The air is filled with the possibility of reforms in the administration of personal income tax. The architect of the most famous tax reform in India, Mr. P C Chidambaram, is again the Finance Minister. What will he do, what can he do, to bring extra buoyancy into the collection of personal income taxes (PIT). He faces several roadblocks, not the least of which is the fact that a large part of the babu economics fraternity is unconvinced of the efficacy of the first set of tax reforms. Which is a tragedy, but not surprising, given the amount of morality and ideology associated with the political economy of PIT.
This article is the first of a new series: Jadu Economics. A close relative of the previous "Calling the Bluff" series, as well as of the voodoo economics (sometimes) practiced in the West. What makes it particularly different is its Indian character - we are like this only. Jadu may mean magic, but like many Indian words, the nuances hint more. This series will help identify the magical nuances in our economic thinking.(Business Standard, January 22,2005).
This (and the next two articles) will analyze the process of thinking that seems to have gone into the major policy initiative of the Congress led government, the Employment Guarantee Act (EGA). This policy initiative is deeply flawed, and smacks overwhelmingly of a "take no prisoners" or "don't confuse me with facts" ideology. So much so, that barely no aspect of the program is not driven by either lies, near lies, or falsehoods (hereafter LNLFs). And if ideology is not the false god, then the only other possible cause behind the pursuit of the act is pursuit of corruption i.e. the Act is being advocated because it will enrich the political parties involved in the making of the Act, and those it will choose to anoint as the receivers of its munificence. Unfortunately, we have not been able to identify which of the two forces is more forceful - yet. But readers are invited to supply methods, and or reasoning, to identify the real culprit. We (at present) however, presume too much. It first needs to be established that the Act is full of LNLFs. (Business Standard, December 25,2004).
There are four policy initiatives of the UPA government whose economic rationale is dubious - at best. Given the dream team of Messrs. Manmohan Singh, PC Chidambaram, and Montek Singh Ahluwalia, these are four dubious initiatives too many. Then how come such false initiatives are the flag-bearers of so-called progressive thinking? Because - and here one is speculating although with cause (documented below) - such progressive initiatives can have a high proportion of corruption content. Corruption that helps perpetuate politicians, political parties, and their power.(Business Standard, December 11, 2004).
This is the first of a small series of articles on what we Indians enjoy the most, and what ails us the most. We are not talking Bollywood because more often than not we don't enjoy it so much, and there is not that much that ails it except its method of financing. We are not talking politicians because while they certainly ail us, we don't enjoy them so much; except perhaps the comic brilliance of Laloo Yadav. There are enough hints here to warm our imagination, if not our pockets. What ails us the most is the BCCI, not the upstart, corrupt, failed, terrorist financing Pakistani bank of yesteryear, but a 75-year old hallowed (though not financially hollow) institution called the Board of Control for Cricket in India. It combines Bollywood in that it finances cricket, the same game we enjoyed before it became a political statement. And it literally combines Mr. Yadav, who, in something that would do Mr. Ripley proud, is the head of the Bihar Cricket Association.(Business Standard, November 27,2004).
With Indian cricket dominated more by politicians than batsmen, the cricket team is mercilessly being thrashed by the Australians, and many a kid, and several more adults, are left disgusted. For us purists, maybe baseball represents a cleaner alternative. At least if we lose, it wouldn't feel so bad - we have just started to play the game. And unlike cricket, in baseball you have three outs (strikes) before you are out. Now with that rule applying to us and not the Australians, surely we won't lose. Or will we? (Business Standard, October 30,2004).
"There's something happening here. What it is ain't exactly clear". So sang Buffalo Springfield about guns and war, circa 1966. They could have been talking about the Indian Census, and the RSS, and Tarlochan Singh of the National Commission for Minorities, circa 2004. How can it be that the Census, whose life and job it is to produce accurate numbers, could have sensationally published the growth rate of population of various religious groups in India without controlling for the fact that the previous Census (1991) did not include Jammu and Kashmir? It took non-specialist journalists to point out this simple error. For Muslims, this error is huge - without J&K, the Muslim population growth rate is 2.6 percent per annum 1991-2001, compared to a growth rate of 1.8 percent for Hindus; with J&K in 2001 (and not in 1991) the Muslim population growth rate is 3.1 percent per annum. The latter is good for sensationalism, but not of much use otherwise.(Business Standard, September 11, 2004).
Something I have never understood, but for which I would welcome comments and help, is why there is a large intellectual constituency in India that just cannot acknowledge the progress in the war on poverty. Any mention of a significant drop in poverty in India is met with derision, contempt, incredulousness, and finally, and invariably, with the comment that "you just don't know what you are talking about". And then a gentle, friendly comment: "please travel through India, visit a village for at least once in your life, and then find out how incredibly wrong you are". Then comes the clincher: "when I visited SEWA (headquartered in Ahmedabad) or Sewa Mandir (headquartered in Udaipur), I was told how the poverty statistics the government puts out just fails to capture the reality of the poor". (Business Standard, September 4, 2004).
There is a new-found spring in the Indian step – foreign exchange reserves are burgeoning, debt is being paid back, and the otherwise depreciating rupee is appreciating. In the eyes of some, stardom will be achieved when the rupee exchanges with the US dollar at a macho rate of Rs 38 (it is currently trading at Rs. 46.7). In the eyes of most others, it is occasion to feel proud – we are achieving a higher growth rate than most of the rest of the world, and therefore should indulge by celebrating the rising rise of the Rupee (and therefore killing the golden goose). Even the dormant leftists have joined in the clamor for “justice” – the dollar should be beaten down because of naughty American imperialism.
Reformists in India have for long argued that the way to salvation was through lowering of tariffs to east Asian levels, through lowering of real lending rates to East Asian levels, and through decrease of the fiscal deficit to East Asian levels. All of this would allow Indian competitiveness to improve, exports to grow, and allow GDP to grow at India’s potential of 8 plus percent a year. Godot is here, if the growth of Indian exports, and the strength of the Indian rupee is to be believed. The rupee has appreciated against the dollar in nominal terms by 4 percent since its trough of Rs. 49.1 reached in May 2002; in real terms, the appreciation is a largish 10 percent, all in the space of 12 months.
