Showing posts with label poverty. Show all posts
Showing posts with label poverty. Show all posts

Tuesday, February 20, 2024

Character & Competence

 

I am tempted to republish this article in this blogpost as the nation needs to rethink, reinvigorate and move forward to reach its visionary goal of becoming a developed nation. 

Character and Competence  

 

 

B Yerram Raju 

 

Economist and Founder-Director, Telangana Industrial Health Clinic Ltd. Co-Author of the book ‘A Saint in the Board Room’ (2011)

 

Global Inequality Report 2022 mentioned that top 10 percent earn as much as the bottom 64 percent. India’s policy reforms during the last two decades saw high growth and high inequality levels intermittently. Quite often we also witness confrontation between the legislatures and Courts. We have also come across persons of acknowledged high competence landing in jail. Why?   

 

Sustainable and inclusive growth demands both competence and character. In order to define competence and character, and seeing the paths of their convergence, some storytelling becomes necessary.

 

The McKinsey Global Institute’s latest research on human development in Mapusa, a small town along a historic trade route in Goa, and in Porto, the second largest city in Portugal, unfolds “the story of both places that had virtually the same GDP per capita of $33,000 in 2019. At the country level, they are worlds apart: India’s GDP per capita was $6,700 (Purchasing Power Parity) or US$1941.82 in 2019, compared to $34,900 in Portugal—overall more than five times less.” 

 

Nevertheless, we are witnessing a few reputed leaders of self-aggrandisement and self-esteem directing the nation into the debris of material prosperity while a few others are wedded to the development of society. Hence, there is a strong need for recalling the basic principles of living that our inherent culture taught us emphasising competence with character.

 

S Radhakrishnan, the philosopher-statesman of India, said: “The ideal man of India is not the magnanimous man of Greece or the valiant warrior of medieval Europe but the free man of spirit who has attained insight into the universal source by rigid discipline and the practice of the disinterested virtues. He has freed himself from the prejudices of his time and place.” Indian heritage lies in humanism and universality. This sets the tone for redefining character and competence as traits of individuals and corporates. 

 

Wheels within Wheels

Meta, Amazon, Google, Wipro, Microsoft etc, are in no mood to keep their roasters intact. Jobs are removed in tens of thousands. NINJA (no income no job, no asset) had set in again. Banks and housing, and real estate companies are scared of their recoveries. Rising interest rates, lowering consumption sentiments, volatile markets, and untamed inflation are at the beginning of a new end. 

 

India, for the moment, seems to make a difference, raking in higher than expected revenues in GST and GDP growth forecast from the CRISIL placing it at 6 percent and Nomura at 5 percent in ‘23-‘24. When winter sets in, can spring be far behind?

 

Pure economics defies answers to many problems confronting society, while behavioural economics does offer solutions if character and competence move like two wheels of the forgotten bullock cart. 

 

If persons of character are afraid of their shadow and fail to take decisions keeping in mind the three ‘angel-robed demons – Central Vigilance Commission, Central Bureau of Investigation and Comptroller-cum-Auditor General’, competence in them takes a backseat. Autonomy, transparency, and timeliness in taking decisions never mean ignoring rules and regulations.

 

Lack of character is different from failure of character. Lack of character is unpardonable while failures are remediable. People who fail should be given an opportunity to correct and they should be made clear about the boundaries and consequences of the failure.

In Chapter 13 of Bhagavad Gita, (Kshetra, Kshetragjna Vibhaga Yogam), Lord Krishna defines the character: ‘Amanitvamadambhitvam, Ahimsaakshantirarjavam, Acharyopasanam, Saucham, Sthyryamatmavinigrahah’. The substance of the sloka is that a person with character should be devoid of pride and disrespect; should be humble, patient, and steady; should be able to have control over his self; be clean and clear in thinking and have restraint. We are at a point where we know what is right but are hesitant to adopt it. The Supreme Court had to pull up a plaintiff over the penalty sought on YouTube for airing what he preferred to see. 

 

High Character, Low Competence

How do we handle people on our leadership team who evidence the highest character, and the best motives, but are incapable of doing effective work? In a matrix of competence and character, fixing such people would be difficult. Organisations also skip them while mapping coaching and mentoring persons for results and sustainable growth. The loss is to the organisation and not to that person.

 

If we can draw a matrix of high character with high competence, high character with low competence, low character with high competence, low character with low competence in a Board of Governors, we will be able to establish the reasons for the failure of many a corporate who got the best ratings but ended up as disasters. 

 

The high character – high competence scenario will automatically lead to a high corporate governance (CG) scenario. But one without the other will not lead to a good CG scenario. It is said, “Economics without ethics is empty, and ethics devoid of economics is limp”.

 

We did not learn our lessons after the 2008 recession. The proverbial Vijay Mallyas proliferated and none of the cases of misgovernance and colossal bank losses got resolution. Over a decade of arguments in the highest courts of jurisprudence, involving malfeasance, misappropriation, corporate failures, and bad governance still defy resolution. On top of it, even the Insolvency and Bankruptcy Code gives the longest rope for resolution and those resolved, benefitted the errand.  

 

It is hard to disagree with EV Ramasamy Naicker, a Tamil philosopher of the 20th century, who said, “When I used to carry heavy bags during my younger days, my back would bend due to the weight, but not due to shame. Being straightforward and having less food is far better than diluting our character and taking lots of rich and quality food.”

 

The history of today’s wealthiest nation tells us about what happened between 1923 and 1948:

-        President of the largest steel company, Charles Schwab, lived on borrowed capital for five years before he died bankrupt.

-        President of the largest gas company, Howard Hudson, went insane.

-        One of the greatest commodity traders, Arthur Catton, died insolvent.

-        President of the New York Stock Exchange, Richard Whitney, was sent to jail.

-        A member of the President’s Cabinet, Albert Fall, was pardoned from jail to go home and die in peace.

-        The greatest ‘bear’ on Wall Street, Jessie Livermore committed suicide.

-        President of the world’s greatest monopoly, Ivar Krueger committed suicide.

-        President of the Bank of International Settlement, Leon Fraser committed suicide.

It was the pursuit of money to the exclusion of other goals that caused them their downfall.

 

Market behaviour largely depends on individual investor behaviour like buying-high-selling-low or buying-low-selling-high. Behaviour here largely is related to the character and not pockets. This character is typically borne of greed and not need. It is more like a honeybee that flits from one flower to another, sucking honey as it flies. But when it perches on its hive, it stops humming. 

 

Man is made by his own beliefs. ‘As he believes, so is he.’ (Bhagavat Gita). Henry David Thoreau may have told in different words, the same thing: ‘What a man thinks of himself: that is what determines, or rather indicates his fate.’

  

We need resilient boards of companies that can build teams of executives with foresight, virtuous and timely response, and adaptation capabilities.

 

India is at the cusp of change and the dream of India 2050 has to be realised by a generation that is seeing the garbage at the foot of the hill. They should be directed to reach the top of a mountain and every step counts. It is competence with character that should enable a crowning future. 

https://epaper.telanganatoday.com/Home/ArticleView?eid=1&edate=20/01/2023&pgid=48693

 

  

Sunday, February 6, 2022

Disappointing Union Budget 2023

 

Bluster Budget

BYTELANGANA TODAY

B. Yerram Raju

PUBLISHED: 6TH FEB 2022 12:02 AM | UPDATED: 5TH FEB 2022 10:27 PM


Budget leaves these ladies in search of viable options

Usually, the Economic Survey presented a day before the Union Budget is expected to lay the foundation for a policy direction. It acknowledges the challenging times for policymaking – this time against the backdrop of the pandemic impact, especially on the vulnerable sections, fall in consumption in the medium term and serious supply-side disruptions. There are some half-truths as well when it said that government expenditure has pushed consumption by 7% in 2021-22. Even credit flow was tepid till the end of the second quarter of this fiscal.

The Union government’s debt crossed 59.3% of GDP from 49.1% a year ago. Recovery of the economy is unlikely to contain fiscal deficit as the major item of investment is through public debt and less through tax revenue. The Finance Minister’s Budget speech has little substance to combat either inflation or inclusivity. It also seemed to ignore several suggestions from the pre-Budget meetings.

Roads, highways, and railways are dependent on States for making available the land but the States have not been taken into confidence and several State-led projects were not supported by the Union government

The Budget has laid, of course, a foundation for large investments in infrastructure to flow under public-private partnership. But roads, highways and railways are dependent on States for making available the land, and the States have not been taken into confidence. Several State-led projects were not supported by the Union government during the year. The same is the case with the integration of rivers —Godavari, Krishna and Cauvery.

Missing Mentions

The Budget disappoints on inclusive development and climate change. Waste management has no incentive and de-carbonisation too was little talked about. Infrastructure development leads only to temporary employment and in the context of migratory unemployment that saw people dying on railway platforms and highways, literally starving during the first Covid-19 lockdown, and their returning to work, there are no clues. Inflation is least talked about.

The increase in GST (Goods and Services Tax) on which there was wide applause is more on account of inflation than due to the increase in productivity going by the drop in IIP. There was no mention of the revival of manufacturing NPAs in Atma Nirbhar Bharat Abhiyan though the extension of the guarantee mechanism under CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) modification and Sovereign Bond replacing the guarantee for tender participation in public sector markets are most welcome for MSMEs. It is the medium enterprises that got the best of the bargain. The agriculture sector received an apologetic approach — a rise in MSP for wheat and rice accompanied by a fall in subsidy for fertilizers by Rs 35,000 crore.

Gujarat is Nation!

No wonder the Chief Minister of Telangana in a deservedly hard-hitting address, highlighted the thinking and approach of the Union government on several issues, and particularly, those relating to Telangana. For eight years, ie, since the inception of the State, Rs 42,000 crore is all that was given under Central schemes. This is far below the disbursements made by the State under the Rythu Bandhu scheme alone. Jal Shakti, the much-touted scheme of the Union government, had an allocation of just Rs 60,000 crore while Telangana spent Rs 40,000 crore on Mission Kakatiya and Mission Bhagiratha. The country holds 65,000 TMC of water with just around 35,000 TMC utilised. The water policy of the nation is in a shambles.

When the International Arbitration Centre was officially launched at Hyderabad and the State government has allotted enough space for it, it is strange that the Budget announced it as a gift to the GIFT city of Gujarat!

Uniform GST rate for toys, a policy framework for the toy industry and targeting at least 1% of the market share from China would mean a Rs 10,000-crore opportunity for the MSEs. The Budget has done little

Bihar Special Package, Gujarat Bullet Train, Karnataka Metro, Bundelkhand Defence Corridor had space but nothing for Telangana. Gujarat is the only State that received a mention in the allocations to the States as if Gujarat alone represents the nation!!

Further, the Budget should usually consider a few recommendations of statutory bodies like the Finance Commissions and the NITI Aayog. This Budget quietly slipped the recommended allocations to Telangana both under the 14th and 15th Finance Commissions depriving the legitimate share of the State in the Union Budget.

Even under the AP State Reorganization Act, 2013, allocations for important projects like IIM, IIT, IT corridor, Warangal-Hyderabad industrial corridor are forgotten despite repeated representations from the State. This squint-eyed approach of the Union government makes one wonder whether we are under a federal democracy or a unitary rule. This is the reason for K Chandrashekhar Rao calling for rewriting the Indian Constitution, which has seen more than 120 amendments.

The International Arbitration Centre was officially launched at Hyderabad but it is strange that the Budget announced it as a gift to the GIFT city of Gujarat!

Devils that lie in details

Legitimising Crypto

The Budget legitimised the illegal cryptocurrency that has the potential for killing the monetary stability of the large population by taxing 30% of those assets. Finance Minister Nirmala Sitharaman said a “digital rupee using blockchain and other technologies” will be issued by the Reserve Bank of India in 2022-23. “It will also lead to a more efficient and cheaper currency management system.”

The RBI coming up with digital currency would add fuel to the fire, as it may help only the fintechs. This could lead to financial instability in the days to come. Digital literacy is at a 32% level and general literacy at more than 45%. There is a cyber-fraud every day draining the hard-earned savings of lakhs of persons hurting their livelihoods as well.

NEP Neglected

There has been no increase in the allocation for the education sector. The National Education Policy demands at least 4-5% of allocation for the education sector but it ended up with less than 2%. The pandemic led to several uncertainties in education — a mix of institutional and digital education — and the complicity of some digital institutions awarding MBA degree that has been rightly discredited by the AICTE.

Poor Health

The health sector, despite all encomiums in her speech for the remarkable speed and efficiency in delivery of vaccines and improvements in health infrastructure during the year, did not receive even 6% allocation.

Uncertain Jobs

Employment had a serious setback due to the pandemic. Employment expectations on account of infrastructure projects under the PPP model will be project-driven and not stability and security for the persons employed. Fifty lakh persons to be employed in such projects and services sector would be a mythical figure. The Budget is hollow here.

Takers for Tourism

Tourism and hospitality sectors received a big-ticket. But all of it would depend on the people’s confidence in safe travel and safe food. Supply chains for this sector are in serious problems. The allocations would give a psychological boost for the sectors and would not materially alter their fortunes at least for six months after the Omicron settles down without any further variants hitting the economies around the globe.

Globally, commodity markets indicate a slump and have all portends of inflation.

Budget quietly slips the recommended allocations to Telangana both under the 14th and 15th Finance Commissions depriving the legitimate share of the State in the Union Budget

MSME Sector

The MSME Sector has some things to cheer about but much to mourn. Extension of ECLGS (Emergency Credit Line Guarantee Scheme) till March 2023 is welcome but they expect that the banks should extend the facilities to the most beleaguered micro and small manufacturing enterprises. Rs 6,000 crore over the next five years for a rating tool for the sector creates more fears as 98% of enterprises are proprietary and partnerships (family concerns).

The organic databases of G to C, B to B, and B to C would perform as portals with interlinkage of Udhyam, e-Shram, National Career Service (NCS) and Aatamanirbhar Skilled Employee Employer Mapping (ASEEM) portals, giving data a big push. There is no indication whether data itself would provide security instead of collaterals or guarantees sought by banks. The proposal to initiate a completely paperless, end-to-end online e-Bill System in all central ministries will greatly help MSME suppliers as it is to reduce delays in payments and make the process transparent. It is, however, doubtful whether this step would boost skilling, re-skilling, up-skilling and promote new enterprises because of the present levels of digitisation of the MSEs.

Micro and small manufacturers or service providers are sub-contractors and the FM’s announcement of substituting guarantees demanded by the governments and PSUs by a surety bond at the hands of insurance companies could be saving the working capital gap. It is important to see the fine print here and that the subcontractors get their due share.

A fund with blended capital raised under co-investment model facilitated through Nabard to finance startups in agriculture and rural enterprises for farm produce value chain is proposed. Startups will be promoted for Drone Shakti. It will be the large among the SMEs that may take advantage of this scheme. It also depends upon the way the co-investment model is structured by Nabard.

We have not seen much traction of PE/VC investments in manufacturing MSEs and hope that the Expert Committee proposed would provide sufficient comfort for the sector’s access to these funds. Extension of tax redemption by one more year for startups beyond the existing three years would help many service sector enterprises.

Micro and small manufacturing enterprises were the worst hit during the pandemic and many have not been able to revive. While speaking about Atma Nirbhar Bharat Abhiyan, the FM chose to ignore the failure of the subordinate debt scheme meant to revive the NPAs as all banks have woven a wet cloth around it. The manufacturing sector, due to severe supply chain disruptions, has grown only by a modest 1.3% (IIP).

MSEs have sought the lowest cost of capital of which, there was no mention in the Budget. Uniform GST rate for toys, a policy framework for the toy industry and targeting at least one per cent of the market share from China would mean a Rs 10,000 crore opportunity for the MSEs. The sector has been demanding cash-flow-based working capital assessment from the banks as recommended by UK Sinha Committee on which there was no word.

The Budget has done little for pushing consumer demand, particularly in the context of McKinsey estimate of a fall in the retail grocery market by 20% in the next five years.

If GST has peaked to Rs 1.40 lakh crore, it is because of inflation and not because of high buoyancy in production and productivity of the industry. Industry is struggling to stay afloat

Doing Business will be Difficult

To establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15% was introduced by the government for newly incorporated domestic manufacturing companies. The FM extended the last date for commencement of manufacturing or production under section 115BAB by one year, ie, from March 31, 2023, to March 31, 2024.

The ‘One Station One Product’ concept is laudable as a souvenir shop will help generate business and spread awareness about local art and craft.

Although the Budget 2022-23 proposes several initiatives for ‘Ease of Doing Business’, including modernisation of building byelaws, Unique Land Parcel Identification Number for IT-based management of land records, Accelerated Corporate Exit and introduction of new ‘Updated return’ — a provision to file an Updated Return on payment of additional tax, the cost of doing business is bound to go up and this will dampen the initiative.

The country needs judicial reforms and several regulatory reforms to make us highly competitive. The Budget was silent on these. The issue of high Customs duties and non-tariff barriers on basic raw material, other than steel, such as copper, aluminum, and polymers also remain largely unaddressed.

Poor, earning less than $1.90 a day as per purchasing power parity of 2011, have nothing to cheer. The Union government seems to be for the rich, of the rich, and by the rich. While rich by itself is no evil as everyone would like to be one, the road to such reach should be laid by governments. Some old tools, like more investment through PPP and disinvestment, to ensure a level playing field have been dusted off to provide the companies some cheer. The Budget is deceptive in approach and has less prospects of success.

(The author is an Economist and Risk Management Specialist)

Bluster Budget (telanganatoday.com)

Thursday, February 3, 2022

Prof. R. Radhakrishna, Eminent Economist

 


A Tribute to Prof. R. Radhakrishna, Chairman, Centre for Economic And Social Studies

A treasure trove in economics and econometrics – he has left a big void with his sudden demise on 28th January 2022. It is difficult to imagine he is no more. I had three interactions after his movement to Visakhapatnam following his illness. Pandemic did upset him greatly. Even in our brief interaction, he expressed his deep distress over the impact on the poor and migrant labour that the pandemic has been causing.

My first association with him was when he worked with the Agro-Economic Research Centre, Andhra University in the company of Prof. G. Parthasarathy, a great economist of the times. “Professor Radhakrishna’s life-long work on Growth, Inequality, Food Security, Poverty, and wellbeing is widely recognized as illuminating, authentic and credible.” (Ch. Hanumantha Rao, in a blurb on his book – The Essays on Indian Economy). 

During my association with Farm and Rural Science Foundation, I invited him to deliver the first J. Raghotham Reddy Memorial Lecture. He readily agreed and laid a firm foundation for further work of the FRSF. After my joining Administrative Staff College of India, my interaction with him became closer. He invited me on a few occasions to talk to the researchers of CESS on the research ideas and methodologies on credit to the poor.

When he moved to IGIDR, he associated me for a meeting to discuss the syllabus of Law And Economics Course. He involved me in a couple of Committees he chaired: Agricultural Indebtedness and AP Agriculture. He is a great leader and effective coordinator. His commitment to research and a concern for the common man, and belief in institutions that could contribute to the development of the poor, like the cooperatives, FPOs leave an imprint on the Indian economy.

When I requested him to write a Foreword to my book on India’s Economic Resurgence, he readily agreed and released it in the CESS Auditorium.

His erudition on Poverty Studies and Agriculture gave me immense benefit. My interaction with him at the Andhra University, University of Hyderabad as Vice Chancellor, as Director, CESS and IGIDR, Chairman, ICSSR, and Chairman of Indian Society of Agricultural Marketing gave the new angle in him. He is a great administrator, researcher,  a good teacher, affable person, a good conversationalist, and a great human being. I am sure the galaxy of researchers built by him would carry on his legacy. I bow to him in all humility. May his soul rest in peace.

Monday, January 27, 2020

Inclusive Agenda


Dedicate the Decade to Women

Seven decades of Federal Republic made India sterner stuff. Optimists invariably look at the half full glass while pessimists see the other half that is empty. But in the other half lie the challenges and opportunities. This retrospect becomes necessary in the backdrop of the latest Oxfam Report on Inequality released on the eve of Davos World Economic Conference that just concluded, putting India in somewhat bad light.

India always proved its might and solidarity in every type of crisis. From Bengal famine and pestilence to fighting Pakistan, from Bhuj earthquake to Tsunami, continual floods of Brahmaputra, Ganges, and Godavari the huge diversity of the nation did not come in the way of overcoming all the crises.

India’s growth and poverty reduction with by far the second largest population in the world, has contributed even to reducing global inequality. Famous economist Surjit S. Bhalla is the first to differ from the international wisdom and establish that ‘if poor defined as fraction of population in 1980, then for each 10% rise in consumption by the non-poor, consumption by the poor rose by 18%. Millennium Development Goals (headcount ratio) target of less than 15% poor by 2015 was reached quite ahead and only 10% of the developing world was poor. Such reduction, however, has no parity when it came to reduction of inequalities.

World Development Report 2000/2001 mentioned: the average income in the richest 20 countries is 37 times the average in the poorest 20 – a gap that doubled in the previous 40 years.

Union and State Governments have independently and together evolved schemes benefitting the poor and absolute poverty in India declined substantially. Poverty levels have gone down in India from 50% in 1993-94 to 23% in 2016-17 in rural areas and in urban areas correspondingly from 32% to 13%. The unrecognized fact is that even rural infrastructure in terms of roads constitute 72% of the road length of the country. These developments need not lead us to complacence as there is lot more ground to cover.

Oxfam Report 2020 highlighted two aspects: the gap between the rich and the poor and even among poor, gender inequality. 2153 persons had more wealth than 4.6bn people. Report on India omits to mention the political constituency that is full of billionaires. If the perverse subsidy regime has to be reversed, it should start from this constituency in favour of poor women of the country.
The wide divergence is attributed however to the underpaid and unpaid care work of women in homes. The Report patently ignored the intangible contribution of women in India – a culture of caring for home and bringing up the family to prosperity.

V.V. Giri, the fourteenth child of the family became the President of India and he married a SC woman who was also a poet. While this is not to mention that there was virtue in big family, upbringing of the child to the expectation of the Mother is still sacred in many a Indian home. Mother is the first teacher in the home. Monetising her ‘care’ is the value she creates for the human resource.
During the last three decades, influenced by globalization and imbibing western culture, the otherwise high value and culture of Indian youth suffered such care. Indian women demonstrated in the past a unique balance between home and work, whether in rural or urban areas. This balancing act is at the core of the ‘care’. The feminist and human values argued by the Oxfam report needs a relook at least in India. It is not right to belittle the role of Mother.

My Mother, who gave birth to six sons and six daughters, though studied only class V, studied the Indian epics Mahabharat and Ramayana, Bhagavatham and Bhagavadgita apart from several books in Telugu literature and learnt English with her children. She always used to say with pride that her contribution to the GDP of the country was substantial and lay in the NRI remittances of her two sons who went abroad and the grandchildren working in the Information Technology sector abroad, her other sons and daughters traveling throughout India at different points of time in the year either on leisure holiday or pilgrimage. The progeny of my parents is 100 and half of them are working in different parts of the globe. She brought us up when my father started his income at Rs.23 per month in 1936 of British India to Rs.250 per month on the day of retirement in 1974!!

Measuring women’s contribution to India’s GDP terming as one of the lowest in the world at 17% needs correction as GDP hides more than what is revealed. The issue, it rightly says, at one point is not just limited to women’s participation in the workforce alone.

Violence against women is another aspect that has been widely reported both in the Report and outside. There is also regional difference and across the castes in such reports. Dalit women were invariably the target and mostly in northern and western India compared to the rest of India.
Villagers invariably debate on the need for girls getting engaged in wedding at the age of 15-16 to provide security to them. It is not so much the unpaid care work of women that is the source of violence and to support such argument citing Krishnaraj report of 1990-91 EPW is perhaps a travesty of the current trend.

During the last three decades, self-help group movement has substantially gained traction in empowering women economically. Economic empowerment for sure is the best way of providing sustainable intervention in women development.

Of course, what needs correction certainly is to make sure that ‘40% of 15-18 year-old-girls go to school. Empowering women will be empowering the nation. It is this context that calls for reservation to women in every field to move to one-third of the population irrespective of caste or creed in the place of all existing reservations. Once this happens, women in SCs, STs, backward castes, and OBCs will automatically fall in the reserved category and would rectify the societal imbalance. If this decade is dedicated to women, 71st Republic Day 2020 will write the future history differently.
*The Author is an economist and the views are personal. Published in Telangana Today on 25.01.2020


Tuesday, June 25, 2019

The Economy in Dilemma amidst Political Stability.



Union Budget by the first lady FM in 50 years is amidst great expectations in this era of political stability. For her, all is not hunky dory. GDP growth is projected by the RBI at 7.1% for the current fiscal. We can set aside for a moment the arguments of Arvind Subramanian and the controversies surrounding the calculus of GDP.

CEIC data reveals that consumer confidence grew at 14.8% in March 2019 compared to the earlier quarter although Business Confidence declined to -1.1% in June 2019 compared to the earlier quarter of a growth of 0.4%.

The dilemma: household debt was 10.9% of GDP while external debt was 20.1%. Private consumption declined to 59.3% of its nominal GDP in March 2019 declining by 2 percentage points from the previous quarter. Gross savings rate was at 30.9% of GDP. With the number of census towns increasing by 186% in 2011, urbanization of India moved to 31% space.

World poverty statistics show that poverty declined to some 70mn in June 2018 from 306mn in 2011. This should mean that spending money to keep people above poverty line, euphemistic subsidies should sharply decline. But the Union and several States are releasing unemployment allowances and loan write-offs along with caste-based dole-outs in the name of poverty!!

NCAER statistics place the middle-income population at around 153mn while the lower middle-income population is at 446.3mn (Krishnan & Hatekar, EPW 2017). The salaried persons constitute still the dependable taxpayers. There is only a marginal increase in tax to GDP ratio between 2008 and 2018 from 17.45% to 17.82% while the GDP and per capita income have doubled during this period. Relentless efforts are needed against tax havens.

We have seen the way audits are conducted calling for disqualification of the so far reputed Deloitte, PWC not excluded. Hiding incomes has become honourable and paying taxes honestly unwise. This situation unfolds great opportunity for the FM to see new frontiers in taxation. Direct Tax code is expected to change and it may tilt the scales.

All the legislators and Parliamentarians with very few exceptions are billionaires. It is time to start rationalizing subsidies and incentives for this group. There is also a case for taxing the rich among farmers – defining them at a threshold of six times to eight times the salaried. The mechanics are difficult but not impossible. Of course, most of them being in politics, irrespective of party affiliation, would engineer ghost rallies against even any modicum of such thought but should be fought over by a stable government trading off with the benefits for the rest of the farm sector.

Manufacturing growth is almost stunted amidst continuously declining credit for the last five years but for the recent marginal increases. Incentives to manufacturing start-ups should be more fiscal than financial and rebuilding the eco-system for sustainable manufacturing growth brooks no delay.

The rural-urban hiatus can be addressed adequately by encouraging investments in modernizing agriculture and value addition initiatives in rural areas. Rural industrial enterprise clusters or Rural Enterprise Zones (like the SEZs) can be the best answer and therefore, fiscal concessions for such investments will two birds at one shot: achieving employment and economy growth.

Actual projections for such fiscal outgoes would be far less than the bonanza that the urban and rich as also the corporates expect from the FM. In addition, as I have been untiringly mentioning since 2005, a percentage of share transaction tax in a rising economy and growing stock market would fetch to the exchequer instantaneous revenue with no tax administration expenditure.

Government should stop incurring public debt to save irresponsible lenders with capital infusion just because it happens to be the owner. Any additional capital from government should go with stringent conditions on the Chairpersons. Governance improvement shall be the focus and the RBI should withdraw its executives on all Bank Boards so that its regulatory rigour can be on par with a food regulator at the time of introduction of new products.

Women have more courage than men when it comes to the question of saving a child from a disaster. Madam Finance Minister should be able to pull it off.
*The Author is an economist and risk management specialist. The views are personal.
Published on 24th June 2019

Wednesday, July 1, 2015

Slashing Centrally Sponsored Schemes

Different states have different poverty levels. Prudence and diligence in spending on social sector schemes would emerge with the centre taking minimum share and allowing states to carve out their budgets in a manner that their poorer citizens require. 

One thing that baffles me is the enormity of social expenditure budgets by states like Andhra Pradesh and Telangana with the percentage of poor in total population in the range of 10-12 percent spending more than 50 percent of their budget on populist schemes. They are not focusing even at that expenditure levels on giving free education to the poor by improving infrastructure in all the government schools on a mission mode and providing health care at the door step by improving the primary health care centres in villages.

Small, marginal farmers and lease holders should get protection from the wild market fluctuations through price buffering, beyond the horticulture crops.

Wednesday, June 17, 2015

Still too many go hungry

http://www.thehindubusinessline.com/opinion/still-too-many-going-hungry/article7322506.ece


Despite the high growth years, malnourishment stalks the countryside. This calls for a small-farmer led focus
At a time when India’s GDP growth is hopefully pitched at 7.5 per cent this fiscal, touted to be higher than China’s, three global reports of significance also grabbed the headlines: The Global Findex Data Base 2014The Global Food Policy Report of the UN and the State of Food Insecurity in the World, 2014.
Ahead of all these, the IMF and the World Economic Forum reported that 25 per cent of India’s population still remains poor.
The Global Findex Data measured the financial inclusion around the world. The other two reports dealt with the food insecurity and the measures to tackle them.
It must be remembered that the data is mostly up to March 2014. The findings are of great import to this government for designing policies tackling financial inclusion, hunger and malnutrition.
The government would like to measure the poor by the JAM method — Jan Dhan account, Aadhaar, and the mobile. It has been acknowledged universally that there were no deaths due to hunger. But the farmers who produced food committed suicide were burdened by excessive debt.
The undernourished poor, like the Jan Dhan accounts, showed an impressive decline in the reports and these are counted once every three years.
A range of indicators can be used to measure a nation’s food security. These include average dietary energy and protein supply, access in terms of road and rail line density, domestic food price index, prevalence of under-nourishment, stability measured in terms of cereal import dependence ratio, political stability as well as absence of violence and terrorism, undernourished children below five years, anaemia among pregnant women, and vitamin A and iodine deficiency in the population.
Measuring insecurity

Malnutrition is redefined to include obesity and overweight. In India, child stunting (under five years) is 47.5 per cent while undernourishment is 15.2 per cent; whereas overweight population is 11 per cent. The country witnessed an average GDP growth of 8.7 per cent in 2003-08, 6.7 per cent in 2008-09, followed by 8.6 per cent and 9.3 per cent in the next two years.
When the growth of GDP was high and food inflation was also high, there was a decline in the percentage of under-nourished population.