One of the weirdest news headlines I came across today was – “France raises ‘terror tax’ to support victims of attacks”. The Associated Press news article further read – “French citizens will contribute an extra 1.60 euros ($1.67) on their property insurance policies to help finance a fund for victims of the extremist attacks that have recently hit the country.” (here is the link to the article). I mean, I don’t think I have to write a blog post on how stupid this sounds. If anything, it is the responsibility of the government to prevent terror attacks on its citizens. Failing to do so should result in holding the government accountable and not in punishment for the citizens who have entrusted the government to keep them safe from such attacks. Moreover, how can a government raise such a tax that sounds and looks like a permanent or long term policy? Is this like France acknowledging – oh, we are going to have attacks every year from now on, so let’s raise taxes and setup a fund to pay the victims on a regular basis? Sigh! Frankly, it is disgusting! Instead, how about every time a terrorist attack happens in France, a thousand euros is automatically deducted from the monthly pay check of all federal lawmakers in that country and that money goes into the fund that helps the victims?
Friday, December 30, 2016
Thursday, December 8, 2016
India's cash ban: A royal intention, a reckless move
As many who follow international news would know by now, the Indian government recently banned all 500 rupee and 1000 rupee notes that were in circulation (these notes constituted 86% of the total cash that was in circulation in the economy). I had been trying to not comment on this for sometime because there are clearly pros and cons to this – and I was waiting to see which will outweigh the other. And to be frank, I am still waiting to see how this plays out, but in the meantime, I just couldn’t stop myself from commenting on what seems to be, in my opinion, a grand move with goddamn repurcussions for the most honest, hard working people in the country, who frankly built that country despite the government and not because of it.
First of all, let’s take the pros of this sudden action by the central (federal) government. India is one of the most corrupt countries in the world. Period. No ifs. No buts. And this action of banning or making the 500 and 1000 rupee notes invalid has basically made all that corrupt money to become worthless – well, atleast the ones that were held as cash. Putting aside the fine points of the economic arguments aside for a minute, this is a huge positive to the quality of life for the Indians in the long run – because all the corrupt money (or illegally obtained money) that was in the economy was the root cause of various law & order issues – including growth of land mafia, gangsters related to political parties and so many more illegal activities across the country. And to make things worse, these illegal activities were becoming a business where younger generation Indians found a way to make money rather than confront it. So in other words, all this corrupt money was changing the culture of the country itself. So rooting out this gives a fresh opening to make things better in a country that has so high potential with a billion plus individuals.
But what are the cons? Well, consider this: how would it be if in order to confront an illegal activity going on in a house in the street, the entire street is destroyed? That is how this sudden policy action seems to be. And in that same street where the illegal activity was taking place, poor farmers were residing, migrant construction workers who buy their lunch with the money they earned that morning were residing, rural women entrepreneurs who learnt a skill through a cash based micro-finance loan and were giving their best to escape poverty were residing, older generation of grandparents who thought that the most responsible thing they did for their future generation was saving and hoarding cash that they earned so hard throughout their life were residing, children whose parents have never even seen the gates of a school but were ambitious enough to get a school or college degree through a loan or their parents savings were residing, patients who have saved every paise (penny) their entire life in order to finally have their life-saving surgery were residing, small business owners who have risen through decades despite the government policies and not because of them were residing, and so many other innocent, hardworking, wonderful people were residing. In other words, more than 90% of India was residing in the same street.
Why did the government had to do such a drastic move? Well, they provided two reasons and I don’t buy both of them. Here they are:
1. National Security concerns due to the prevalence of fake/counterfeit currency flooded in by foreign countries (a.k.a Pakistan) to destabilize India: Well, I am not a national security expert and let us assume (and most likely) this is true. But, common sense says, this amount, if anything, has to be so minimal relative to the overall huge Indian economy and the cash that was in circulation that it doesn’t warrant destroying the entire street (like I mentioned above). Moreover, fake currency doesn’t cross borders itself. Someone is bringing it in. So a responsible government would try to identify the source through which the counterfeit currency travels and would work on preventing it instead of…again, what is it? – that’s right! – destroying the entire street.
2. Unearthing black money: So the money that was legally or illegally earned but haven’t been reported and paid taxes on is called black money. Again, it is legally or illegally. Considering just the legally earned portion for now, for some reason, in a country like India, the officials fail to understand the concept that black money is not fake money. When we pay taxes, the government collects it as revenue and spends it back in the economy. When we don’t pay taxes, the individuals who have been hoarding that cash spend it back in the economy. Was that clear? In both ways, the money comes back to the economy. Now, I strongly believe we all should pay taxes so that we can build a safer and equitable society that covers all sections of the population. But in a country like India, where governments have either been inefficient or corrupt since independence, people have accustomed to under-reporting their income or have accustomed to not understanding the benefits of paying taxes. And this is 99% India. I re-iterate and I am not exaggerating – this is 99% India. So, in a country where tax revenues have been slowly going up every year, tax-base widened every year through gradual policy changes (like increasing the bond paper value on real estate transactions, mandatory income tax reporting on gold purchases above a certain amount at the time of purchase, or on other expensive transactions, or bringing more and more sectors into formal category through globalization and opening up to foreign investments), why on earth, in the name of “I know better, so I want to spend your money”, would the government disrupt and…..what is it again? right, right – destroy the entire street where more than 90% of Indians live?
But now that this disastrous move has been done, what next? Well, it all depends on what kind of fiscal policies the government comes up with? And the fiscal policy I would like to see and recommend is a tax holiday for a significant amount of time for all income below 50 lakh rupees (approximately $ 80,000) annually. And a moderate tax on the next 50 lakh earned. Income beyond that could be taxed at regular rates. With all the extra revenue that the government has obtained with the unearthed black money, this shouldn’t be a problem for the government to do. But it is extremely important for people to start generating and accumulating wealth again (legally). Without accumulation of wealth, because of this drastic move, the psychological damage that will be incurred by the sudden reduction in the monetary value of all currently held wealth will significantly dent demand growth for years to come. Without demand growth, local and foreign investments will slow – thereby resulting in further rupee weakness and inflation – which will once again hurt the poorest of the poor much and will suffocate them beyond what they can bear. The middle class will also shrink significantly while the rich will start to park and grow their money abroad. So a major policy, this time not just a bold one, but also a rational one, is urgently needed on the fiscal front. And I sincerely hope that the government uses tax-holiday as that fiscal weapon instead of government spending. There is never a time in today’s world where a government can better spend people’s money than people themselves. Governments can only facilitate growth, but ultimately growth itself has to come from people.
The government has been royal in their intentions, but reckless in their moves. It’s time for the government to correct that mistake – by first acknowledging the problem and the work before it, and stop being cocky, and build the street back up again!
Monday, December 5, 2016
A daughter to two, a mother to millions
Today marks an end of an era in the politics of the great state of Tamil Nadu in India. Jayalalithaa Jayaram (or more popularly called as ‘Amma’ (Mother) by the millions in that state), a leader of a major political party, and the current chief minister of Tamil Nadu has passed away at the age of 68 following a cardiac arrest. When I heard the news this afternoon, there were no mixed feelings. Instead, I had just one feeling – a feeling of sadness. Or more appropriately, a feeling of loss.
1. http://indianexpress.com/artic
2. http://indianexpress.com/artic
I don’t associate myself with any political party in any part of the world and I frankly am not a fan of any politician. And when it comes to Indian politics, it can be written in stone that almost every politician in India is corrupt in one form or the other. Jayalalithaa was not an exception. I have lived under her administration in Tamil Nadu and things were not always clean (though under these circumstances one cannot say for sure if anything directly relates to her. She was convicted of corruption in some court cases, acquitted in many, and acquitted in few through appeals and some cases and appeals still pending before the courts). That being said, one also cannot deny the fact that she has been a force – of some good and some bad – in the lives of nearly 70 million Tamils who live in that state. She entered politics in early 1980s and has administered that state for nearly 15 years in four different terms (sworn 5 times as Chief Minister (akin to a Governor in the United States)).
Of the nearly 70 million people in Tamil Nadu, there will not be a single person who wasn’t affected by her or influenced by her. Affected – by the various policies she put forth during the many years of her administration; Influenced – by the courage, perseverance, grit and political calculation she displayed over the course of her lifetime.
For all the court cases before her, and for all the judgments against her, people continued to elect her to represent them as the top elected official of the state – as recently as 2016 when she beat the anti-incumbency wave and rode to electoral victory for a second consecutive term in the state (the only politician in the state to have done that in 30+ years). She had a mass following. She was looked upon with awe and inspiration by her followers, and with fear by people who stood opposite to her. Even her arch political enemies have at times praised her courage and boldness with which she carried on her government.
This is not to say that I liked everything about her. In fact, I hated so much about her. Corruption was still rife in the society and government under her administration. Work and progress in the state was slow at times because of the iron grip she had on all sections of the government. The ministers who worked under her were terrified of her. So terrified that they would literally fall at her feet and get her blessings when they see her. It was frankly disgusting to watch. But at the same time, the same iron grip quality of her is the quality that maintained law and order in the state far better than many other administrations. The courage she displayed was the quality that made her make bold political calculations where today 37 seats in the Indian parliament, the second largest by a single party in the whole of India, are being held by her party. And this came at a time when the nation was swept by the ‘Modi’ wave (when Mr. Modi became the prime minister of India). The grit that seemed like an inborn quality of her was the quality that made her daringly take neighboring state governments of Kerala and Karnataka to courts to make sure that the people of Tamil Nadu get their fair share of water from various water and dam treaties. The boldness that radiated from her like a light from the sun is the quality that made her the strongest voice of the time against the plight of the innocent Tamil civilian population in Srilanka at the height of the final civil war there.
Yes, she had her flaws. She was no more than a shrewd politician. Every policy she put forth had an electoral calculation in her mind. But that’s not to say that many of her policies – though politically calculated they might be – hadn't actually helped the people who needed help the most. Take the ‘Amma canteen’ policy for example that she implemented few years back. On one hand, it was a huge waste of tax payers’ money because it provided subsidized meals to all people of Tamil Nadu in various canteens setup across the state. But on the other, in a state where millions go hungry everyday, it was a Godsend. This policy literally eliminated hunger in the state.
Or take the fact that under her administration, Tamil Nadu, which was an electricity deficit state, turned into a surplus state. Or the fact that in 2016, under her administration, Tamil Nadu exceeded the ‘Renewable Purchase Obligation’ target from the central government, and was looking for ways to sell surplus wind power to other states where they haven’t met the requirements. At a time of rising nationalism in India, she pushed against the ‘Sanskrit week’ initiative by the central government, and strongly voiced against the central government directive that called for the compulsory use of Hindi in twitter by all central government officials - a group that included officials from Tamil Nadu and other non-Hindi speaking regions.
And when many people and frankly many leaders across the country were busy trying to (or not) understand the details and complexities behind the bills like the anti-corruption ‘Lokpal’ bill, she displayed her brilliance by calling for an exclusion of the office of the Prime Minister in the Lokpal bill, even when she was in the opposition to the then prime minister's party, citing reasons of dangers involved in foreign powers using such a national law to undermine the office of the Prime Minister at critical times. Or when the entire country stood behind the recently passed Goods and Services tax bill, that completely revamped India’s age-old tax system, she displayed her courage and brilliance by being the sole voice in opposing some fine sections of the bill – by citing the disadvantages and potential loss of revenue and state autonomy in fiscal policies that she considered her state, which she rightly pointed out as a ‘producer’ or ‘manufacturing state’, would incur due to the fact that Tamil Nadu consumes less than what it manufactures. And as much as her political life was filled with complaints of corruption and what-not, it was equally filled with many such brilliant endeavors.
Jayalalithaa was born to an actress, she herself was an actress, never married, spoke six languages, was a topper in her school, well-read, a lady of immense knowledge on various state and global matters, a ‘lioness’ to her opponents, an ‘Iron Lady’ to her supporters, ‘Amma’ to her followers, and a stateswoman to many people, including me, who saw her objectively within the Indian context. Given the times, it is a huge loss to Tamil Nadu and frankly to India itself.
She will be missed. May her soul rest in peace.
Further references:
2. http://indianexpress.com/artic
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