Lockdowns ,Unlocks and White elephants!

 

We have had four lockdowns and unlocks across the country.To start with it was Complete lockdown, which struck like a bolt from the blue starting from March 24th till May 31st 2020. Many prominent opposition leaders severely criticized the Govt for this lockdown accusing Modi of dictatorship tendency throwing the hungry, poverty-stricken, migrants on the streets and pavements uncared for. The second lockdown little relaxed was in June as experimentation and once the pandemic started spreading wildly, Govt. was again back to stricter lockdowns. But by the end of june, Central Govt realized that the question of livelihood was becoming important and advised staggered unlocks.

But many states ruled by opposition leaders taking a holier than Centre attitude continued with strict lockdowns introducing epasses even for intrastate movements, imposing restrictions like total lockdowns during weekends making life difficult for the common man. There was a tough competition between states as to who leads in making life miserable for the man on the street.

Now the whole world is praising Modi for his foresight in clamping down a total lockdown inorder to control the spread of the pandemic. Opposition leaders have grudgingly acknowledging this, have now started saying that because of lockdown Indian economy is in ruins.

India had to face many unwanted human tragedies in between due to industrial accidents in Vizag, Neyveli,etc.fire accidents, air accident in Kochi, and also serious border clashes with China apart from terrorist incursions in J&K from Pak.

In the meantime, Central Govt unveiled Atmanirbhar initiatives, Agri reforms, and announced Rs.21 lac crore package of measures to revive the economy.

In the melee that followed, India is still left with some white elephants like Air India which are a drain on the exchequer.Air India should have been corporatized, separating the ownership and the management at least five years back. Had Central Govt taken this bold step at that time we would have found real value of the Air India as a Corporate entity. We understand that when Jitendra Bhargava wrote a book "Descent of Air India", it kicked off a political storm with Praful Patel filing a defamation case in  the court to get a ban on the book. But the author self-released it  in 2016 and is available on Amazon kindle as an e-book.Praful Patel withdrew his defamation suit in 2017.

Now with Air India only its Intangible asset of Bilateral Landing Rights is the most valuable of all assets.This has been brought out by Kumar V.Pratap former Joint Secy,GOI, in his recent article in FE wherein he has said that Planning Commission in 2011,refused permission to publish his earlier article on Privatisation of Air India(see the link) .Now the quotes for the sale of Air India have been invited through a global tendering process. The last date for submission of bids have also been so far postponed 4 times and now the last date stands at 31st Oct.When Travel & tourism and more particularly the aviation sector around the world has been severely crippled by the pandemic , finding a suitable bidder would be highly improbable. But Govt is left with Hobson's choice now.It has to bide its time for a suitor when the airline continues to lose its value and burn tax payers' money.

BPCL sale tendering process also is in the limbo due to the prevailing uncertainty induced by the pandemic. Other PSU divestments are also moving at snail's pace due to lockdowns.

To sum up, the Govt is unable to unlock the value for its assets!!

Tax, STT and Windfall tax.

The only thing certain about Tax is, it is always taxing. 

India abolished LTCG(Long Term Capital Gains) tax some years back while STT(Securities Transaction Tax) was introduced. After few years Arun Jaitley,the then FM at the Central Govt, thought it fit to reintroduce LTCG Tax from Fy 18-19, with an exemption if STT had been paid on the transaction. Now many Economists have recommended for abolition of LTCG tax showing the distortion it brings in transactions involving Digital Gold, unlisted shares and the black money generation it encourages in all and sundry especially in Real estate transactions.

The arguments against LTCG Tax are strong and valid. The vagueness it brings in matters of valuation brings lot of confusion and uncertainty giving the incentive to hide part of the consideration received. What demo wanted to flush out, LTCG Tax has encouraged inadvertently. It has sent wrong signals across the economy.

What is the remedy then. One simple alternative is to bring Transaction Tax similar to STT as Gold Transaction Tax and Real Estate Transaction Tax.

Recently Mohandas Pai, on LTCG Tax wrote a column in FE correctly stating that LTCG Tax is anathema to simpler taxation philosophy since it creates a mindset of evasion among tax payers.He has called for abolition of LTCG tax forthwith by rightly pointing out few perverse taxing rates especially with ref. to LTCG tax rates on the sale of unlisted shares.

Once LTCG Tax is abolished  Central Govt may want another avenue for Tax revenue and for that I would recommend Gold Transaction Tax and Real Estate Transaction Tax on the same lines that of STT. These Taxes will be much simpler to comprehend and easier to comply with. Even administering it by IT dept will be easier.

Now there is a clamor for a Windfall tax from the stock exchange transactions, as people who dabble in Stock exchanges are generally from well off sections of the society. When the whole nation is battling pandemic induced economic woes, it is quite natural to expect the group of well-heeled rich to contribute something extra by way of tax to the country's cause in fighting this economic downturn. But this windfall tax must be a one-time tax or it can be a temporary increase in STT for 2/3 years.

My preference would be for a temporary increase in STT for 2/3 years.

Open society and its friends!

 Karl Popper wrote in his book "Open society and its enemies"  that Paradox of Tolerance leads to more intolerance. He explained that in order to maintain a tolerant society,the society itself must be intolerant of the intolerant. He openly borrows his idea from Plato's concept of Benevolent despotism or benevolent dictatorship.

Indians have understood this contradiction in governance and according to the best of statecrafts defined by them State Governance has four ways of taking action : Sama,Dhana , Bheda and Dhanda. When it should actively encourage dharmic ways of living, it should seek out and identify those who are bent upon disturbing this peaceful coexistence. It may be its own citizens or enemies from outside. For dealing with them it should employ the above four ways and it can move from one to another subtly, discreetly or sometimes directly. Dhanda is always the last resort and even for criminal acts and for offenders, punishment is a must. This is intolerance of the intolerant. Punishments should be given after speedy and fair inquiry and justice must be seen to be delivered without delay. This will have a deterrent effect.

However the contrast is to see who are Friends of Open society. Friends are Those who forge consensus, those who encourage cohesion, those who believe in cooperation, those who trust collaboration, those who practice transparent communication, and those who want syncretic, synergistic community development.

The tolerance towards genuine failures, mistakes in trying to invent, missteps in search of progress will go a long way in supporting open societies that are productive and supportive in the long run. When the societies are young in age such openness provides the youth power to blossom out full harnessing its potential.

But, many times, these friends of open society work in silence and with lot of patience. But earnestness, perseverance and persistence are their hallmarks. Friends of Open society will always build checks and balances to prevent even unintended misuse of power, influence, nepotism etc.

When Voltaire declared Liberty as the fulcrum of modern human society, he meant , civil liberties, freedom of expression and freedom of religion. He is widely believed to have written "I disapprove of what you say, but I will defend to the death your right to say it." Those who subscribe to his views are all Friends of Open society.Such open societies will bring forth positive changes in human dynamics and nurture inventions, innovations in all spheres of life from poetry ,arts to physics,biology.All this leads to prosperity in society and the virtuous cycle is set in motion.

It is our bounden duty to identify and safeguard these Friends of Society who are pillars of Tolerance and not to discredit them wantonly by imputing intolerance.

Inflation, Monetary policy and India

 The minutes of the recent meeting of Monetary Policy Committee  of RBi which were released this week, contain some interesting mentions. One of the news columns said that RBI minutes mention 'uncertainty' 12 times, 'growth' 43 times and 'inflation' 147 times It has expressed concern over inflation and it seems to be valid as CPI has remained above 6% which is more than the tolerance limit of RBI. Alongside, India is experiencing severe GDP growth pangs as its IIP has remained in the negative territory in the first quarter and in July also. Services sector is in a deeper mess except of course ITES, SAAS etc. which have been affected to a lesser extent. It looks like only Agri sector has not been impacted adversely so far ,as the progress of monsoon has been satisfactory and the spatial dispersion also fairly good.

The RBI Deputy Governor Mr.Michael Patra had said : "If inflation persists above the upper tolerance band for one more quarter, monetary policy will be constrained by the mandate to undertake remedial action, including an immediate and more than a proportionate response to head off the build-up of inflation pressures and prevent it from getting generalized." So, to sum it up ,we have classic case of "stagflation"- a combo of GDP slowdown and inflation.!

CPI in India has a higher weightage for food and fuel indices and these two are certainly not amenable to monetary policy measures. In India fuel price is driven more by Govt . policy measures and it is feeding into inflation with its rippling effects on the rest of the economy widespread.When pandemic is restricting economic activities profiteering becomes rampant in vegetable and food prices. When the supply chain and free movement of people and commodities happen, the inflation tendencies will come down. Cost push inflation of food prices will not listen to monetary policy signals in the short term in Indian conditions. As India is driven more by cash , there is a quite a lag in food inflation responding to monetary policy measures, if at all it is significant. May be hoarding and black marketing of these vegetables,cereals ,staples etc. may come down a little bit.However Govt. initiatives through Essential commodities and anti-hoarding sticks used by Govt. through other means incl. emergency imports may be more effective in the short term to bring down food prices.

When the economy is awash with liquidity, the prices in general have tendencies to go north .More so when the supply constraints remain elevated due to lockdowns,e-passes and uncertainties compounded by fear for life and livelihood affecting the income. In these circumstances. RBI should look at high CPI as extraordinary during the pandemic period and should start looking at Core inflation now and then revert back to CPI only after the pandemic is seen plateauing.In the meantime, RBI may seek a temporary amendment for its inflation targeting, switching to Core inflation in times of extraordinary circumstances like a pandemic,global financial crises etc. and then have a glide path back to CPI inflation targeting after the crest of the crises is over.

Plato's Cave theory and Advaita!

 Plato in his magnum opus Republic has given an Allegory of the Cave which is widely called Cave Theory to emphasise on the lack of education on our nature which is similar to the prisoners inside the cave .Prisoners inside the cave see only images of reflection which are only shadows of the reality in the dim light.Plato being the disciple of Socrates has written this as a dialogue between his brother and Socrates. The prisoners free themselves from the bonded chains in the caves and come out and see that what they have experienced is not reality but reality outside the cave exists. This allegory shows that the human senses when chained to the cave do not allow humans to think beyond the cave images. In this allegory Plato keeps mathematics, geometry and deductive logic at the third and highest level of education.

There is a similarity of this to Indian philosophy of Advaita, in which in simple terms it is said that what we experience is not the reality and it is more like an illusion what we dream in our sleep. Adi sankara when explaining this illusory phenomenon says that this happens due to Avidya or lack of education which is awareness. When we realise our true self we become one with our Creator and realise there is only one Absolute and there is no second- "A dvaita"- only" Brahmam Sathya" and this "Jagat(Earth) Mythya(myth/illusion)".

So in a way both the concepts of philosophy talk about Education or lack of it and its effect, impact on human understanding. Human minds are conditioned by experiences, perceptions and memory impressions and their interplay, without comprehension of the reality or the true nature of human existence.

Bhagawan Krishna in his Gita also emphasizes on this Avidya (Chapter 4)and suggests ways to come out of it(chapter 5). The best and the easiest way is to surrender our ego to Bhagwan and continue with our duty selflessly without any attachment to the fruits of our actions.

TReDS AND GST PORTAL

GST portal has come a long way from a fledgling,fumbling and faltering days to its better days.However it has go a long way to evolve into a mature and more user-friendly phase. Now Central Govt is introducing e Invoicing with unique Invoice Reference Number (IRN) for traceability and matching concept introduction. This IRN will be given by Govt and this is to identify whether it is a valid e Invoice .

This numbering system will be similar to cheque MICR no. for the purpose of verifying the genuineness and also for the use in matching it for clearing mechanism. This IRN will also serve similar purposes.More than bigger companies this system will help MSMEs in the longer run.

For MSME bill discounting some of the banks like Axis Bank have introduced a digital platform called TREds so that MSMEs can access cheaper bank finance against their supply invoices. Ministry of Corporate Affairs have also made it mandatory for all Corporates with a turnover of Rs.500 cr and above to register under this for all their MSME suppliers to take advantage of this bill financing platform which will help them in working capital.My suggestion is that TREdS ,which is a standalone platform of the Axis bank, may be linked and integrated with the GST portal so that ,MSMEs need not have to again look for another software to do E invoicing and generating Eway bill through GST portal. If this linking is done ,as and when Eway bill/E invoicing is done in GST portal/software, it is enough to take it to TREds platform and any duplication and time loss can be totally avoided. This will also be a great marketing tool for quicker Adoption of TREds as mandated by MCA.RBI and MCA, MOF and MSME ministries will have to work together to do this immediately which will be a great boon for MSMEs making it easy for them to do business.

Today there is a heartening news that Cabinet  has approved the budget decision to amend Factor Regulation Act 2011 to allow non-banking finance companies(NBFCs) to extend invoice financing to the MSMEs through TReDS, an electronic platform  for facilitating discounting of trade receivables. 

Now Govt should also takeup this digital linking of TReDS and GST portal softwares for MSMEs to really usher in ease of doing business and paying GST .This will also indirectly help Central Govt garnering higher GST revenues through widening of tax base

US, India and Kamala!

 Independence day in India is always a grand event as it happens on August 15th of the year. A year has 365 days and if you have a cut off at Aug 15th ,it is 227 days into the year starting from Jan 1st..This is approx 1.66:1 of the year. That is the Golden Ratio which is supposed to be a mystic proportion of anything including the picture of Mona Lisa ,and that is considered to have made it magically beautiful.

That apart, Indian Independence day this year was preceded by the announcement of Kamala Harris as the running mate of the US democratic presidential candidate Biden.

Kamala Harris' mother was of Indian origin from Chennai. She carries the name Kamala which is a traditional Sanskrit name for Lotus flower. Indian ruling party BJP has Lotus symbol as its primary identity. The moot point is , the common least denominator between the ruling party of india and US politician Kamala ,is the Lotus . In many ways, Lotus i.e Kamal is very dear to india and it is the official flower of the country also.

From time immemorial in all the Indian Sanskrit scriptures and literature, Lotus has come to be identified with the cultural and religious sanctity.It holds a premier position in Hindu/Buddhist/Jain/Sikh religions as representative of all that is blemishless and purity. Many of the Hindu,incl. Buddhist etc. Gods or Goddesses are seen seated on the Lotus flower as it symbolizes purity in full bloom. Offering Lotus to Hindu Gods and Goddesses is believed to usher in , auspiciousness and prosperity into the lives of devotees. Even our heart is called Hridaya kamala in our literature. In higher philosophy,'Ka' is referred to as Brahman(paramatma), 'Ma' is referred to as Human(jeevatma), and 'La' is referred to as Acharya or Sri, who tirelessly work in uniting the Jeevatma with the Paramatma.

But it looks like the connection between Kamala Harris and India seems to end with Kamala and not beyond that, since the general social and political outlook of BJP and Kamal harris are totally divergent.They do not share a common platform of understanding of the fabric of Indian society, which is inherently plural and democratic. She has shared her opinion of Indian ruling class , relationships with Pak, Kashmir problems etc. seen through the prism of US and not through the prism of India. Pak and Bangladesh are offsprings of India and it is not sibling rivalry that bogs down India-Pak relationships as viewed by US generally. 

To that extent , I humbly believe, Kamala Harris will have to borrow an Indian prism to look at Indian subcontinent issues, since almost 7 countries(India, Pak, Bangladesh, Afghan,Nepal,Bhutan and SriLanka of South Asia were all part of Bharat i.e India ,till the advent of the 20th century.The cultural and religious relationships and influence of India extend beyond this to China, especially Tibet and all the South east Asian countries incl. Japan, Indonesia, Thailand, Malaysia etc.

Finally, she should not forget that India is a 70year old thriving democracy and that too the largest democracy in the world sharing many similarities with US, which Columbus thought to be India!!