
The Jan Lokpal movement based in Delhi’s Jantar Mantar, spreading across India through fasts, marches and vigils, reflects a serious face-off, between the middle class and India’s political class. As the tussle over the Bill’s provisions continues, the depths of the popular groundswell of disgust with corruption become evident, disaffection strong enough to bring together diverse groups.

While the movement’s leader, Anna Hazare, is a Gandhian, adopting the Mahatma’s method of fasting, many joining him are not satyagrahis shaped by austerity. Several are middle-class Indians, moulded by professionalism, progress and consumption. Many are youth in university or jobs, shaken by what they see, stirred into joining an elderly leader who refers to another leader’s practices, which for many have passed into the realm of cliche. The agitation is strong enough, however, to override these divisions. Corruption, exemplified by a terrible year of scams, is the oil fuelling such coalescing.

However, there’s more. The Indian middle class is not only demanding accountability but dignity in citizenship. This notion has been catalysed by recent cases like Rizwanur Rehman’s and Ruchika Girhotra’s, where regular middle-class lives were crushed by a brutal nexus of political and financial clout. The booing away from Jantar Mantar of Om Prakash Chautala, one of the political shields around Ruchika’s tormentor, police officer S. P. S. Rathore, reflected public anger with precisely this sort of nexus. This reflects growth in ideas about citizenship. Previously, notions of citizenship were limited to a small, well-educated elite. Today, this circle has perforce widened. Media and travel have changed the way people think. Indians are increasingly aware of countries where bribery isn’t normal, where murders get punished even when committed by the powerful. It’s become apparent that globalisation is not just about mobile phones and malls, but lawful, equal societies, an ideal many are now demanding.

The media is their ally. Starting with the Jessica Lal case in 1999, the media began acting as mirror and motor to civil society agitation, transmitting information about unpunished crimes, locations to gather at and modes of protest, like candlelight vigils, email and text campaigns. The Internet also sees massive following for Hazare’s movement. All this gives lie to the notion of middle-class Indians being ‘apathetic’ to politics. Where once frustration existed without cohesiveness, today there are effective means to channel feelings, forums to gather at, ways to debate and discuss. Several ‘ideas of India’ are emerging. Many Indians feel a deeper connection to their country. In that sense, Anna has won the war even as the battle persists.

(Source: The Times of India, dated 8-4-2011)

levitra

Lost in Mumbai? Google Transit to the rescue

fiogf49gjkf0d
Search giants Google have launched a nifty tool to help commuters and tourists navigate across Mumbai. The service uses Google maps to help travellers choose from public transportation options available from any location to any other place in the buslting metropolis.

Users need to visit www.google.com/transit and key in the start and endpoints of their proposed journey. Google then uses algorithms to churn out the best possible routes. The application, which is available in desktop and mobile versions, utilises a database of BEST bus routes as well as the railway routes and schedules on the Western, Central and Harbour lines.

However, this is not the first application that encourages people to use public transport. The BEST runs its own application on www.bestundertaking.com.

(Source: The Times of India, dated 8-4-2011)

levitra

Lokpal Bill — Probity: Different yardsticks

fiogf49gjkf0d
Lokpal Bill (Govt. version):

1. The Lokpal will have jurisdiction only over the Prime Minister, ministers and MPs

2. The Lokpal will not have suo motu power to initiate inquiry or even receive complaints of corruption directly from the public. The complaints will be forwarded to it by the presiding officer of either House of Parliament

3. It is purely an advisory body and can therefore only give recommendations of the Prime Minister on complaints against ministers and to the presiding officer of either House on complaints against the Prime Minister and MPs

4. Since it has no police powers, the Lokpal cannot register an FIR on any complaint. It can only conduct a preliminary enquiry

5. Anybody found to have lodged a false complaint will be punished summarily by the Lokpal with imprisonment ranging from one year to three years

6. The Lokpal will consist of three members, all of them will be retired judges

7. The committee to select Lokpal members will consist entirely of political dignitaries and its composition is loaded in favour of the ruling party

8. If a complaint against the Prime Minister relates to subjects like security, defence and foreign affairs, the Lokpal is barred from probing those allegations

9. Though a time limit of six months to one year has been prescribed for the Lokpal to conduct its probe, there is no limit for completion of trial, if any

10. Nothing has been provided in law to recover ill-gotten wealth. After serving his sentence, a corrupt person can come out of jail and use that money.

Jan Lokpal Bill (Civil society version):

1. The Lokpal will have jurisdiction over politicians, bureaucrats and judges. The CVC and the entire vigilance machinery of the Centre will be merged into the Lokpal

2. The Lokpal cannot only initiate action on its own, but it can also entertain complaints directly from the public. It will not need reference or permission from any authority

3. After completing its investigation against public servants, the Lokpal can initiate prosecution, order disciplinary proceedings or both

4. With the corruption branch of the CBI merged into it, the Lokpal will be able to register FIRs, conduct investigations under the Criminal Procedure Code and launch prosecution

5. The Lokayukta can only impose financial penalties for complaints found to be false

6. The Lokpal will consist of 10 members and one chairperson, out of which only four are required to have legal background without necessarily having any judicial experience

7. The selection committee will be broad-based as it includes members from judicial background, Chief Election Commissioner, Comptroller and Auditor General, retired Army Generals and outgoing members of the Lokpal

8. There is no such bar on the Lokpal’s powers

9. The Lokpal will have to complete its investigation within one year and the subsequent trail will have to over in another year

10. Loss caused to government due to corruption will be recovered from all those proved guilty. (Source: The Times of India, dated 8-4-2011)

levitra

Sport and nation — Given the market for cricket, why tax breaks and cash awards?

fiogf49gjkf0d
The Indian cricket team deserves all the accolades, the love and affection, the wild enthusiasm and all the money it made for winning the World Cup for the country. This was a historic and well-deserved victory for, clearly, one of the world’s best cricket teams today.

The players, their coaches and selectors have all been adequately rewarded not just in kind, but also in cash. In any case, India’s cricket players are the richest among the country’s sportspersons, given the money in the sport, the sponsorships and the advertisement budgets. The glistening diamonds worn by the wives of Indian cricketers, and their fancy cars, tell a tale of adequate recompense. So why did the taxpayer have to shell out more cash, in the form of cash awards from state governments and a tax break from the central government? There are games sportspersons play to win and there are games they play to make money. The Indian Premier League is a money-making enterprise. But a World Cup match is about winning for the country. It is the kind of achievement that finds recompense in the form of a Padma Shri or a Padma Bhushan award.

But tax breaks and cash awards from the government are an unnecessary indulgence. Gujarat’s Chief Minister Narendra Modi has resisted the cash award idea; instead, he has so far restricted himself to giving the Eklavya award. Some of India’s world-class sportspersons deserve financial support given the lack of adequate investment and the absence of a mass market in their respective sports. Cricket is certainly not one of them. The market is doing a good job, and the government, too, has done a good, indeed an excellent, job in ensuring security and safety of the players and the huge audience. Having done the job it must, and that too well, the government need not have tried to ingratiate itself with the players with more cash!

(Source: Business Standard, dated 5-4-2011)

levitra

Indians among world’s happiest people.

fiogf49gjkf0d
Despite economic woes, wars, conflicts and natural disasters the world is a happier place today than it was four years ago and Indonesians, Indians and Mexicans seem to be the most contented people on the planet. More than three-quarters of people around the globe who were questioned in an international poll said they were happy with their lives and nearly a quarter described themselves as very happy.

“The world is a happier place today and we can actually measure it because we have been tracking it,” said John Wright, senior vice-president of Ipsos Global, which has surveyed the happiness of more than 18,000 people in 24 countries since 2007. But he added that expectations of why people are happy should be carefully weighed. “It is not just about the economy and their well being. It is about a whole series of other factors that make them who they are today.”

Brazil and Turkey rounded out the top five happiest nations, while Hungary, South Korea, Russia, Spain and Italy had the fewest number of happy people. Perhaps proving that money can’t buy happiness, residents of some of the world biggest economic powers, including the United States, Canada and Britain, fell in the middle of the happiness scale. “Sometimes the greatest happiness is a cooked meal or a roof over your head,” he explained. “Relationships remain the No. 1 reason around the world where people say they have invested happiness and maybe in those cultures family has a much greater degree of impact.”

levitra

White lies on black money.

fiogf49gjkf0d
Estimates of ‘black money’ generated in the Indian economy vary: from rather minuscule amounts of a couple of billion dollars to more unbelievable numbers. The Union finance ministry issued a white paper on the subject that highlighted various measures of black money and what needs to be done to curb its generation. The analysis carried out in it does not represent anything new; it certainly does not give a road map for handling this problem.

In India, the easy fixes to curb tax evasion and the generation of black money have all been exhausted: there will be few, if any, taxpayers who try and evade what they owe the government. The tax administration is robust enough to detect and capture evasion by these citizens. The problem lies elsewhere.

The white paper itself illustrates these issues. Three examples can be highlighted. The issue of taxation of wealth generated in the businesses linked to exploitation of natural resources such as mining, hydrocarbons, telecom and other related sectors; the problem of income in “vulnerable” sectors such as real estate and, finally, the issue of political willpower required to make a difference. In each of these, this government has been an abject failure.

Consider the natural resources sector first. The problem lies in the vast discretionary powers enjoyed in allocating these resources. From spectrum allocation to that of issuing mining licences, there has been little or no transparency. The result is that there are inbuilt drivers to generate illicit wealth. If anything, this government is complicit in this process: it is deeply unhappy with auctions as a process to allocate these resources. In a firstcome- first-served process, there is ample scope for corrupt practices. Clearly, it has to address that issue before it can even argue that natural resource allocation processes are a problem. In fact, the sector can only be dubbed as a ‘politically exposed sector’.

In case of ‘vulnerable’ sectors such as real estate, the cause and effect are mixed: real estate is both a recipient and a generator of black money. Illicit gains made elsewhere can be parked in residential and commercial property without much fear of tax enforcers. But that is just one part of the problem. The high taxes — stamp duty is a prime example — levied make evasion a worthwhile chase. And high stamp duty being an important source of revenue for many states ensures that undervalued transactions are a norm and not an exception.

Finally, this government lacks the willpower to deter potential tax evaders — the big fish that is. The surest way to do so will be to disclose the names of evaders that are available with the government. Given that our politicians are sure to figure on such a list, confidentiality of agreements with other governments and, hold your breath, human rights of tax evaders (page 68 of the white paper) come in the way of public disclosures. This is difficult to believe.

levitra

Don’t blame Greece for our problems.

fiogf49gjkf0d
In the gloomy economic environs of a falling rupee, slowing economy and a general drift of things, an easy way to shirk responsibility would be to lay the blame at Greece’s door. Former ICICI Bank chairman N. Vaghul would strongly recommend not to rummage through the ruins of the Athenian economic Acropolis to explain our problems away.

“No one is going to believe if we say our problems are because of Greece. Our problems are self-inflicted”, says the celebrated banker, reasoning that the “root cause of India’s troubles lies in a decline in its values”.

“It isn’t a question of some fiscal, inflation or some other problem like a fall in the value of the rupee. It doesn’t have to do with the change in recent times in our tastes with regard to music, clothes, marriage or some social mores. Those are irrelevant. What is hurting is that our core values are disappearing and it has been six decades of decline with the political, economic and industrial leaderships dropping in integrity,” he says. Blending his characteristic wit with banking analogy, Vaghul says,

“the root cause of our financial crisis is that we have created derivatives without underlying assets,” referring to the decline in values in all spheres of life. Holding forth on the importance of upright leadership at an event here to remember banking stalwart and former SBI chairman R. K. Talwar, Vaghul said work ethics ought to be the cornerstone on which to build careers and industry and that the decline in values witnessed all around reminded one of the importance of the philosophy of those like Talwar, who thought everyone was an instrument of the divine.

levitra

Corporate anonymity — Incorporation with limited liability is a privilege. It should not include anonymity.

fiogf49gjkf0d
Limited liability — A commercial venture that protects its shareholders from personal bankruptcy —is one of the greatest wealth-creating inventions of all time. The law allows companies to borrow money, to take risks and to make contracts as if they were people, but without the human beings who own it going bust if things go wrong, as they would in an unlimited partnership.

Limited liability allowed Elizabethan adventurers to finance voyages to spice islands; it allows Silicon Valley technologists now to make similarly risky bets. But limited liability is a concession — something granted by society because it has a clear purpose. It is unclear why in parts of the world anonymity became part of the deal. Efforts to withdraw that unjustified perk deserve to succeed. In dozens of jurisdictions, from the British Virgin Islands to Delaware, it is possible to register a company while hiding or disguising the ultimate beneficial owner.

This is of great use to wrongdoers, and a huge headache for those who pursue them. Anonymously owned companies can buy property, make deals (and renege on them), launch intimidating lawsuits, manipulate tenders — and disappear when the going gets tough. Those who seek redress run into baffling bureaucracy and a legal morass. Seeking real names and addresses means dealing with lawyers and accountants who see it as their job to shield their clients from nosy outsiders.

Owning up

Reform ought to be simple. Anyone registering a limited company should have to declare the names of the real people who ultimately own it, wherever they are, and report any changes.

Lying about this should be a crime. Some dodgy places will try to hold out. But anti-money-laundering rules show international co-operation can work. You can no longer open an account at a respectable bank merely with a suitcase of cash. Let the same apply to starting a limited company.

levitra

How to declutter your mind.

fiogf49gjkf0d
By life overloads our senses with a barrage of sensations: information, sights, sounds and choices. We have portable devices that inform, entertain, update and connect. We are not designed to deal with so much information all at once. The noise keeps us from focussing on what matters, keeping us disconnected from the big picture.

Breath: Take a few deep breaths and relax. Concentrate on your breathing as it comes in and goes out of your body. This has a calming effect and allows other thoughts to float away.

Write it down: Pen down your thoughts. It helps to get them on paper and off your mind. This keeps your head from being filled with everything you need to do and remember. List and prioritise: Tasks that are critical to do today, tasks that you need to do in the next 1-2 weeks — prioritise what’s urgent and important.

Eliminate: Now that you’ve identified the essential, identify what’s not essential and eliminate those items. It declutters your mind really fast.

Decide now: List the things which you are yet to decide. Stop procrastinating and tackle them. Do a physical activity: Spending some physical energy clears the mind. Reduce TV time: It fills your head with noise. By reducing it, you will find that you have time for the more important things in life.

Take a break: Short breaks during work hours will help you feel more re-energised and fresh. Go slow: Life is not a race all the time. Do things one at a time. Relax and move at your own pace. As a result, your mind is less hassled.

Forgive and forget: Harbouring negative emotions of anger and frustration only add to the mental stress.

levitra

Time for change — The country needs a new government, under a new leader.

fiogf49gjkf0d
The second UPA government is observing its third anniversary. The second of those three years saw rampant and large-scale corruption emerge as a hot-button issue. The third and latest year has been disastrous for the economy. So the two principal attributes credited to Prime Minister Manmohan Singh — as a man of probity and as the author of economic reforms — have ceased to be political assets for the government. At the heart of the government’s problems is the dyarchy that prevails, something which the Westminster system of parliamentary government is simply not equipped to deal with. Political power rests with Sonia Gandhi, and she therefore has an important say in what must happen. In practice, therefore, the prime minister serves so long as he enjoys her confidence, and he has to consult her on ministerial appointments. More importantly, he cannot dispense with any of them if he so chooses. This fundamentally undermines his authority in the Cabinet, a situation which many ministers have exploited to thumb their noses at him.

Many other things are wrong with this government. For a start, its leading lights are simply too old. The prime minister will be 80 in a few months, while the foreign minister is already 80. Mr. Mukherjee is 77, and Mr. Antony 71. Among those exercising the sovereign functions of the state, only Mr. Chidambaram (67) is below 70. In the Cabinet as a whole, 15 of 34 ministers are 70 or older. Any government with so many old people, who have little to look forward to other than political survival for a few more years, is likely to be short on energy and initiatives, and tied to old ways of thinking. It also matters that most of the stalwarts in the Cabinet are political lightweights who have no real clout with voters in their states.

A lightweight prime minister has around him a bunch of other lightweights. This may have to do with the nature of the Congress party — if it is to be protected and preserved as family property, the party’s only real vote-getters must be from the Gandhi family; and young ministers like Jyotiraditya Scindia and Sachin Pilot cannot be allowed to flower too early or they might outshine Rahul Gandhi. It is frequently said that the bane of this government has been its recalcitrant allies. Perhaps, but how much of the failure to carry them along rests with the Congress? How often has the UPA actually met as an alliance? Why does it not have a common minimum programme, which everyone has agreed on? Why is there no effective system of discussion and consultation? Is it simply because the leading lights of the UPA lack political ability — the prime minister is reticent if not retiring, the home minister gets people’s backs up, and the finance minister has too much on his plate to focus on anything in particular? In any case, the ministerial mathematics tells its own story: 28 out of 34 Cabinet posts are with the Congress, as also all seven positions of minister of state with independent charge; that’s a score of 35 out of 41. Of the six posts with five allies, the government has got almost unstinting support from Sharad Pawar’s Nationalist Congress, Farooq Abdullah’s National Conference and Ajit Singh’s Rashtriya Lok Dal. When push came to shove, the Dravida Munnetra Kazhagam too played along, even allowing its Cabinet representation to shrink. The sole problem case can be said to be Mamata Banerjee. Is this really an unmanageable situation, or a failure of management?

levitra

Lionising the indicted — Politics must reconnect with respect for law, propriety.

fiogf49gjkf0d
In Punjab, the declared killer of a former state chief minister is honoured by those speaking in the name of a whole community. In Tamil Nadu, Andimuthu Raja returns to his home state as a conquering hero, after having had to resign as communications minister and then spending 15 months in jail. In the first case, the killer is awaiting execution, while in the second the trial is still to get under way.

 In that sense, the two are on different planes. But it is necessary to ask whether the Dravida Munnetra Kazhagam (DMK) is no better than some of the Akali factions when they cock a defiant snook at the law. It was left to the General who led Operation Bluestar to express his unhappiness at a memorial being built in memory of those killed by soldiers during Bluestar, since those killed included terrorists and armed separatists.

As for Mr. Raja, he is technically innocent, since no court has declared him guilty, but he has been indicted in no uncertain terms, as a simple reading of the Comptroller and Auditor General’s (CAG’s) report on the telecoms scam shows. He twisted the principle of ‘first-come-first-served’ by fixing arbitrary cut-off dates and other criteria in such a manner as to make the ultimate choice of licensees completely arbitrary, and therefore devoid of principle. Even when it came to simple paperwork, he gave licences to companies that did not qualify or were not eligible because they had not given the prescribed information or the prescribed documentation in time. Whether he committed any crime is something that is yet to be determined, as also the question of any quid pro quo. But on the evidence already set forth, it is clear that Mr. Raja is not someone who should be getting lionised by any serious political party, given that his handling of a ministerial portfolio did not set standards worthy of emulation. That the DMK has chosen to lionise such a person tells the country that politics in Tamil Nadu is as disconnected from propriety as it is in Punjab.

levitra

Archives and archaism.

fiogf49gjkf0d
The Government of India has a curious habit. It spares no effort on buying documents and personal effects of Gandhiji and storing them in its lightless archives. At the same time, it is most reluctant to grant access to scholars to any papers it remotely considers ‘sensitive’.

The latest example is its purchase of the Gandhi- Hermann Kallenbach papers. Kallenbach, an architect, was a close collaborator of Gandhiji in South Africa. The two issues may appear distinct, but they are not. The history of a country can’t be divided into what is acceptable to the government and what is not: that is not history, it is hagiography.

No Indian scholar has access to papers on vital post-1947 events such as the 1962 war with China, let alone recent matters such as our involvement in Sri Lanka after 1987. India’s archives access policy is perhaps one of the most illiberal anywhere in the world. It should be discarded fast.

levitra

Sanction for prosecution: SC order brings cheer to beleaguered CVC.

fiogf49gjkf0d
The Central Vigilance Commission welcomed Supreme Court order setting a timeline for giving prosecution sanction in cases against public servants.

“Sanctioning of prosecution by competent authority within a timeframe of four months will be a big help in fighting corruption, and will expedite action against corrupt public officials,” CVC Pradeep Kumar told TOI.

The CVC’s response came in the wake of the Supreme Court saying that “delay in granting such sanction has spoilt many valid prosecution and is adversely viewed in public mind that in the name of considering a prayer for sanction, a protection is given to a corrupt public official as a quid pro quo for services rendered by the public official in the past or may be in the future and the sanctioning authority and the corrupt officials were or are partners in the same misdeeds”.

The CVC has been at the receiving end of delaying tactics adopted by various departments to stall prosecution of officials against whom corruption proceedings are pending. As of December 2011, prosecution sanction was pending in at least 24 cases for more than four months.

In November, there were 28 cases pending with 17 ministries for over four months. The highest, of 10 pending cases, was with the Finance Ministry — four of them before the Central Board of Direct Taxes and four of them before the Central Board of Excise and Customs.

levitra

Their birth right! (right or wrong?) judge for yourself!

fiogf49gjkf0d
Patrick French’s recent book, India: A Portrait, offered this startling revelation about the Indian Parliament: “Every MP in the Lok Sabha under the age of 30 had in effect inherited a seat, and more than two-thirds of the 66 MPs aged 40 or under were HMPS (Hereditary Members of Parliament). In addition, this new wave of Indian lawmakers would have a decade’s advantage in politics over their peers, since the average MP who had benefited from family politics was almost 10 years younger than those who had arrived with ‘No Significant Family Background’. In the Congress, the situation was yet more extreme: every Congress MP under the age of 35 was an HMP. If the trend continued, it was possible that most members of the Indian Parliament would be there by heredity alone, and the nation would be back to where it had started before the freedom struggle, with rule by a hereditary monarch and assorted Indian princelings.”

levitra

Majority wins: Bombay High Court paves way for redevelopment.

fiogf49gjkf0d
Dissenting members who deliberately skipped housing society meetings have ‘no right’ to object to a resolution favouring redevelopment passed by majority of the members, observed a Cooperative Court recently. The Court upheld a resolution passed by majority of the members to redevelop a four-storey building in Khar (W).

The ruling is significant as it seals the fate of the dissenting few and holds that the resolution, if passed at a meeting held legally, will be binding on all members of a cooperative housing society.

levitra

Schooling not enough.

fiogf49gjkf0d
Higher spending on education is not improving dismal outcomes India came 72nd of 73 nations in the Programme for International Student Assessment (PISA) competition, despite fielding students from its best states, Himachal Pradesh and Tamil Nadu. The dismal quality of Indian education is confirmed by the latest Annual Status of Education Report (ASER). Throwing money (Sarva Shiksha Abhiyan) and legislation (Right to Education Act) at education has produced no quality gains at all. Abhiyan spending is up from Rs.7,166 crore in 2005-06 to Rs.21,000 crore last year, yet parents are shifting wholesale from free government schools to private options (schools and tuition). In the last five years, private school enrolment has gone from 18.7% to 25.6% of the total, with Kerala already at 54%. The shift has not, however, improved dismal learning outcomes. Half the Class V children cannot read Class II texts, and 40% of Class V children cannot solve a two-digit subtraction. This represents a fall in outcomes, especially in Government schools in the Hindi belt. Higher spending by the Government and parents has not yielded better outcomes. Many studies suggest that private schools have better outcomes, but the shift to private education has not achieved that at a macro-level. In 13,000 schools visited by surveyors, student absenteeism was 50% and teacher absenteeism 45%: neither seem motivated.

levitra

SC tells HCs not to stay corruption probes unnecessarily.

fiogf49gjkf0d
Expressing serious concern over High Courts staying investigations in criminal cases, the Supreme Court has directed the Higher Courts to exercise such powers with due caution and circumspection.

“Unduly long delay has the effect of bringing about blatant violation of the rule of law and adverse impact on the common man’s access to justice,” said a Bench comprising Justice A. K. Ganguly and Justice T. S. Thakur in its judgment.

The Bench said, “a person’s access to justice is a guaranteed fundamental right under the Constitution and particularly Article 21. Denial of this right undermines public confidence in the justice delivery system and incentivises people to look for shortcuts and other fora where they feel that justice will be done quicker. In the long run, this also weakens the justice delivery system and poses a threat to Rule of Law”.

Taking into account that such pendency were related to HC orders putting on hold the trial/ investigations into the criminal cases, the SC said, “the power to grant stay of investigation and trial is a very extraordinary power given to High Courts and the same power is to be exercised sparingly only to prevent an abuse of the process and to promote the ends of justice”.

The Bench passed a slew of directions to the HCs to reduce such pendency like disposing of such proceedings as early as possible, preferably within six months from the date its stay order, etc. The SC also asked the Law Commission to inquire into the issue and submit a report on it.

The Bench took into account that the pendency in criminal cases related to murder, rape, kidnapping and dacoity in different High Courts, varies from 1 to 4 years. Out of 201 cases, 34 such cases out were pending in Patna High Court and 33 out of 653 cases in Allahabad High Court were pending for eight or more years.

levitra

Economic Assessment – Raghuram Rajan: A case for India

fiogf49gjkf0d
Such bipolar behaviour seems to apply to assessments of India’s economy as well, with foreign analysts joining Indians in swings between overexuberance and self-flagellation. A few years ago, India could do no wrong. Commentators talked of “Chindia”, elevating India’s performance to that of its northern neighbour. Today, India can do no right.

India does have serious problems. Every commentator today highlights India’s poor infrastructure, excessive regulation, small manufacturing sector, and a workforce that lacks adequate education and skills.

These are indeed deficiencies, and they must be addressed if India is to grow strongly and stably. But the same deficiencies existed when India was growing rapidly. To appreciate what needs to be done in the short run, we must understand what dampened the Indian success story.

In part, India’s slowdown paradoxically reflects the substantial fiscal and monetary stimulus that its policymakers injected into its economy in the aftermath of the 2008 financial crisis. The resulting growth spurt led to inflation, especially because the world did not slide into a second Great Depression, as was originally feared. So monetary policy has since remained tight, with high interest rates contributing to slowing investment and consumption.

Moreover, India’s institutions for allocating natural resources, granting clearances and acquiring land were overwhelmed during the period of strong growth. India’s investigative agencies, judiciary and press began examining allegations of largescale corruption. As bureaucratic decision-making became more risk-averse, many large projects ground to a halt.

Only now, as the government creates new institutions to accelerate decision-making and implement transparent processes, are these projects being cleared to proceed. Once restarted, it will take time for these projects to be completed, at which point output will increase significantly.

Finally, export growth slowed, not primarily because Indian goods suddenly became uncompetitive, but because growth in the country’s traditional export markets decelerated.

The consequences have been high internal and external deficits. The post-crisis fiscal stimulus packages sent the government budget deficit soaring from what had been a very responsible level in 2007-08. Similarly, as large mining projects stalled, India had to resort to higher imports of coal and scrap iron, while its exports of iron ore dwindled.

An increase in gold imports placed further pressure on the current-account balance.

For the most part, India’s current growth slowdown and its fiscal and current account deficits are not structural problems. They can all be fixed by means of modest reforms. This is not to say that ambitious reform is not good, or is not warranted to sustain growth for the next decade. But India does not need to become a manufacturing giant overnight to fix its current problems.

The immediate tasks are more mundane, but they are also more feasible: clearing projects, reducing poorly targeted subsidies and finding more ways to narrow the current account deficit and ease its financing.

Every small step helps, and the combination of small steps adds up to large strides. But, while the government certainly should have acted faster and earlier, the public mood is turning to depression amid a cacophony of criticism and self-doubt that has obscured the forward movement.

Indeed, despite its shortcomings, India’s GDP will probably grow by 5-5.5% this year—not great, but certainly not bad for what is likely to be a low point in economic performance. The monsoon has been good and will spur consumption, especially in rural areas. The banking sector has undoubtedly experienced an increase in bad loans; but this has often resulted from delays in investment projects that are otherwise viable. As these projects come onstream, they will generate the revenue needed to repay loans. In the meantime, India’s banks have enough capital to absorb losses.

Likewise, India’s public finances are stronger than they are in most emerging-market countries, let alone emerging-market countries in crisis. India’s external debt burden is even more favourable, at only 21.2% of GDP (much of it owed by the private sector), while short-term external debt is only 5.2% of GDP. India’s foreign-exchange reserves stand at $278 billion (about 15% of GDP), enough to finance the entire current account deficit for several years.

That said, India can do better—much better. The path to a more open, competitive, efficient, and humane economy will surely be bumpy in the years to come. But, in the short term, there is much low-hanging fruit to be plucked. Stripping out both the euphoria and the despair from what is said about India—and from what we Indians say about ourselves—will probably bring us closer to the truth.

(Source: Extracts from an article by Shri Raghuram Rajan, Governor of the Reserve Bank of India, in Mint Newspaper dated 12-09- 2013, written before he took office.)
levitra

Regulators must promote not strangulate industry

fiogf49gjkf0d
India has several “regulators”, trying to “regulate” several sectors of the economy. There is SEBI keeping a check on the stock markets, TRAI doing the same for the telecom and broadcasting sectors, IRDA for the insurance sector, PFRDA for pensions, DGCA for civil aviation and CERC for electricity.

By their very nomenclature regulators regulate, which many mock to mean strangulate industries. In many cases, regulators focus on keeping private players in check, thinking of them as rapacious booty hunters who need to be tamed, confirming the suspicion that the government never really accepted the private sector as a dynamo of growth. What India needs in the form of regulators are bodies that focus on promoting and developing industry. For if industries develop, there are more tax revenues for the government, more jobs for the people, and more social and economic goals.

This would in turn propel industrial growth and start a virtuous cycle of prosperity. Regulation cannot become shorthand for controlling power tariffs. Equally, the proposed coal regulator should overhaul the defunct and destructive policy of reserving coal production for the inefficient public sector and not become an excuse to “regulate” prices, production capacities, import quotas and the like.

The primary role of regulators must be to ensure that the country’s resources are exploited efficiently and transparently for the benefit of industry and thereby people. Transparency demands that resources are allocated using ascending or single-step auctions, or tenders, not via opaque “administered methods” or “First Come First Served” which lead to corruption and hence must be banned.

Pricing must be remunerative, for only a profitable company can continue investing and exploring. Keeping prices and margins low, and crippling industry doesn’t serve anyone’s purpose, least of all the government’s. Domestic production of gas will increase, lowering the need for imports and easing the balance of payments position.

Regulators must of course always protect consumers. For if consumers suffer, industry suffers. Indeed, the whole reason for setting up SEBI came from the securities fraud of the early 1990s.

A fine balance between protecting consumer and corporate interests is required. The regulator often has to shield industry from the government’s faulty policies, just like the Supreme Court has to shield people from laws that violate the Constitution. A development oriented regulator must have the authority to question government policy, forcing it to make amends as and when required.

(Source: Extracts from an Article by Shri Anil Shinde in the Times of India dated 11.09.2013).
levitra

Falling BRIC — India’s macro numbers are harming its global image.

fiogf49gjkf0d
It has been more than ten years since the term ‘Bric’ was coined. The Bric nations — Brazil, Russia, India and China — were supposed to be the engines of global growth, the new poles of the world economy as Europe and North America slipped slowly into twilight. Yet Jim O’Neill of Goldman Sachs, the man leading the team that coined the phrase in 2001, has been quoted as saying that “there are important structural issues about all four, and as we go into the 10-year anniversary, in some ways India is the most disappointing”.

levitra

BMC elections — Dance of democracy

fiogf49gjkf0d
1. I am very disappointed that the voter turnout in the city is so low. We have no right to call ourselves educated and enlightened if we don’t come out to vote. We cannot expect things to change then. Voting is not just a fundamental right, it is our duty. If we fail to vote, we have no right to make comments about the state of affairs in the city. The quality of life is deteriorating and desperate measures are needed. Mumbai is the most important city in the country and generates a huge amount of revenue. It also has the largest number of urban problems. We want the elected leaders to fight for the city and get funds.

— Deepak Parekh, HDFC Chairman

2. The BMC is one of the richest corporations in the country. Despite this, the condition of Mumbai is pitiable. People should not consider voting day as a holiday, but as a day to do their duty. We can talk about responsibility only when we talk about duty. People should cast their vote. Not casting your vote is a crime.
— Anupam Kher, Actor 3.

It is very sad that a lot of people have not come out to vote. If you don’t vote, you have no right to complain. They are not contributing to the society. You are getting what you deserve . . . you are harming society and the country.

— Priya Dutt, Congress MP,

Mumbai North-Central 4. Times View — Another election, another low turnout in Mumbai. Is it apathy, or cynicism? Do we not care? Or do we believe that both sides are equally unworthy of our vote, that there’s nothing to choose from? Either which way, it doesn’t bode well for the city. The more affluent, it would appear, have mentally seceded from the city.

levitra

FDI — The cost of caprice

fiogf49gjkf0d
Serious economies cannot behave irresponsibly. That is the lesson to be drawn from the international fallout of our domestic telecom scandal. Within a week of the Supreme Court cancelling 122 telecom licences because of how they were issued, Bahrain Telecommunications Company has pulled out its investment in S Tel, and Etisalat of the UAE has written off investment of $ 827 million in Etisalat DB, in which it holds a 45% stake. A Norwegian Minister has come calling, to protect the interests of Telenor (which is majority-owned by the Norwegian Government), and you can rest assured that the Russians are not going to meekly accept the loss of Sistema’s majority stake in Sistema Shyam TeleServices, especially when Sistema owner Vladimir Yevtushenkov is closely linked to Prime Minister Vladimir Putin. So how much damage has been done internationally to the country’s standing and goodwill, because Mr. Raja was allowed to get away with his antics while the Prime Minister and Finance Minister fiddled?

Our capricious politicians are only dimly aware of the international fallout of their domestic dance. All too often, the operating assumption within the country is that the Government can do pretty much what it wants since most serious businessmen don’t want to be in court against it. That is not how it works around the world. So Devas has dragged Antrix to arbitration in Paris, after the government woke up one day and cancelled their contract. Cairn has accepted the Government’s unilateral rewriting of its contract with the Oil and Natural Gas Corporation, but only because it needed the Government’s approval for a change in shareholding control, and you can be sure that others in the energy space have been watching. Indeed, who is to tell how much damage was caused by the Enron-Dabhol fiasco in the 1990s, in terms of lost investment? While the collapse of Enron saved India some blushes, subsequent overseas investment in Indian power generation has been barely $ 5 billion (about the cost of one ultra-mega power project).

As it is, the country makes life hard for businesses, or it would not figure embarrassingly low in the World Bank’s list of countries ranked on the ease of doing business (132nd in a list of 183 countries; six years ago it was 116th out of 155 countries). Why add to the headaches with poor contractnegotiation, then second thoughts and unilateral action? This is not to argue that the country should not get out of bad deals; rather, the issue is of avoiding capricious conduct in an economy that hopes to be the fourth largest in the world by the end of the decade. If you want to get there, you have to start behaving like a serious economy, not invite comparisons with banana republics.

levitra

Not textbook stuff — The NCERT cartoon issue is more about degeneration of political debate.

fiogf49gjkf0d
At its root, the whole controversy on cartoons in NCERT textbooks underlines the malaise afflicting political debate in the country: passions whipped up in aid of divisive political ambitions. Here, rage and slanging matches trump reasoned debate. One of the stated reasons for the order of the six-member panel constituted to review cartoons — that politicians and bureaucrats can’t be shown in an ‘incorrect’ way — amply reveals that undemocratic spirit. Some of the suggestions of the panel, say, about changing the captions of cartoons that have appeared years ago border on the Orwellian. This is not just tantamount to changing history, it is indicative of school textbooks and curriculum being tinkered with according to ideological inclinations in India. Often, it is one political party or the other raising a furore over such issues, citing the oft-invoked ‘hurt sentiments’ theory.

Which is just another means of reinforcing the social and political faultlines the entire political class thrives on, given that it envisages politics as a competitive identity management project. Just as people’s representatives cannot amend, just because they have a majority, say, the theory of relativity, they cannot decide the school syllabus. There is a National Curriculum Framework, meant to further a consultative approach to framing school textbooks, but that fact is drowned in the cacophony of contesting, and largely manufactured, rage.

levitra

Putting integrity into finance.

fiogf49gjkf0d
Behaviour that lacks integrity leads to value destruction. This paper analyses some common beliefs, actions, and activities in finance that are inconsistent with being a person or a firm of integrity. Each of these beliefs leads to a system that lacks integrity, i.e., one that is not whole and complete and therefore creates unworkability and destroys value.

Focussing on these phenomena from the integrity viewpoint, makes it possible for managers to focus on the value that can be created by putting the system back in integrity and correcting the non-value maximising equilibrium that exists in capital markets. In effect, integrity is a factor of production just like knowledge, technology, labour, and capital, but it is undistinguished — and its affect (by its presence or absence) is huge. We summarise our new positive theory of integrity that has no normative content, and argue that there are large gains from putting integrity into finance — into both the theory and practice of finance. We define integrity as being whole and complete and unbroken. We argue that if finance scholars, teachers and practitioners take this approach to applications in finance, there are huge gains to be achieved.

levitra

The Big Stick — The time for soft words is over, we need concrete action.

fiogf49gjkf0d
It is all very well for the Prime Minister to say that he will cut red tape, reassure investors and keep the India growth story intact. He can hardly say the opposite. The whole point is to act, rather than talk or set up yet more committees to produce yet another report on a subject on which an endless number of committees have already produced an equal number of reports. Of the 40,000 MW of power generation capacity added over the last two years, only 6,000 MW of capacity generates power, the rest idles for want of coal or want of regulatory permission to pass on the higher cost of imported coal to willing consumers. Scrap the anti-national Coal Mines Nationalisation Act.

This will not only ensure that the country’s coal sector transforms from a dark realm of loot and thuggery to an efficient supplier of the country’s most abundant fuel, but also reassure potential inves- 36 37 38 Tarunkumar Singhal Raman Jokhakar Chartered Accountants Miscellanea tors that India is serious about economic growth. Muster courage to implement a Cabinet decision to decontrol diesel, and institute competition, including from independent operators, in the retailing of petro-fuels. This will slash the fiscal deficit, reduce inefficiency at India’s oil companies and increase energy efficiency across the spectrum. By reducing the fiscal deficit, the reform would also reduce the current account deficit, thereby easing pressure on the rupee. This move, too, would go a long way in restoring investor confidence.

Make progress on the ground on implementing the goods and services tax, getting the IT infrastructure and procedural framework for seamless integration of the tax ready. This will put pressure on the BJP-led states holding out against the transition. Concrete action of this kind is what we need, to restore investor confidence and get the economy vrooming. Kind words of good intent spoken with sincerity are always welcome. But the big stick that needs to back up soft talk is what has been missing and needs to be found.

levitra

RTI — A weakened right

fiogf49gjkf0d
One way to defeat a measure is to have your ‘yes men’ in places where decisions are taken. The Right to Information is meeting a similar fate.

In 2012, two-thirds of the 83 information commissioners at the Union and State levels are retired civil servants; three out of four chief information commissioners are retired members of the Indian Administrative Service (IAS). That is not all: on 1st May, 30% of the posts of information commissioners in states were vacant. It is no one’s case that all civil servants are placemen.

But the esprit de corps of the IAS in this domain is less likely to help the cause of accessing information. A bit more of diversity — say persons from civil society (and not merely those who claim to be from civil society), former soldiers, businesspeople and others — can go some distance in achieving the goal of transparency.

levitra

Facebook co-founder says bye to US — Absurd American tax laws prompt Ed Saverin to move to Singapore ahead of landmark IPO

fiogf49gjkf0d

Eduardo Saverin, the billionaire cofounder of Facebook, renounced his US citizenship before an initial public offering (IPO) that values the social network at as much as INR5,938 billion, a move that may reduce his tax bill.

“It’s plainly lawful and at the same time profoundly ungrateful to the country that provided these opportunities for him,” said Edward Kleinbard, a tax law professor at the University of Southern California. “He benefited from his US education, the contacts he made at Harvard, and most important the extraordinary openness and flexibility of our economy that encourages start-up ventures to flourish.”

Saverin’s name is on a list of people who chose to renounce citizenship as of April 30, published by the Internal Revenue Service.

levitra

China orders big four audit firms to restructure

fiogf49gjkf0d
The world’s top four accounting firms will have to bring in Chinese citizens to run their operations in China and end the dominance of foreign partners under new rules announced by the finance ministry.

The Big Four auditors — Deloitte Touche Tohmatsu, Pricewaterhouse Coopers, Ernst & Young and KPMG — must start to convert their practices this August and comply with all the new rules by the end of 2017.

The rules require them to ‘localise’ their operations so that they are led by Chinese citizens and dominated by accountants holding China’s accountancy qualifications. The changes come at a difficult time for the Big Four, grappling with the fall-out from a string of accounting scandals at Chinese companies listed in the US that has left investors questioning the quality of auditing in China. US securities regulators charged Deloitte’s China practice for refusing to provide audit work papers related to a US-listed Chinese company under investigation for accounting fraud.

The new rules will force the proportion of foreign partners at the Big Four to be a maximum of 40% when the structure is adopted in August, and fall to under 20% by 2017. This is likely to come as a relief to the firms, as there had been concerns that China could force them to convert more quickly to Chinese-dominated practices. Tougher though, will be the requirement that each of the Big Four’s senior partner be a Chinese citizen. All are currently led by foreigners.

The foreign joint venture arrangements currently used by the Big Four were signed 20 years ago and allowed foreign-qualified accountants to dominate their China practices. Since then, the firms have come to dominate the country’s accounting industry, having won much of the lucrative work to audit the books of stateowned enterprises when they first listed.

In 2010, their audit practices, excluding their consultancy businesses, had combined revenue of more than 9.5 billion yuan (INR93 billion), according to the Chinese Institute of CPAs. However, their market share has slipped in recent years to about 70% of the revenue among the top-10 auditors, down from 85% in 2006.

levitra

Info exchange pacts turn troublesome for NRIs — Inbound investment may suffer as foreign taxmen seek info on funds parked by NRIs in India

fiogf49gjkf0d

India’s search for black money overseas is having an unintended consequence, one that could affect one of its stable sources of dollars. Investments by non-resident Indians, or NRIs, and their funds parked in India are coming under the glare of the tax authorities in their home countries.

Indian income-tax authorities are sending financial details of NRIs to their respective countries under the information exchange agreements inked by New Delhi with many countries.

 Indians settled overseas have collectively pumped in nearly INR600 billion in NRI deposits in India in April- February 2011-12 financial year to take advantage of the higher returns available here. Interest rates of these NRI deposits can be as high as 9.5% in some cases, which yields a handsome tax-free package for investors even after adjusting the rupee depreciation.

levitra

Flipkart faces heat of rivals’ discounts

fiogf49gjkf0d
Flipkart, the big daddy of the online books trade, is feeling the heat of competition. Of late, several other portals are making a strong pitch for the pie with bigger discounts. Book lovers have options galore with players like Infibeam, Dial-a-Book, Bookadda, Friends of Books, Indiatimes Shopping, eBay, Junglee, uRead and more.

The new kids on the block offer bigger discounts than Flipkart, which range up to 40% on bestsellers. Retail industry insiders say the online books business is all about customer acquisition. Books help get customers online.

It’s hard to damage books while shipping. It builds trust that can later get customers to transact from other categories.

levitra

World’s biggest rubbish dump out at sea, twice the size of America

fiogf49gjkf0d
A ‘plastic soup’ of waste floating in the Pacific Ocean is growing at an alarming rate and now covers an area twice the size of the continental United States, scientists have said.

The vast expanse of debris — in effect the world’s largest rubbish dump — is held in place by swirling underwater currents. This drifting ‘soup’ stretches from about 500 nautical miles off the Californian coast, across the northern Pacific, past Hawaii and almost as far as Japan.

levitra

Harvard, MIT to launch free online courses soon

fiogf49gjkf0d

Harvard University and Massachusetts Institute of Technology have joined hands to launch an ambitious INR3,711 million initiative under which they will offer free online courses to students, a collaboration that will be headed by Indian-origin professor Anant Agarwal.

The new online education platform ‘EdX’ would be overseen by a Cambridge-based not-for-profit organisation and be owned and governed equally by the two universities. MIT and Harvard have committed INR1,856 million each in institutional support, grants and philanthropy to launch the collaboration.

Director of MIT’s Computer Science and Artificial Intelligence Laboratory, Agarwal led the development of the platform.

“EdX represents a unique opportunity to improve education on our own campuses through online learning, while simultaneously creating a bold new educational path for millions of learners worldwide,” MIT president Susan Hockfield said.

levitra

Putting integrity into finance

fiogf49gjkf0d
Behaviour that lacks integrity leads to value destruction. This paper analyses some common beliefs, actions and activities in finance that are inconsistent with being a person or a firm of integrity.

Each of these beliefs leads to a system that lacks integrity, i.e., one that is not whole and complete and, therefore, creates unworkability and destroys value. Focussing on these phenomena from the integrity viewpoint, we argue, makes it possible for managers to focus on the value that can be created by putting the system back in integrity and correcting the non-value maximising equilibrium that exists in capital markets.

 In effect, integrity is a factor of production just like knowledge, technology, labour and capital, but it is undistinguished — and its effect (by its presence or absence) is huge. We summarise our new positive theory of integrity that has no normative content, and argue that there are large gains from putting integrity into finance — into both the theory and practice of finance. We define integrity as being whole and complete and unbroken. We argue that if finance scholars, teachers and practitioners take this approach to applications in finance, there are huge gains to be achieved.

levitra

A Third Industrial revolution calls for radical changes in our thought and action

fiogf49gjkf0d
There is a paradigm shift underway in manufacturing, points out The Economist. New technologies in computing, materials and processes such as three-dimensional printing are making fundamental changes in the way things are made, where they are made and by whom, whether workers or smart robots.

Three-dimensional printing, in which a computeraided printing machine deposits successive layers of different materials to produce solid designs and objects, is a key exemplar of this third industrial revolution. The knowledge and service content of the final value of a manufactured product would go up, and the labour cost would go down.

Mass customisation would be in and locating manufacture to low-wage countries would be out. Boston Consulting Group foresees a resurgence of manufacture in a country like the US at the expense of a China, or an India. Several policy ramifications follow.

One, India will find it well-nigh impossible to take the route to prosperity that Asia’s miracle economies, including South Korea and China, followed, of outsourced manufacture to feed demand in developed economies. Ten years from now, much of the manufacture to meet demand in the US and Germany could well take place in those countries themselves. Two, low wages would only be a drag for attracting investments, whereas smart labour and a huge home market would be a big draw.

Three, knowledge would drive the entire economy: not the rote-driven mastery of yesterday’s verities but a ceaseless quest to challenge established wisdom and produce new knowledge. Universities have to not just train manpower but create new knowledge, serving as hubs of new production ideas. Our school and education systems would have to undergo a fundamental change in terms of organisational structure and culture. The way ahead is to universalise not just secondary education but also tertiary education, with extensive modular course offerings.

Four, the financial ecosystem must evolve to mediate funds towards knowledge acquisition, knowledge creation and conversion of knowledge into production. Finally, high-speed broadband must become ubiquitous and cheap, to enable all this.

levitra

Lokpal Bill: A bitter pill for political parties.

fiogf49gjkf0d
It is for the 545 members of Lok Sabha to decide on the Bill. It is not being done in undue haste . . . What were political leaders doing sitting on Anna Hazare’s platform?

— Pranab Mukherjee

Minority reservation and 50% quota are unconstitutional . . . . it will be struck down by the courts on the very first day. Do you want such a legislation?

— Sushma Swaraj

Making the PM accountable to Lokpal is against the soul of the Constitution. No official will take a decision. Won’t the Lokpal machinery blackmail the Government?

— Mulayam Singh Yadav

It’s wrong to bring ex-MPs under the law . . . even Anna did not ask for this. He will consider us slaves and threaten us with dharnas in front of our houses.

— Lalu Prasad

Why are we so scared of an ex-bureaucrat, an excop and somebody who is pretending to be another father of the nation?

— Gurudas Dasgupta

(Source: The Times of India, dated 23-12-2011) (Comments: Why do our politicians of all hues dread scrutiny of their decisions and actions by a strong Lokpal. Daal mein kuch kaala zaroor hai!)

levitra

Stop indiscriminate raids on industry, reform political funding.

fiogf49gjkf0d
Several captains of industry have complained to the Government that taxmen are harassing India Inc. Harassment is unacceptable and must be halted. Raids and searches that have been rampant this year are blunt and opaque instruments of tax collection. The lack of transparency raises questions on the intent of such operations. Agreed, the Government is desperate to raise revenues in a slowing economy, but that is no justification for indiscriminate raids on businessmen. A system is already in place to scrutinise tax returns of companies and individuals by selecting cases through the computer-assisted scrutiny system. CASS should be strengthened as it minimises interface with taxpayers.

The point is for taxmen to make intelligent and creative use of technology to establish audit trails of transactions. This is eminently feasible if every financial transaction is dovetailed to the permanent account number (PAN), the tax department’s unique identifier. A foolproof PAN and an efficient tax information network will help track evaders and stem black money generation. What is truly troubling about these raids is that they bring back memories of an ugly, pre-reform past, when extraction of tribute through use of the state’s coercive powers was a standard procedure of mobilising political funding, with considerable amounts sticking to those who collect, before the tribute reaches party coffers. Economic reform and modern tax administration should bring such practices to an end. Lingering suspicion on what precisely motivates the state’s coercive machinery to descend on businessmen can be wholly removed only when a system of transparent funding of politics is instituted. Creating this is as important as creating and operating a modern tax information network married to intelligent analytics.

In parallel, the Government should widen the tax base, implement the proposed goods and services tax, correlate, if not unify, the databases of direct and indirect tax payment, lower rates and simplify laws and procedure. This is the best way to improve compliance and raise collections. Let raids and searches join the 97% tax rate.

levitra

Time for elections.

fiogf49gjkf0d
A dismal year has ended appropriately — with a fiasco in Parliament; the only reform measure of the year stuck in limbo; the stock market down 24 per cent; the business mood at its lowest ebb in years; the weak rupee signalling the gathering storm clouds of external vulnerability; and key economic indicators spelling Trouble with a capital T. If 2010 was the year of scams (or the unearthing of scams), the compensation was that the economic news was better than in the two previous years. Now you can scan the horizon and spot just one piece of good news — food prices.

Two more years of this is more than the country should be asked to take. So — even though it would be considered politically premature by both the Congress and the BJP — it may be best to think in terms of fresh elections. The lengthening list of pending Bills makes it clear that the government is unable to get legislation through Parliament. The Congress’ allies in the ruling coalition are simply not pulling in the same direction. And, for all their assertions of Parliament’s exclusive right to legislate, the present lot of parliamentarians is not interested in any kind of Lok Pal. It is easy to guess why. So much, then, for tackling corruption as the issue of the year. Anna Hazare might find takers again if he echoes Shakespeare and says “a plague on both your houses”.

As for the Prime Minister, he brought with him two reputational assets: a blemishless record of probity, and his historic role in salvaging the economy in the 1990s and setting it on the path to rapid growth. Both assets have depreciated sharply. The aam aadmi would be justified in wondering what use it is to have an honest Prime Minister if he cannot rein in rogue colleagues. As for economic reform and macroeconomic management, there has been little of the first and latterly a poor record on the second. The result is that the liabilities now hold attention — the lack of political weight, and the inability to pull the Congress behind him on key issues. Rather, Manmohan Singh has been forced to pilot the Congress leadership’s big ideas on entitlement even though his past record suggests that he must have little faith in their efficacy. In his frustration, Dr. Singh has taken to blaming the messengers — the media, businessmen — for his manifest inability to deal with the situation. It is symptomatic of the malaise that he can’t (or won’t) sort out the clash between those running the unique identity programme and the National Population Register.

levitra

Accounting for foreign exchange loans.

fiogf49gjkf0d
Instead of allowing firms to avoid marking foreign- exchange losses to market, regulators must increase clarity.

The National Advisory Committee on Accounting Standards or NACAS has advised allowing Indian companies to keep any losses or gains caused by exchange-rate fluctuation out of the main profit and loss accounts for the time being. This recommendation from NACAS, which is the technical advisory committee to the corporate affairs ministry, follows a period in which the rupee has suffered a sustained loss of value against the dollar, around 20% since August alone. Naturally, this has hurt those Indian companies that have a preponderance of imports in their input mix, or which have dollar-denominated debt. A large number of smaller companies will find it even harder to keep their margins or to roll over their foreign debt. NACAS’ recommendation will work to insulate these companies from some of the consequences of their exposure to currency risk.

At a time when India’s banking sector is under stress, and the sense is beginning to gain ground that non-performing assets (NPAs) in the financial system are not being properly accounted for, moving away from marking to market is a particularly bad idea. Those responsible for regulating accounting procedures should not have to be reminded that their job is not to make it more difficult for people to scrutinise a company’s profit and loss figures, but to make it easier. Keeping foreign exchange losses off the accounts will have major negative consequences systemically. First, it will not encourage responsible behaviour, which should include hedging of excessive currency risk. Second, it will conceal which companies are under stress, and add to the confusion about NPAs in the market, which will only heighten the fear of impending crisis. Third, it is reminiscent of some of the worst excesses of the global financial system three years ago, when brick-and-mortar companies would keep their losses from financial speculation off their balance sheets, and marking to market sometimes seemed optional. It also raises the question of regulatory confusion, as at the same time the main accounting regulator, the Institute of Chartered Accountants of India (ICAI), is suggesting that every private-sector bank branch should be audited only by Reserve Bank-approved auditors, purportedly to examine NPAs at the branch level. (The ICAI is, however, believed to be in favour of keeping marked-to-market exchange-rate losses off the main accounts, too.)

India’s investors need a uniform and clear approach to accounting requirements for companies. Regulation should strive towards making stresses or poor performance more visible. Instead, postponing the introduction of exchange-rate losses reduces clarity. Regulators should not take a call in order to protect those whom they are regulating. They should take decisions on the basis of what increases systemic strength and robustness. Marked-to-market values are the clearest indication of systemic health, and should be encouraged at the earliest.

levitra

Tracking money hidden abroad

fiogf49gjkf0d
Several questions arise from the UBS affair — involving also Barclays Bank and Société Générale, in London and Mauritius — regarding the reported attempt by Anil Ambani to use funds raised overseas for two of his group’s companies to invest illegally in India, in the shares of a third group company. Some of the questions relate to the role of foreign banks in facilitating illegal transactions abroad by resident Indians, a matter that has come into focus in recent weeks because of yet another foreign bank, HSBC. An ex-employee of HSBC allegedly stole bank data from its Geneva branch, which became available to the authorities — so it has been revealed that this one Swiss branch of one bank had the accounts of no fewer than 700 Indians. Other details are also with the Government, on money stashed away in places like Liechtenstein.

Banks usually pin the blame for wrong transactions on rogue employees. But some of the employees charged with illegal activity have argued in their defence that their employers encourage a culture of undertaking dodgy transactions, which returns the spotlight to the organisations. Is illegal activity being facilitated by foreign banks operating in India — or by ‘briefcase bankers’, based in tax havens across Asia, that come to India looking for people desirous of conducting illegal transactions overseas? And, if so, what pressure is the Government and the Reserve Bank of India putting on these banks and bankers? India is an increasingly attractive banking market, and virtually all the leading international banks are eager to expand their presence here. Surely it should be possible to demand their strict compliance with Indian laws not just here, but globally, and to officially disfavour those organisations that don’t play ball when global compliance is sought. The United States has successfully arm-twisted the same UBS into handing over the names of 4,450 clients for whom it had offered to conceal funds from the eyes of US tax inspectors; why should it be difficult for India to attempt something similar?

Questions have to be posed to Indian regulators as well. The Anil Ambani-related matter was investigated by the Securities and Exchange Board of India (Sebi), and settled last January through a consent order that involved payment of Rs. 50 crore. This is said to be the largest consent fee in Indian history; even if true, it is little more than a flea-bite for a large corporate house. It, therefore, raises questions about the correctness of such consent orders, almost always agreed to without admission of guilt. Such arrangements are usually made in an opaque manner, independent of the public scrutiny that would arise in a case tried in open court. Such questions are current in New York too, where a district court recently rejected a settlement with Citibank by the US Securities and Exchange Commission. The Court order has been contested subsequently, but perhaps someone in India should test Sebi on such matters.

levitra

Food insecurity?

fiogf49gjkf0d
The Food Security Bill cleared by the Cabinet is likely to hurt the poor more than it helps them. India already has 54.7 million tonnes of rice and wheat lying as stocks with the Centre and the states, 29.7 million tonnes of grain in excess of the buffer stocking norm. Offtake of rice in the current fiscal year has been 74% of the allotment, and that of wheat, 64%. The residual will keep adding to the grain mountain with the Government, which will rot, due to poor storage, be eaten by rats and be pilfered. By cornering huge volumes of grain, the Govt. reduces the supply in the open market, putting upward pressure on prices.

By banning exports every now and then, it depresses prices. This irrationality is set to be replicated on a much bigger scale, if the proposed Food Security Bill becomes law. This is not to say that the goal of ensuring food security for the people is either unworthy or undoable. It is neither. Rather, the Govt. is going about it in the most inefficient, unintelligent fashion possible. The world demand for food is set to climb, thanks to steady growth in the poorer regions of the world and increasing diversion of corn to biofuel.

The right way to guarantee every Indian food security is to act to make India a major source of the additional food the world demands, to invest in agricultural growth: in harnessing water for scientific irrigation, in extension of know-how as well as in R&D, in rural roads that provide vital physical linkage to markets, in electronic spot exchanges, in scientific storage and efficient transport logistics, in developing as close a link as possible between the farmer and the first stage of food processing and in providing proper regulation of financial markets in agricultural commodities, futures, derivatives and insurance.

levitra

Little hope for 2012.

fiogf49gjkf0d
As India marks two decades of reform, the year just past, 2011, may well go down as the one year in these decades in which the macro management of India’s economy showed the greatest signs of strain. All the major indicators are in the red. Consider, first, the fiscal deficit. The Budget declared it would be at 4.6% of gross domestic product (GDP), which was hailed at the time as a sign that the Finance Ministry wished to strike a blow for fiscal prudence. Yet it appears, now, that the Budget estimates were a worrying underestimation. It is not just that they did not take into account basic facts like that the 3G auctions, which bailed the fisc out last financial year, would not be an option this year. It is also that, over the months since the Budget was presented, there appears to have been no reasonable attempt made to control expenditure. The deficit is likely, thus, to be at least 100 basis points more than the Budgeted level, suggesting, that fiscal responsibility has gone for a complete toss. The Government has shown itself unable to contain its borrowing, which has seen an unprecedented 25% increase over the Budgeted level.

The rupee, meanwhile, saw a steep fall in its value vis-à-vis the US dollar. It was previously overvalued, judging by real effective exchange rate calculations — but it is nevertheless the case that a 20% depreciation over just four months has delivered serious shocks to the system. Meanwhile, as global markets slow, it is far from certain that the usual beneficiaries of a weaker rupee — India’s exporters — will be able to gain. Imports, however, will become more expensive, thinning corporate margins and making inflation harder to control. Another headline number that reveals poor macro-economic management is the current account deficit (CAD). At the time of the 1991 crisis, India’s CAD was 3% of GDP. That figure looks modest in comparison to the 3.6% of GDP the economy posted for the first half of the current year. Slowing export growth as seen in the last couple of months means keeping CAD at last year’s level of 2.6% appears difficult this year. Then, of course, there is inflation, which continues to hover around 9%.

The macro-economic mismanagement these numbers reveal is reflective of poor management all through. The coal sector has been hit hard by political troubles, environmental red tape and land acquisition norms. Only 9 km of roads are built a day — as opposed to a target of 20 km. Every kind of major legislation has been on hold: pension reform and the companies Bill. Even foreign direct investment in multi-brand retail, which did not require Parliament’s approval, has been shelved.

levitra

IRS offshore programs produce $ 4.4 billion to date for nation’s taxpayers; offshore voluntary disclosure program reopens.

fiogf49gjkf0d
The Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $ 4.4 billion so far from the two previous international programs. The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The third offshore effort comes as the IRS has collected $ 3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95% of the cases from the 2009 program. On top of that, the IRS has collected an additional $ 1 billion from upfront payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program. The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5% of the highest aggregate balance in foreign bank accounts/ entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25% in the 2011 program. Some taxpayers will be eligible for 5 or 12.5% penalties; these remain the same in the new program as in 2011.

levitra

Starbucks, Amazon and Google to face MPs over Tax

fiogf49gjkf0d
MPs will quiz executives of Starbucks, Google and Amazon about how they have managed to pay only small amounts of tax in Britain while racking up billions of dollars worth of sales here.

The Public Accounts Committee (PAC), which is charged with monitoring government financial affairs, has invited the companies to give evidence amid mounting public and political concern about tax avoidance by big international companies.

Britain and Germany announced plans to push the Group of 20 economic powers to make multinational companies pay their “fair share” of taxes following reports of large firms exploiting loopholes to avoid taxes.

Starbucks had paid no corporation or income tax in the UK in the past three years.

The world’s biggest coffee chain paid only £8.6 million in total UK tax over 13 years during which it recorded sales of £3.1 billion.

(Source: The Economic Times dated 13-11-2012)

                                                        (Comment: Do we want a similar situation in our country?)
levitra

Marwari Businesses at Crossroads

fiogf49gjkf0d
A leading Gujarati industrialist recently asked me the reason for the drop in the pecking order of Marwaris in India’s top business groups. We tried to name a few potential next generation leaders from the community. Except for Kumar Birla, Prashant Ruia, Rajiv Bajaj, all now above 40 years, none else came to mind.

Rewind to early 20th century. The Marwaris exemplified a feisty and formidable spirit— traders who escaped the barren business landscape of their homes and created trading outposts in remote areas. Many of them had settled in Kolkata, which emerged as a commercial hub and offered manifold trading opportunities. Over time, they tried their hand at manufacturing which, after Independence, was clearly the future. But, as long as the manufacturing activity involved commodities and the economy was protected, it was fine. The moment there was a shift in the ruling industry paradigm, the pre-dominant Marwari business construct seems to have got challenged.

The community is currently exercised by an unavoidable question: Has the spirit of Marwari enterprise started flagging? The provocation for such introspection stems from the rise of a new entrepreneurial class in India which comprises very few Marwaris and consists of primarily Gujaratis, Punjabis and South Indian industrial groups. Over the past few years, the leaders in emerging industry categories— infrastructure, pharmaceuticals, information technology, telecom—have been markedly non-Marwaris.

(Source: Times of India dated 14-11-2012)
levitra

SC Draws Medias Laxman Rekha, Lauds Crucial Role

fiogf49gjkf0d
The SC on Tuesday gave its nod for an accused to seek the postponement of media reporting of a trial if it interferes with the administration of justice.The bench of Chief Justice S. H. Kapadia and Justices D. K. Jain, S. S. Nijjar, R. P. Desai and J. S. Khehar said they (orders of postponement ) should be passed only when necessary to prevent real and substantial risk to the fairness of the trial, if reasonable alternative methods or measures such as change of venue or postponement of trial will not prevent the said risk and when the salutary effects of such orders outweigh the deleterious effects to the free expression of those (media) affected by the prior restraint order. But the SC said the media had a right to appeal against postponement orders. Such orders of postponement should be for a limited duration and without disturbing the content of the publication. The order of postponement will only be appropriate in cases where the balancing test otherwise favours nonpublication for a limited period, Justice Kapadia, who authored the 56-page judgment on behalf of the bench,said.

Importantly, the SC said constitutional courts could temporarily prohibit media statements if they had the potential to prejudice or obstruct or interfere with the administration of justice. The bench said the doctrine of postponement was for the benefit of journalists, who otherwise would be on the wrong side of contempt of court law. The doctrine of postponement will serve as a Laxman Rekha for journalists and warn them not to cross it, the CJI said.

(Source: Times of India dated 12-09-2012)
levitra

Indian Economy – The Vital Signs

fiogf49gjkf0d
To the long record of government leaders promising jam tomorrow, we must add the prime minister’s forecast on Independence Day that GDP growth this year will be better than last year’s 6.5 %. Now, three months later, the finance minister has lowered expectations to the 5.5 % – 6.0 %t range, but he expects growth next year to be back upto 7 %. In other words, “jam tomorrow” once again. If you keep predicting this till kingdom come, it will eventually turn out to be true. But will it be next year, or the year after, or still later? And has the economy bottomed out, as Montek Singh Ahluwalia says, although the latest monthly industrial production, trade and inflation figures are as depressing as any? Could we, instead, be heading for more bad, indeed worse, news? The pointers to the future are the macroeconomic numbers – the fiscal deficit, the trade deficit, and the level of inflation – which you could say are the equivalent of the system’s pulse rate, blood pressure and temperature. All of them are higher than normal, or what is desirable; indeed they are higher than what is being recorded by most other economies. And all three readings have stayed stubbornly high despite the government’s ministrations. In short, India’s economy has been and continues to be off balance. The more accurate metaphor would be “over-heated”, except that it is odd to say so when growth is slower than it has been in a decade. Still, the logical conclusion would be that the system needs to slow down some more, so that its vital signs get closer to normalcy, before structural adjustment measures (ie., real reforms) prepare the ground once again for faster growth. In short, not jam tomorrow but more pain before (at some point) the good times return.

(Source: Weekend Ruminations by T.N. Ninan in Business Standard dated 17-11-2012).
levitra

London risks losing its status as world’s top financial centre.

fiogf49gjkf0d

London risks losing its status as the world’s top financial centre as the INRNaN-trillion interest-rate fixing probe follows a series of market abuses by banks that eroded trust in a city already shrinking faster than rivals. JPMorgan Chase & Co’s trading loss of at least INRNaN billion, the alleged INRNaN billion fraud at UBS and the investigation of at least a dozen banks including Barclays for rigging global interest rates all happened in London in the last year. The effect is taking a toll on the capital of a country enduring its first double-dip recession since the 1970s, which fired more financial-services workers than any other country in 2011 and again this year.

“My heart sinks every time there is a scandal and the perpetrators are in London, even if it is not always the UK’s responsibility, it is under our noses,”

Sharon Bowles, chairwoman of the European Parliament’s economic and monetary affairs committee, said in an interview.

“There is an effect on the UK’s reputation, and it reinforces the view that even after all the apologies there is much to do.”

London, ranked as the world’s number one financial centre by research firm Z/Yen Group, was where American International Group and Lehman Brothers Holdings booked transactions that helped lead to their downfall. This week saw Bank of England and UK government officials tied to the interest-rate fixing scandal that cost Robert Diamond, London’s best-known banker, his job at Barclays. With the European debt crisis on its doorstep, London now faces calls to cull its bonus culture, rein in risk-taking and beef up a light-touch regulatory system that fuelled a decade long boom.

The danger for London is that Europe is preparing to set up its own regulator for banks, which may exclude the UK or disadvantage firms based in the city. Domestically, the industry is losing longstanding political support from both Conservative and Labour parties — as well as the public. Home to about 250 foreign banks, London is the world’s biggest centre for foreign-exchange trading and cross-border bank lending and trades INRNaN trillion of interest derivatives daily, according to the Bank for International Settlements.

levitra

Liebor? — Determination of the LIBOR must be above suspicion.

fiogf49gjkf0d

The scandal involving the London Interbank Offered Rate (Libor) — which serves as a benchmark for determining the rate of interest on a great many financial transactions — has already cost Barclays, the UK’s third-biggest bank, dear. It has been fined nearly half-a-billion dollars and lost three powerful men at the top, including CEO Bob Diamond. But the damage to date may be only the tip of the iceberg. If a 2008 internal memo published by Barclays is to be believed, manipulation and subterfuge are not the exclusive preserve of banks. The rot goes much deeper. Barclays, so it would seem, was only taking its cue from the Bank of England and the government. Both wanted to keep interest rates low to stimulate economic activity in the aftermath of the 2008 crisis.

What better way to do that than have friendly banks deliberately under-report the actual rate of interest in order to depress Libor, the market benchmark used to price financial contracts, globally? If true, the implications are much more serious and go well beyond the UK. Allegations of Libor rigging are not new.

For now, Barclays’ claim that it had official sanction to manipulate the rate and report it lower during the crisis has not found many takers. But there is no denying that after the collapse of Lehman Brothers when banks’ borrowing costs increased dramatically, managers and governments were keen to shore up confidence, tempting banks to present a rosier-than-actual picture by reporting lower-than-actual interest rates. There is also no denying the nexus between Western governments and banks.

Most US Treasury Secretaries have cut their teeth on Wall Street. But the Barclays scandal shows the nexus could potentially be wider and far more damaging than suspected so far. Libor determines the interest rate on transactions to the tune of close to INRNaN trillion globally. Like Caesar’s wife, it must be above suspicion.

levitra

Third industrial revolution calls for radical changes in our thought and action.

fiogf49gjkf0d
There is a paradigm shift underway in manufacturing, points out The Economist. New technologies in computing, materials and processes such as three-dimensional printing are making fundamental changes in the way things are made, where 651 (2012) 44-A BCAJ they are made and by whom, whether workers or smart robots.

Three dimensional printing, in which a computeraided printing machine deposits successive layers of different materials to produce solid designs and objects, is a key exemplar of this third industrial revolution. The knowledge and service content of the final value of a manufactured product would go up, and the labour cost would go down. Mass customisation would be in and locating manufacture to low-wage countries would be out. Boston Consulting Group foresees a resurgence of manufacture in a country like the US at the expense of a China, or an India. Several policy ramifications follow.

One, India will find it well-nigh impossible to take the route to prosperity that Asia’s miracle economies, including South Korea and China, followed, of outsourced manufacture to feed demand in developed economies.

Ten years from now, much of the manufacture to meet demand in the US and Germany could well take place in those countries themselves. Two, low wages would only be a drag for attracting investments, whereas smart labour and a huge home market would be a big draw. Three, knowledge would drive the entire economy: not the rote-driven mastery of yesterday’s verities but a ceaseless quest to challenge established wisdom and produce new knowledge. Universities have to not just train manpower but create new knowledge, serving as hubs of new production ideas. Our school and education systems would have to undergo a fundamental change in terms of organisational structure and culture. The way ahead is to universalise not just secondary education but also tertiary education, with extensive modular course offerings.

Four, the financial ecosystem must evolve to mediate funds towards knowledge acquisition, knowledge creation and conversion of knowledge into production. Finally, high-speed broadband must become ubiquitous and cheap, to enable all this.

levitra

India’s low ranking in higher education is a matter of serious concern

fiogf49gjkf0d
The QS world ranking of universities has no place for any Indian institution among the top 200.

Unlike China, Hong Kong, Taiwan, Singapore, Korea, Malaysia, South Africa and Brazil. (Source: The Economic Times dated 13-09-2012) 120 (2012) 44-B BCAJ (Comment: We do not promote meritocracy in India. Politics of reservation in all walks is a big hindrance to promotion of meritocracy.)

levitra

Don’t delay GAAR : Do it properly – but do it now

fiogf49gjkf0d
There is no question that the proposed General Anti- Avoidance Rules, or GAAR, need to be reviewed. To the extent that they give excessive discretion to the tax assessment authorities, they are clearly unsuitable for a country like India where the tax department has often been accused of harassing its taxpayers. Compliance with tax requirements is difficult enough currently; allowing more levers for potential harassment to income tax officers is a dangerous step. The government’s move to set up a committee headed by tax expert Parthasarathi Shome was, thus, welcome. The Shome committee’s draft report, which was released on Saturday, however, is worrying in its own way. The delay by three years for “administrative” reasons, in particular, is questionable.

Remember, GAAR was always proposed to be part of the new direct taxes code, which was supposed to be in force by now. What additional preparation time will three years gain? It merely kicks the responsibility for introducing GAAR and calming market participants over to the next government. It strains belief to assume that, by that time, distrust of the income tax authorities will have ended. GAAR needs to be redrafted to ensure that excessive discretion is minimised — but six months is long enough to do that. The new tax policy should be in place by the next Budget. To try any less hard would be to betray the core purpose of GAAR: to serve as part of a co-ordinated, international crackdown on the sources and destinations of unaccounted-for and tax-avoiding money. This was a compact between the countries of the G20 post the financial crisis, when government resources were crucial to staving off the worst that could happen; and it is clearly something that voters desire. The government should do it properly, and do it now.

Some other aspects of the recommendations are equally questionable. For one, there is insufficient recognition that the incentivisation of “foreign” investment from Mauritius must end. The tax treaty that India currently has with Mauritius must be renegotiated, and the grandfathering of investment made under more lax rules must not also perpetuate the “evergreening” of tax-free pipelines even after laws change. Entities investing in India must be properly regulated, even if in low-tax environments like Singapore, and should meet more stringent know-your-customer requirements than has hitherto been expected of those from Mauritius. The “Mauritius route” is unsustainable, and must be closed. A clear timeline and method to do so must be laid out.

Finally, there is the question of tax on short-term capital gains from listed securities, which the panel suggests be ended. This – yet another attempt to boost listed securities as destinations for India’s savings – is problematic in isolation. However, the Shome committee suggests that securities transaction taxes receive a compensating hike, in order to ensure no loss of revenue to the government. That has some points in its favour: a securities transactions tax does have the advantage of ensuring that more people come into compliance with the law. It serves as an incentive against speculation. It is simple. These are all positive qualities. In the end, it must be remembered that India’s tax system is starkly regressive, and taxation is too easy to avoid. The concerns of equity must be borne in mind when designing taxation. GAAR is an essential tool towards equalizing the tax burden, and must not be watered down beyond recognition.

levitra

Be Constructive – What are the BJP’s alternatives to the government policies it bashes?

fiogf49gjkf0d
Ordinary people won’t be happy with the politics of obstructionism. Recently, the BJP stalled Parliament at taxpayers’ cost. Then it decided to take anti-UPA protests to the streets, along with reforms-bashers like the Left. The result was partially effective “Bharat bandh” coming at the aam aadmi’s cost. The biggest irony is that the BJP, thanks to which Parliament’s monsoon session was washed out, now wants a special session to discuss the UPA’s nod to retail FDI!

Certainly, the main opposition party should seek answers from the government on important issues, including corruption. However, the place for such interrogation is Parliament. The BJP is also within its rights to disagree with government initiatives, be it subsidy reduction or retail reform. But to come across as neither interested in debate nor offering alternatives to the policies it bashes, doesn’t bolster the party’s image. The BJP seems more concerned with destabilising the government than with resolving issues.

Why does the BJP limit its critique of the diesel price hike or retail reform to making noise? Surely, it should also prescribe how it thinks India should promote much-needed fiscal consolidation. Petrol prices rose several times under the tenure of the NDA, which endorsed price decontrol in 2002. Nor was the NDA hostile to retail reform, as pointed out by commerce minister Anand Sharma. Opposing multi-brand retail FDI today, the BJP must explain how else investors can be made to help boost the agri-value chain. Or how direct contact between farmers and buyers could be facilitated to raise farm incomes and lower prices for consumers.

When ruling at the Centre, the NDA brandished pro-growth policies to claim India was shining. Today, the BJP comes across as wilfully disowning a modern economic vision in tune with fastglobalising India. Tomorrow, if it comes back to power, can it afford to blink at reforms and let the economy go further down the tube? It’ll also serve the nation better by providing constructive opposition rather than fuelling political uncertainty.

levitra

Auditor Holmes — SEBI’s forensic accounting team is a welcome move to expose frauds

fiogf49gjkf0d
Kautilya listed 40 ways of embezzlement in the Arthashastra centuries before fictional detective Sherlock Holmes pursued forensics as a science.

Even if it comes a century after Holmes, SEBI’s move to form a separate forensic accounting team to detect fraudulent transactions of companies is welcome. An in-house team will strengthen investigation and force companies to improve their corporate governance.

So, SEBI’s move to ready a cadre of forensic accountants with specialised skill-sets is a good idea. Surely, these auditors can identify, expose and prevent weaknesses in areas such as poor corporate governance, flawed internal controls and fraudulent financial statements.

The Office of the Chief Accountant in the US Securities and Exchange Commission, for example, assists other departments in investigation and ensures that financial statements are presented fairly to investors. The forensic accounting team in SEBI can play a similar role. In any case, better late than never.

(Source: The Economic Times, dated 1-3-2012) (Comme n t s : Do we h a v e e n o u g h we l l – t r a i n e d a n d experienced Forensic Accountants/Auditors? What are we doing to assemble such a Team of Forensic Auditors?)

levitra

Transforming transfers

fiogf49gjkf0d
The report suggests that a vast network of micro- ATMs, or automated teller machines, be set up across the country using the business correspondent model. The million-strong army of business correspondents will have to be subsidised by the government in order to make the transactions profitable and extend the network sufficiently. Once in place, however, the presence of network externalities should incentivise and enable the use of bank accounts and post office accounts by many more recipients of government money — whether it be kerosene users or beneficiaries of the National Rural Employment Guarantee Scheme (NREGS). More than that, all payments or receipts of the government of sums greater than Rs.1,000 should be made electronically, which will greatly increase transparency and accountability. Micro-ATMs are already being piloted in Jharkhand by the UIDAI for NREGS payments; their effectiveness will need further independent evaluation, as Mr Mukherjee emphasised, but the principle appears sound.

levitra

Ark full of books to help tide over digital disaster

fiogf49gjkf0d
Forty-foot shipping containers stacked two by two are stuffed with the most enduring, as well as some of the most forgettable, books of the era. Every week, 20,000 new volumes arrive, many of them donations from libraries and universities thrilled to unload material that has no place in the Internet Age.

As society embraces all forms of digital entertainment, this latter-day Noah is looking the other way. A Silicon Valley entrepreneur who made his fortune selling a data-mining company to Amazon. com in 1999, Kahle founded and runs the Internet Archive, a non-profit organisation devoted to preserving Web pages — 150 billion so far — and making texts more widely available.

But though he started his archiving in the digital realm, he now wants to save physical texts, too. “We must keep the past even as we’re inventing a new future. If the Library of Alexandria had made a copy of every book and sent it to India or China, we’d have the other works of Aristotle, the other plays of Euripides. One copy in one institution is not good enough,” he said.

levitra

EPFO to begin end of Inspector Raj

fiogf49gjkf0d
Senior officials say the EPFO will begin the process on April 1. That will eliminate the need for any EPFO officer to personally inspect company records. In the new system, the EPFO will ask companies to voluntarily disclose all information required to comply with the EPF Act. Based on the information, the EPFO will devise parameters to discover defaulters. The parameters will change each year to avoid companies being compliant with only certain parameters.

“At present, if there is any complaint then the enforcement officer goes and does the inspection. In some cases, his personal biases and prejudice colour his work. We want to eliminate that,” said a senior official. Corruption cases against EPFO employees have been on the rise in recent months. Last July, the Central Bureau of Investigation registered cases against nine senior officials of the EPFO for causing a loss to the exchequer amounting to Rs.169 crore.

levitra

Veritas says DLF accounting, biz model suspect

fiogf49gjkf0d
Report mischievous, a/cs in public domain, says company.

Canadian research firm Veritas has slammed realty major DLF Ltd, calling its accounting practices ‘conflicting’ and pointing at gaps in its business model — charges the company termed ‘mischievous and presumptive’. Earlier, Veritas Investment Research had come out with damaging reports on other Indian firms, including Reliance Industries, Reliance Communications and Kingfisher Airlines.

Veritas has said DLF’s stock is at best worth Rs.100, and the company may have to recast its loan. DLF said “the company adhered to the highest standards of corporate governance and financial integrity”. “We do not generally comment on individual research reports. However, this report in question is presumptive and mischievous as the analysts have never contacted the company to seek any information or clarification,” a DLF spokesperson said . “The audited financials of the company are always in the

levitra

Culture and perception of time

fiogf49gjkf0d
Culture plays a significant role in how time is perceived by a community:
• It’s extremely important for a westerner to be ‘on time’ while people in the Middle-East & South Asia are comfortable being ‘in time’, a relaxed 5-10 minute window., Westerners view their work day as one composed of 30-minute slots while Easterners, with the exception of Japan, have a holistic approach towards time.

• Westerners like to schedule multiple business meetings during their work day, viewing these as transactional in nature. Asians prefer fewer but longer meetings, using them ‘to know’ their business partners as building trust is extremely important, especially in the initial rounds of discussions and negotiations.

• In eastern societies, including India, people of higher rank may make those of lower rank/ vendors wait for them, subtly displaying their authority and power in the business relationship, whereas in Western cultures this is considered rude and unprofessional.

• Eastern cultures are increasingly aping the western perception of time. This is due to the fact that cultures where punctuality is non-negotiable are clearly more economically advanced than those where time is flexible.

In India today, we are at an interesting crossroad. On one hand most multinational and progressive Indian firms are already operating on the western pattern where punctuality is critical while several Indian companies (both big and small) continue to retain the eastern perception of time. My view — know your client’s culture before you do business with them.

levitra

Mass Unemployment – A lost generation

fiogf49gjkf0d
Europe’s financial woes are well known. But its other economic problem—unemployment at mass levels—is underappreciated. Data released on Monday showed unemployment at a “stable” 11.4% in the euro zone. Roughly 18.2 million people were out of work in August.

The highest rate of unemployment is in Spain, with 25.1% of the workforce out of work. What is worse is the figure for those under 25 years of age—52.9% can’t find work.

(Source: The Mint Newspaper dated 02-10-2012)
levitra

Appendicitis: Antibiotics in, surgery out?

fiogf49gjkf0d
Antibiotics can replace invasive surgery for the
treatment of acute appendicitis involving the removal of the organ, as
it could be just as effective, a new study found.

The study also
found that patients who are treated with antibiotics are at lower risk
of complications than those who undergo surgery. Some patients are so
ill that the operation is absolutely necessary, but 80% of those who can
be treated with antibiotics recover and return to full health.

(Source: The Times of India dated 28-09-2012)
levitra

Budget on the back burner — For UPA managers, meaningful discussion on Budget is far less important than the need for parliamentarians to campaign for Assembly polls.

fiogf49gjkf0d
If the United Progressive Alliance (UPA) has its way, Parliament will approve the Union Budget for 2011-12 by 25th March, in less than a month of its presentation on 28th February. This will be both unusual and unprecedented. Worse, it will deal a blow to the time-honoured tradition of subjecting the government’s annual Budget to elaborate scrutiny and discussion by members of Parliament, before the final assent by the president.

The schedule, followed for several decades, is that the Budget receives Parliament’s nod of approval by the first week of May. A lot happens during the nine weeks between the presentation of the Budget on the last working day of February and its passage in the first week of May. Various parliamentary committees examine Budget provisions and present their findings to the Finance Minister. Also, members of the two Houses get an opportunity to discuss the various provisions in the Finance Bill and even make useful suggestions on the expenditure programmes of a few central ministries. There is, of course, a short recess in between. But that only allows the parliamentary committees to complete their scrutiny of the Budget and table their reports before the two Houses.

levitra

I-T to make staff’s work less taxing

fiogf49gjkf0d
In a bid to reduce the burden on officials, the Income-tax Department is planning to outsource record management to private entities.

The number of income taxpayers in the country is about 35 million. It is expected to reach around 80 million by 2015. Considering that a substantial number of taxpayers file returns manually, managing records has become a major task for the Department.

The Department says it requires about 12,000 officials just for scrutiny cases. At present, around 4,000 officials are handling 7,00,000 scrutiny cases a year.

levitra

Global PE biggies put India story on hold

fiogf49gjkf0d
“We stay away from places that have impossible governments and impossible tax regimes, which means S ayo n a r ato India,” TPG Capital founder-partner David Bonderman said recently, tearing into the country’s investment attractiveness. Bonderman, among the most influential private equity (PE) investors, said publicly what his peers quipped behind the scenes: India is possibly the least attractive of the emerging markets for PE, right now.

“Global investor confidence has been shaken badly even as India vies with not China, but Indonesia, Vietnam and South Africa for capital”, said Wilfried Aulbur, managing partner, Roland Berger, a global management consulting firm. “Private equity mostly made growth capital investments for minority stakes in Indian companies. They have had little influence on the strong promoter-driven businesses, and hardly managed what they usually do in western markets to improve return on investments,” he added.

(Source: Times of India dated 26-07-2012)

levitra

HDFC Bank is now one of the most valuable in the world

fiogf49gjkf0d
For most banks across the globe, the past five years have been a battle for survival with many falling by the wayside and others becoming wards of the state. In late 2008, India was also not immune with ICICI Bank, the nation’s second largest, experiencing some jitters. But one lender which has remained immune to the troubles swirling around the sector is HDFC Bank.

With a market capitalisation of Rs 1,38,469 crore (or $24.88 billion), HDFC Bank has surpassed the biggest lender in the nation – State Bank of India – which has deposits that are almost six times that of the private lender.

(Source: The Economic Times dated 01-08-2012)

levitra

Curbing the lust for litigation

fiogf49gjkf0d
The Supreme Court has abruptly replaced an internal mechanism to weed out wasteful government appeals with a think tank.

In more than one-third of the litigation in India’s Courts, the government is a party. In criminal cases, it cannot be avoided. According to one estimate, the government is involved in 10 million cases. No wonder, the Union Law Minister and Attorney General have described the government as a ‘compulsive’ litigant.

Some Supreme Court Judges also echoed this sentiment, in stronger terms. They criticised the government for resorting to prolonged litigation on ‘trivial’ issues, and pointed out that not only did this waste the judiciary’s time but also caused the public exchequer a ‘colossal’ loss.

While unveiling a tantalising vision statement last year, the Law Minister recognised the problem and promised to turn the government from a ‘compulsive to a responsible and reluctant litigant’. The government proposed to entrust the task of weeding out senseless litigation from the government’s docket to top law officers — the Attorney General and the Solicitor General. They now have a full-fledged office in central Delhi, assisted by 52 lawyers and 26 law researchers. Statistics on pending matters have been called from government departments including public sector undertakings.

Attorney General G. E. Vahanvati has also commented on the government’s unhealthy urge to litigate. “It cannot be denied that government has become a compulsive litigant. There are several reasons for this. The Law Commission identified various reasons why the government became an irresponsible litigant. It said that in most cases, government litigated because of the utter indifference on the part of civil servants,” he said at recent conference. “Sometimes, the government pursued litigation as a matter of prestige, with an attitude of vengeance. In several cases, the officials had an attitude of arrogance and a superiority complex in litigating. It is easy to file a case in Court and leave it to the Courts to decide. One obvious reason to do so is to avoid the necessity of taking decisions, some of which can be awkward.”

Meanwhile, a five-Judge Constitution Bench of the Supreme Court last week scrapped a scheme under which state-run enterprises had to resolve their disputes through an internal mechanism. In its judgment in the case, (‘ONGC cases’) in 1995, 2004 and 2007, the government set up a committee to settle the disputes so that they did not rush to the Court.

levitra

Let’s fast-track the process of subsidy reform

fiogf49gjkf0d
Society’s less well-off have long been treated as passive wards of the state. This has served as justification for a byzantine subsidy edifice which helps the poor less than it does politicians playing populist cards and babus entrenched as intermediaries in public services delivery. The govern-ment’s move to form a task force to facilitate direct cash transfers to beneficiaries of subsidies like kerosene, LPG, fertilisers, etc., signals fresh, reformist thinking. The panel being led by UIDAI chairman Nandan Nilekani, there’ll be technical expertise at the top for the job. As also a necessary synergy between the cash transfer and UID endeavours: both aim at better targeting and leak-proofing of redistributive mechanisms via proper identification of the end-users of subsidies.
levitra

India works on EU for ayurveda lifeline

fiogf49gjkf0d
India has asked the European Union to relax its May 1 ban on over-the-counter sale of ayurvedic and herbal drugs by another 10 years. A delegation of officials from the Department of Ayush and Commerce visited Brussels in January end.
levitra

Indian growth rate — The new normal

fiogf49gjkf0d
In an interview to The Wall Street Journal, Reserve Bank of India governor D. Subbarao has said that the Indian economy can manage a maximum of 7% growth without stoking inflation.

This is significant, especially as it comes from Subbarao, known to choose his words carefully. What he is trying to say is that unless the current bottlenecks in the economy are fixed, the Indian economy will have to get used to a much lower rate of growth than what it recently experienced: 9%.

In other words, this is going to be the new normal. It is more than double the low growth rate trap that India found itself in the 1970s — the so-called Hindu rate of growth — but lower than the ideal.

The writing is on the wall: reform or perish. Low growth will hit tax buoyancy and curb spending, especially for the raft of inclusive measures. But is the UPA listening?

levitra

Asked for bribe? You can appeal Babu’s acquittal

fiogf49gjkf0d
Those who complain of corruption or bribes in government are ‘victims’ under the law and can file an appeal challenging the acquittal of the accused bureaucrat, the Bombay High Court has ruled. A Division Bench of Justice V. M. Kanade and Justice M. L. Tahaliyani recently extended the scope of the legal definition of the word ‘victim’ in the changes introduced in 2009 in the Criminal Procedure Code (CrPC) to include complainants in corruption cases.

“In our view a restricted meaning cannot be given to the word victim,’’ said the judges, adding, “In a case under the Prevention of Corruption Act, the inaction or omission on the part of the public servant of not passing any order on an application or passing an adverse order since bribe is not given would constitute the loss or injury and therefore, even such a complainant would fall within the category of a victim.’’

The Court was hearing a petition filed by 38-yearold Kurla resident B. U. Batteli, who had dragged the state anti-corruption bureau to Court and had sought permission under the 2009 CrPC amendments to challenge the acquittal of two government officers in a corruption case that he had lodged against them. Earlier, under the CrPC only the prosecution agency could give the go-ahead to file an appeal in any criminal case.

levitra

‘Putting value to time may diminish your happiness’

fiogf49gjkf0d
Time is money, as the old adage goes. But, believing it too much may be bad for your overall happiness, scientists say. In a series of studies, researchers at Rotman School of Management at the University of Toronto found that when people were prompted to think of their time in terms of money, they felt more impatient and received less enjoyment from leisurely activities, such as surfing Internet or listening to music, unless they were being paid to do so.

The results indicate this mindset may affect our ability to enjoy leisure time, and they have implications for our ability to ‘smell the proverbial roses’, study authors Sanford DeVoe and Julian House were quoted as saying by Live Science. They pointed out that national surveys have shown that while the number of leisure hours has increased in the US over the past 50 years, there has been no accompanying increase in happiness. Instead, people report feeling more time pressure, they said.

The study also found that when participants were paid to listen to music, after being prompted to think about their time in terms of money, they derived more enjoyment from the experience.

levitra

Speed up the judicial system

fiogf49gjkf0d
The government faces flak for appointing P. J. Thomas as the Central Vigilance Commissioner. Thomas has a charge-sheet pending against him in Kerala, accusing him of being a party to a palm oil import controversy dating back to 1992. This brings up the desirability of having fast-track courts to try anyone in public life, politician or civil servant. Fast-track trials should be made mandatory for all lawsuits pending against public figures, including candidates for political office. This is necessary till India overhauls its creaking judicial machinery. The total number of judicial officials, including the 31 Judges of the Supreme Court, is a little more than 17,600, which means that India has less than 18 Judges per million people. This compares badly with 51 Judges per million Britons or Canada’s 75 Judges per million citizens. Unsurprisingly, all Courts have a long queue waiting for judgment: over 30 million cases await a verdict, with 52,000 lawsuits pending in the Supreme Court and over 4 million in the High Courts.

The condition of most Courts can reduce the hardiest undertrial to tears: the buildings are dilapidated and infrastructure hasn’t been upgraded for near to a century. This has to change. The government is flush with funds, and some of that has to be used to improve physical infrastructure in Courts. Over 3,000 judicial posts are vacant, mainly in the lower Courts, and these positions must be filled quickly. Today, the job of hiring judicial officers is with state and central governments. But their track record is abysmal and the goal of having 50 Judges per million Indians, stated nearly nine years ago, still looks distant. Governments are not doing a decent job of hiring judicial officers, particularly state governments. It is time to create an Indian judicial service, on the lines of the administrative and police services. That’s an idea that has been discussed in the past, but never implemented. There is little justification for delaying the proposal any further. Justice delayed is justice denied. In India, the denial of justice has become endemic, and that must stop. Delivering justice on time is a vital instrument of inclusive growth, with the potential to check the rampant misuse of social power that works against the poor, in the absence of legal restraint.

levitra

Justice below poverty line – The Supreme Court laments that large sections of people do not have access to legal remedies

fiogf49gjkf0d
Some appeals that reach the Supreme Court unravel such grim stories that judges find it difficult to write a decent finale.

The first one, New India Assurance vs Gopali, showed how insurance firms not only deny just compensation while raising technical objections but also tire dependents out through endless litigation. The road death in this case occurred in 1992. The victim’s aged parents, wife and five children had been seeking the insured amount since then. Looking into the case’s history, in which courts below had applied wrong formulae, the Supreme Court exercised its inherent, discretionary powers under Article 142 to award Rs 15 lakh. The tribunal had granted only Rs 2.55 lakh.

What is significant in this judgment is the insight into the judicial system through the eyes of the judges themselves. “If the claimants had been members of economically affluent sections of society,” the judges wrote, “they would have engaged an eminent advocate and taken steps for hearing of the matter at an early date, but they do not have the financial capacity and resources and energy to engage any advocate.”

How the cases of corporations and businessmen get priority over those of ordinary people is still a mystery to court watchers. Some time ago, there was a furore over bail granted to a renowned businessman late night on a Supreme Court holiday from a judge’s residence. In one instance, the then Chief Justice, who was in Argentina to attend a conference, constituted a bench to hear the bail application of a noted film star.

This is not the first time the judges wrote such jeremiad. In one judgment, D Navinchandra vs Union of India (1987), the then Chief Justice wrote: “My conscience protests to me that when thousands of remediless wrongs await in the queue for this court’s intervention and solution for justice, petitions at the behest of diamond and dry fruit exporters where large sums are involved should be admitted and disposed of by this court at such quick speed.”

The Supreme Court faces a dilemma. Though it has declared speedy trial as a fundamental right of every person under the Constitution, it has not quashed any trial on this ground. In an earlier judgment, it expressed its apprehension that if prolonged prosecution is made a ground for quashing the trial itself, many unscrupulous people might engineer delays to take advantage of this escape window.

The central government has argued that the court has no power to set a time limit for completion of criminal trials. This can be done only through legislation. The arguments are currently going on, and the court’s decision will affect thousands of people who are on bail or in jail awaiting trial. Though it is apparent that there is violation of a precious fundamental right, no clear remedy is in sight. Imagine, one of the first maxims taught in law colleges is: “Where there is a right, there is a remedy.”

(Source: Extracts from MJ Antony’s Column “Out of Court” in Business Standard dated 01-08-2012)

levitra

Attacking tax havens – Instead of retreating, India needs to do more

fiogf49gjkf0d
The era of bank secrecy is over,” declared a 2009 G20 communique — except it isn’t, apparently. While black money worldwide has likely decreased following amnesty schemes and stepped-up enforcement in the last three years, it is clear that it has not gone far enough. A just-released report from the non-governmental organisation Tax Justice Network, written by a former chief economist for McKinsey and Company, has used an innovative method to document the size of flows to tax havens from a set of developing and emerging economies. Unlike previous estimates, which relied on data surrounding “trade mis-invoicing” and were open to question, these estimates use Bank of International Settlements and IMF data, along with details available from source countries. The numbers, however, are staggering: anything between $21 and $32 trillion is stashed away.

What, therefore, has been the progress in closing these gaps in the global tax net — and has India contributed what it should have to the effort? It appears that the central problem has been a lack of co-ordination. Although the G20 spoke out on the issue after the global financial crisis, it then left individual countries to their own devices. What this meant was that countries like the United States could renegotiate treaties in their favour with much greater ease than could most other jurisdictions. The US, for example, has succeeded in getting Switzerland to hand over even the names of tax dodgers not covered by treaty, through threats to launch criminal charges against their banks. Other European countries have agreed to provide the details of all accounts held by American citizens to the US. Germany and Britain similarly pushed Switzerland into a treaty by which the latter will tax Swiss bank accounts for them, and introduce a withholding tax on future interest earned. India, while it has been renegotiating treaties, has simply not been that tough or threatening when it comes to forcing tax havens like Switzerland, Leichtenstein or the UK-owned Cayman Islands into giving it similar deals. This must change. At a minimum, the onus of demonstrating bona fides should be shifted to the depositor, as with depositors of other nationalities — instead of on to Indian tax investigators. Nor is it sensible to allow legal protection of the identities of tax evaders.

(Source: The Business Standard dated 25-07-2012)

levitra

Our feudal democracy

fiogf49gjkf0d
Five hundred years ago, in feudal England, the nobles had private armies and their own livery. The king depended on the nobles for money and for horsemen to fight wars. Henry VII changed all that when he came to power in 1485, ending the 30-year Wars of the Roses (essentially, an endless feud between rival groups of feudal lords). He abolished the private armies, reduced his dependence on the nobles by drawing support from the rising middle classes and the trading community, and established a modern nation-state. Some version of that needs to be done in contemporary India.

The parallels become obvious when we see that our “nobles” today are the state satraps — They each have their horsemen and livery (parliamentarians with party tags), and their power in the Delhi court depends on how many “horsemen” they can bring to our contemporary version of the Wars of the Roses.

So long as the king is dependent on these nobles, each of whom has quasi-autonomous power in their duchies and earldoms, no central power can assert itself. The private armies in pre-Tudor England essentially pillaged and plundered; likewise, some of our nobles today honour horsemen (knights?) who have a record of murder and rape, they indulge in mass transfers of officials to make them toe the line, arbitrarily arrest cartoonists and those who ask questions… (you know the rest of the list). The king in Delhi does nothing because he gets unseated if the nobles withdraw support. It doesn’t help that the “king’s party” has no local presence to mount a challenge to the nobles in their duchies. So how does the nation-state function if every national issue is hostage to the nobles, and dependent on their consent — including which head of state can visit the country?

(Source: The Business Standard dated 22-09-2012)
levitra

Heed the Kelkar report – Govt should move immediately on fiscal consolidation

fiogf49gjkf0d
The report of the Vijay Kelkar Committee on fiscal consolidation argues that the Indian economy is “poised on the edge of a fiscal precipice”. The fiscal deficit is poised to miss its budgeted target by a large margin for the second year in a row — it could be 6.1% of gross domestic product, a full percentage point higher than the Budget estimate. India is going through a demographic bulge, with millions entering the workforce yearly; fiscal space is needed to stimulate growth, or India’s demographic dividend will become a curse. The cost of doing nothing, the report argues, would approximate the crisis of 1991. The panel makes suggestions to take the fiscal deficit down to 5.2% of GDP in 2012-13. However, some of these suggestions, including on tax policy, will require legislative action — difficult for the United Progressive Alliance (UPA) to pull off currently. The emphasis should, therefore, be on speedily implementing administrative reforms, instead of merely focusing on legislative changes such as the constitutional amendment for the goods and services tax. As the chairman of the committee told, credible action, not a big-bang step, is needed to achieve fiscal consolidation.

(Source: The Business Standard dated 01-10-2012).
levitra

Big, bad data: India’s official statistics seem to have little or no link with reality

fiogf49gjkf0d
Making official statistics accurate and current must be a prime concern. Official figures seem to have little or no link with reality. Industrial output, as gauged by the index of industrial production (IIP), reveal great volatility and mismatch with logical correlates such as power generation and cargo movement, in the aggregate and in particular sectors such as capital goods. Also, often, IIP data is at variance with published financial results of companies.

Now the base year of the index was changed to 2004-05 last year, and there is a big increase in the number of items tracked, to 399. But there is reason to believe that the raw data piling up in the 16 source agencies and departments for the IIP are not being processed either in a timely manner or, worse, entirely.

Reports suggest large vacancies in statistics cells across government departments. It is entirely possible that skilled data specialists are moving to greener pastures in the private sector. In the digital age, making sense of data is big business, of course.

Official statistics are either dated or erroneous today. Policymakers are often unable to fathom IIP trends. The Collection of Statistics Act, 2008, was notified last year, and the earlier 1953 law repealed. Chapter IV of the Act concerns offences and penalties, for refusing to supply particulars, false statements and ‘mutilation and defacement’ of information, and so on.

But there is nothing in the law that penalises nonprocessing and skewed interpretation of raw data in the various departments and ministries. The Statistics Act’s neglect of data processing by government agencies, seems to have compromised reliability and dependability of the official numbers. Speedy correction is essential. The entire policy process would be suspect without reliable official figures.

(Source: The Economic Times dated 06-10-2012)
levitra

No need for developer’s NOC for flat sale/ transfer

fiogf49gjkf0d
In a major relief to flat buyers and society residents, the state government has said that there is no need for a no-objection certificate from the developer for sale or transfer of flat (resale) in a fully constructed building.

The state housing department has issued an official communication in this regard after coming across cases where developers illegally collected money from flat buyers for providing such NOCs.

The Cidco, which has leased out a number of properties in Navi Mumbai, has also been asked to ensure that developers of these plots comply with MOFA norms. The department has sought Cidco’s opinion on whether its permission was needed for transfer/ sale of flats for plots leased by it. The department is of the opinion that the permission—insisted upon at present—is not required. The government has urged societies where developers haven’t conveyed plots within stipulated time to apply for deemed conveyance.

(Source: The Times of India dated 01-10-2012)
levitra

Egalitarian president could wreak havoc on entrenched hierarchies

fiogf49gjkf0d
The move by President Pranab Mukherjee to dispense with the traditional honorifics ‘Excellency’ and ‘Mahamahim’ is not likely to go down well in much of India even though it is a democracy. In 2008, the Bar Council of India passed a resolution recommending that judges should no longer be called by their colonial-era titles of ‘Your Lordship’ and ‘Your Ladyship’ but by the more egalitarian and gender-neutral nomenclature, ‘Your Honour’.

Old habits have died hard, however, and the anachronistic form of address continues. In that sense, the President’s move to downsize his official protocol should alarm those further down the ladder who delight in prefixes such as ‘Hon’ble’ – always written thus rather than in expanded form. As it has been appropriated by President Mukherjee as his preferred title, insidious mango men may use this as good opportunity to divest increasingly discredited politicians of this obviously unsuitable honorific, routinely affixed to VIP names on placards, invitations and communiques.

In a country where even red beacon lights are zealously guarded as symbols of privilege by those who are paradoxically supposed to be public servants, it is unlikely that grandees will take kindly to their titles being abolished with as little ceremony as the maharajas were dispossessed of theirs, 40 years ago.

President Mukherjee’s other initiative – to hold more functions in Rashtrapati Bhavan rather than at other venues – should also delight the mango men. Besides reducing bandobast and security costs, it will save thousands of litres of petrol, not only of the presidential cavalcade but also of those caught in traffic restrictions due to ‘VIP movement’. Will India’s other excellencies be willing to dispense with some of their privileges too?

(Source: The Economic Times dated 11-10-2012)
levitra

CAG has powers to examine efficiency of policy decisions: Supreme Court

fiogf49gjkf0d
The Supreme Court has said that the Comptroller and Auditor-General had a duty to comment critically on the efficacy of policy decisions. The court rejected a PIL, seeking to rein in CAG, saying there should be no confusion over the auditor’s mandate.

“Do not confuse the constitutional office of CAG with that of an auditor of a company or corporation… CAG is not the traditional Munimji to prepare only balance sheets. It is constitutionally mandated to examine the efficiency, effectiveness and economy of the decisions of the government in using resources. If CAG will not do this, then who will,” an apex court bench comprising Justices R. M. Lodha and A. R. Dave asked.

The court’s observation came amid criticism of CAG by the ruling side, over its report on coal block allocations. Prime Minister Manmohan Singh had described some of CAG’s findings as ‘disputable’ and some as ‘selective reading’ of a 2006 law ministry opinion.

He termed as ‘flawed’ the auditor’s premise that competitive bidding could have been introduced in 2006, by amending the existing administrative instructions.

However, the apex court said, “Article 149 of the Constitution, the 1971 Act and the Rules clearly mandate CAG to examine the efficiency, effectiveness and economy of the decisions. One should not forget that CAG report is tabled in Parliament through the President. There is a full-fledged mechanism to examine a CAG report and then debate it in Parliament. A constitutional office, as we said, should not be confused with a traditional Munimji,” SC said.

(Source: The Economic Times dated 02-10-2012)
levitra

Loyalty above duty – Ministers should not defend a deal in advance of facts

fiogf49gjkf0d
Prime Minister Manmohan Singh, addressing the annual conference of the Central Bureau of Investigation (CBI) and state anti-corruption bureaux, said that the Prevention of Corruption Act would be amended to focus on corporate bribery, and that investigative agencies should upgrade their “skills and techniques” to deal with “newer methods of corruption”. He added that his government “stands firm in its commitment to do everything possible to ensure probity, transparency and accountability in governance”. These are fine words, and should be welcomed. However, it is far from clear why the prime minister was addressing them to the CBI and its cohorts rather than to his own Cabinet.

The political wisdom of the Congress closing ranks behind its president’s son-in-law is extremely questionable. The fact that even Karnataka Governor H. R. Bhardwaj was unable to maintain his office’s neutrality sufficiently to keep silent on the subject, saying instead that allegations against the Gandhi family always “fall like nine-pins”, is an indication of the degree to which the party’s members feel their loyalty requires a stout defence of Mr. Vadra, whatever the political cost. But it is a political party’s right to be bad at politics, if it so wishes. However, those who hold ministerial portfolios relevant to possible investigations into the association between Mr. Vadra and DLF should be a little more restrained in their comments on this issue. Finance Minister P. Chidambaram, who supervises the income tax office among other relevant departments, declared that a probe was impossible without “specific allegations or quid pro quo”. This is certainly correct as a principle. But it is far from clear that specific allegations will not emerge. Indeed, Arvind Kejriwal believes he has already made specific allegations — that the Haryana government provided favourable treatment to DLF in return for Mr. Vadra receiving benefits from that company.

( Source: The Business Standard dated 11-10-2012)
levitra

Use of PC in Bed & Sleep Disruption

fiogf49gjkf0d
In today’s gadget-obsessed world, sleep experts often say that for a better night’s rest, people should click the “off” buttons on their gadgets before tucking in for the night. Gizmos stimulate brain activity, they say, disrupting your ability to drift off to sleep. Increasingly, researchers are finding that artificial light from some devices at night may tinker with brain chemicals that promote sleep.

Researchers at Rensselaer Polytechnic Institute showed that exposure to light from computer tablets significantly lowered levels of the hormone melatonin, which regulates our internal clocks and plays a role in the sleep cycle. In the study, published in the journal Applied Ergonomics, the researchers had volunteers read, play games and watch movies on an iPad, iPad 2 or PC tablet for various amounts of time while measuring the amount of light their eyes received.

They found that two hours of exposure to a bright tablet screen at night reduced melatonin levels by about 22%.

levitra

What Makes a Leader?

fiogf49gjkf0d
The most effective leaders are alike in one crucial way: They all have a high degree of what is known as emotional intelligence. Self-awareness, which is a deep understanding of one’s emotions, strengths, weaknesses, needs and drives, is the first component of emotional intelligence.

People with strong self awareness are neither overly critical nor unrealistically hopeful. Rather, they are honest with themselves and with others. People who have a high degree of self-awareness recognize how their feelings affect them, other people, and their job performance.

Someone highly self-aware knows where he is headed and why; so, for example, he will be able to be firm in turning down a job offer that is tempting financially but does not fit with his principles or long-term goals. A person who lacks self-awareness is apt to make decisions that bring on inner turmoil.

“The money looked good so I signed on,” someone might say two years into a job, “but the work means so little to me.” Decisions of self-aware people mesh with their values; so they find work energizing. How can one recognize self-awareness? First, it shows itself as candor and an ability to assess oneself realistically. Such people are able to speak accurately and openly, though not necessarily effusively or confessionally, about their emotions and the impact they have on their work.

(Source: The Economic Times dated 09-11-2012.)
levitra

Where is the Regulator’s Response to Allegations about HSBC?

fiogf49gjkf0d
The documents that Arvind Kejriwal released last week, which he claimed were leaked witness statements recorded by income tax officials in the course of a raid, raise serious questions about the Indian entity of the Hongkong and Shanghai Banking Corporation (HSBC). While the bank has refused to comment on any specific details, the government has refused to acknowledge Mr. Kejriwal’s charges and only said it was taking action against all individuals named in the list pertaining to black money given to it by France in June of 2011. Anything less would lead to a major loss of faith in India’s regulatory capacity. Unfortunately, while the banking regulator – the Reserve Bank of India – has long sat on HSBC’s request to extend its branch network, it is yet to address these concerns directly.

How does the procedure that the three high-networth individuals who feature in Mr. Kejriwal’s documents describe differ from hawala? All three, apparently, independently told the tax authorities as to how they managed from Delhi to open, operate and get back cash deposited in accounts in HSBC’s branch in Geneva. If the documents released by India Against Corruption are to be believed, all that is required is a phone call to HSBC, which will then depute its officers to open the account, collect cash in rupees, have it deposited abroad in a currency of your choice, operate it under your instructions — and then pay you cash in rupees, as and when required in India. None of the beneficiaries needed to go out of India to open or operate an account. If the charges are found to be true, this is a blatant case of flouting money laundering laws.

HSBC has been accused in other jurisdictions of similar acts. In the United States, the bank has admitted that a fine for a violation of federal anti-money laundering laws could cost it around $1.5 billion, and might lead to criminal charges — damaging the bank’s reputation and forcing it to set aside a further $800 million to cover a potential fine for breaches in anti-money laundering controls in Mexico as well as other violations. The provisioning was on top of $700 million it put aside in July. A US Senate report in July criticised HSBC for letting clients shift potentially illicit funds from several countries, including India. The size of the fine expected by HSBC dwarfs every other similar case, including the previous record set by ING Bank, which agreed in June to forfeit $619 million to resolve allegations that it illegally moved money on behalf of sanctioned entities in Cuba and Iran.

(Source: The Business Standard dated 13-11-2012)
levitra

2G Spectrum Auction Generates Plenty of Lessons

fiogf49gjkf0d
The 2G spectrum auction hasn’t quite hit the jackpot. It’s raised Rs 9,407 crore – far less than the government’s target of Rs 40,000 crore and niggardly compared to Rs 67,719 crore raised via 3G spectrum bidding. Look deeper and it’s clear expectations of market demand were pitched at outlandish levels. What the dud event did generate, however, is plenty of lessons.

First, CAG’s astronomical figure – Rs 1.76 lakh crore – flies out the window on being tested on the ground. Booty amassed in 2010 from sale of a restricted amount of 3G spectrum was hardly a realistic revenue-garnering benchmark. This isn’t to say the latest auction couldn’t have scored better, had the reserve price been less eye-popping and India’s investment climate more propitious. But that’s exactly why the government shouldn’t have been bamboozled to rush into an auction, using TRAI’s play-safe floor price. Nor is this to argue that the FCFS policy wasn’t messed with by former telecom minister A Raja. This is merely to reiterate that mobile telephony wouldn’t have soared had we been fixated on maximising revenue.

Second, outrage over corruption scandals shouldn’t blind us to issues of jurisdictional propriety and economic sense. It’s not for CAG or courts to dictate policy. In its response to the presidential reference on allocation of natural resources, the Supreme Court made this clear. Identifying ‘common good’ as the key criterion for resource disbursal, it said policymaking is the government’s turf. Yes, government must work with institutional checks and balances. But institutional overreach can lead to unhappy denouements, as with the lacklustre spectrum auction.

Third, resources are best mobilised through the expansion of telecom which fosters overall economic growth. But the sector can’t grow to potential with exorbitant costs of entry that would mar competition by barring smaller players, financially burden companies and raise prices for consumers. It’s important here that spectrum distribution isn’t opaque, whatever the modality. For instance, single-step e-auctions can work well with safeguards. So can a technology-enabled system where all licensees can access pooled spectrum. What we need now is to focus on practical ways to boost telecom infrastructure and transparency in policy implementation. What we don’t need is sound and fury over controversies blown out of all proportion. As we’ve seen, that only makes policymakers bungle on the side of caution, which chokes off investor feel-good and raises prices all round.

(Source: The Times of India dated 16-11-2012).
levitra

India Inc braces for stricter bribery laws

fiogf49gjkf0d
India Inc is gearing up to face more stringent and specific anti-bribery laws with the government planning to amend the Indian Penal Code (IPC) to cover bribes given domestically by the private sector.

Once this comes into force, the employee concerned and also the company’s management could face imprisonment of upto seven years. It is likely that the proposed IPC amendment would be broad based and, in addition to bribes given to public officials, will also cover bribes within the private sector (such as company A, a supplier, bribing an official in company B to bag huge orders).

levitra

Nine of ten, unemployable – No movement yet on quality control in higher education

fiogf49gjkf0d
The state of professional higher education in India is abysmal. Consider engineering. All told, there are 1.5 million engineering seats in the country. Almost a third of these are unfilled, so about a million engineers are produced every year. Yet, barely 10 per cent of them are readily employable. About a quarter don’t know enough English to make sense of the curriculum. The tab for this monumental inefficiency is picked up by the companies that draw from this pool. Every year, they end up spending thousands of crores of rupees to retrain the fresh graduates and make them job-worthy. The situation is no better in business schools. Unlike engineering colleges, the rot has not been measured here. But it can’t be vastly different. People are, naturally, disillusioned: the number of students who appear in the entrance examinations for business schools has fallen steadily for three years. There are as many as 300,000 seats on offer; about one-third of this capacity is vacant. As a result, close to a hundred business schools have shut down in the last couple of years. More are bound to follow.

 All engineering colleges and stand-alone business schools are regulated by the All India Council for Technical Education (AICTE). Business schools under universities are regulated by the University Grants Commission (UGC). The AICTE has thus far focused exclusively on fattening the supply pipe of engineers and MBAs. The logic is that India’s higher-education enrolment ratio is very low compared to other emerging countries; to improve that, the AICTE has been liberal with approvals. This strategy is turning counterproductive. The AICTE should now focus on the quality of education imparted.

Employers complain that the output of engineers and MBAs is poor because the teaching faculty is weak. Engineering colleges and business schools, in turn, say that’s because the salaries are regulated by the AICTE, which keeps them from hiring good teachers. While the norms for engineering colleges are fairly stringent (not less than 2.5 acres of land, at least one acre of land for every 300 students, working capital of at least Rs 1 crore and a studentteacher ratio of not more than 15), those for business schools are lax: 20,000 square feet of built-up area, seven faculty members, 20 computers, 2,000 books in the library and subscription to 30 journals. The lack of entry barriers has caused the glut and the consequent fall in quality. These are issues that the AICTE needs to address urgently.

The crucial reform this sector needs is more effective legislation. Legislative initiatives like the Higher Education and Research Bill, 2011, which seeks to replace the AICTE and the UGC with a commission responsible for ensuring quality, and the National Accreditation Regulatory Authority for Higher Educational Institutions Bill, 2010, which will make it mandatory for all institutes of higher education to be accredited by an independent agency, have not made much headway. Unfortunately, in another craven surrender to its allies, the government reportedly withdrew the latter Bill – two years after its introduction – on Tuesday, because the Trinamool Congress had objections. Surely these objections were not new? If so, why has the human resource development ministry waited for so long to review the Bill? Such lack of seriousness in reform will only worsen the sector’s crisis.

levitra