Saturday, December 27, 2025

GST Regime: A course correction is needed to fix glitches

l20171110117593Co-founder of Apple and pioneer of microcomputer revolution Steve Jobs once said that “sometimes when you innovate, you make mistakes. It is best to admit them quickly, and get on with improving”. Acknowledging the error of judgment is essential for a genuine course correction at times than crude politics. It is heartening that the Union Government is stepping up its bid to address concerns about the fledgling goods and services tax to provide a “good and simple” tax regime.
The premature delivery of the GST four months ago required a surgery to make the new tax regime people-friendly. The GST Council has now brought some items of common use such as chocolates, shaving creams, shampoos, beauty
products, granite and marble to lower slabs. As a consequence, the prices of some items of common consumption will drop which may please some. These concessions are estimated to make a dent of 20,000 crore annually in GST collections. Ironically, the burden of the revenue shortfall will also be borne by the same consumer.

When GST regime was announced and implemented, many people did not take it kindly because the outcome appeared contrary to the lofty expectations as they wanted a simple taxation system with one or two rate slabs, minimal paper work and elimination of the inspector raj. Already, Revenue Secretary Hasmukh Adhia has admitted recently that differential treatment to some similar items may not necessarily be fair and the rates may be revised. With Adhia agreeing that the GST regime will take a year to stabilize and the government doing a course correction, we may not be far away from having the palpable shape of one-nation, one-tax plan. The commitment to correct course is welcome. But the real question is the timing and sequencing of changes.

The good news is that the GST has brought 27 lakh new registered entities into formal tax coverage in its first three months alone. The revenue collections from the first month of its launch itself when taxpayers brought in 95,000 crore shows its success as far as gain to the exchequer is concerned. It is significantly higher than the 91,000 crore indirect tax target for the Centre and the States on an overall basis. With many more taxpayers registering in subsequent months, the GST appears to have begun well. However, the GST Council needs to take up more rate revisions to rationalize multiple GST rates, simplify tax system by removing glitches in the network and bring real estate in the GST regime as indicated by Finance Minister Arun Jaitley.

‘Tiger of Mysore’ caught in political quagmire

tipuAt NASA’s Wallops Flights Facility, a rocket launch site to support the US agency’s science and exploration missions, hangs a painting of the 1780 Anglo Mysore War. It depicts a battle scene with a few rockets flying in the background. “A painting with this theme should be the most commonplace thing at a flight facility, but the painting caught my eye, because the soldiers on the side launching the rockets were not white but were dark skinned, with racial features found in South Asia. It turned out to be Tipu Sultan’s army fighting the British. The painting depicted a fact forgotten in Tipu’s own country but commemorated here on the other side of the planet,” Late Dr APJ Abdul Kalam had pointed out in his autobiography while mentioning about one of his US trips.

Hyder Ali, the 18th century ruler of Mysore, and his son and successor Tipu Sultan used the first iron-cased rockets successfully and effectively against the British East India Company during the 1780s and 1790s. Their conflicts with the company exposed the British to this technology, which was then used to advance European rocketry with the development of the Congreve rocket in 1805. Thus, it can be claimed that the Western rocket and space ship technologies actually have their roots in India and the role of Tipu Sultan cannot be ignored.

Hailing the ruler of Mysore as a hero, President Ramnath Kovind recently said, “Tipu Sultan died a heroic death fighting the British. He was also a pioneer in the development and use of Mysore rockets in warfare. This technology was later adopted by the Europeans.” President Kovind’s comment on the “formidable soldier’’ from Karnataka, however, came as an embarrassment for the BJP, which alleges that Tipu Sultan was a Hindu-killing king who forced people to change their religion. The saffron party is vehemently against the Karnataka government’s plan to celebrate his birth anniversary on November 10.

BJP’s Anant Kumar Hegde, minister of state for skill development and entrepreneurship, recently described Tipu Sultan as “a brutal killer, wretched fanatic and mass rapist” and refused to attend functions related to the “Tiger of Mysore”. The Hindu right wingers apparently base their allegations against Tipu Sultan on the extensive phobic material on Tipu created by the English officials, authors, artists and cartoonists in the last two decades of the 18th century when Tipu had challenged the Britishers in military combat, which cast him as a Muslim fanatic who broke Hindu temples and forced Hindus and Christians to change their religions. This made it look only proper for the British to take over Mysore and save his subjects. It also helped overcome the image of the East India Company as corrupt and unfit for embarking on political rule in India.

The images of Tipu Sultan as cruel and bigoted, which flourished in English writings all through the 19th century, is now being highlighted by the right-wingers across the country. But it was not always the case. The Mysore ruler was considered an icon by one and all until recently. Several Kannada folk songs, known as lavanis, lamenting his death were in circulation in the 19th century, the earliest dating back to 1800, the year after he died in the battlefield. Thousands of plays on the Mysore ruler were staged across the state during the late 19th century and 20th centuries. History textbooks and popular literature, such as Amar Chitra Katha comics, were unequivocal in calling him a brave martyr.

Even the RSS had published a concise Kannada biography on Tipu Sultan in late 1970s, praising him as a patriot and heroic personality, and did not offer any negative remark on him. In late 2012, after walking out of BJP to form his own party, the Karnataka Janatha Paksha, BS Yeddyurappa had donned Tipu Sultan’s headgear and held a mock sword while praising the ruler’s virtues at a function to seek support of Muslim voters. Back in the BJP two years later, Yeddyurappa is at the forefront of BJP’s opposition to the celebration of Tipu Jayanthi in Karnataka. Thus, the present opposition of the 18th century Mysore ruler seems to be aimed more at creating political space in the south than anything else. And historical icons come in handy to grab attention of the masses.

There are not many authentic historical records that suggest that Tipu Sultan had destroyed Hindu temples conquered in war. But there is well documented evidence suggesting that he used to support religious places that fell under his kingdom. The Sharada temple at Sringeri, a seat of Shankaracharya, perhaps has the best documented association with Tipu Sultan. When the temple was looted by Maratha chieftains, the pontiff Sri Sacchidananda Bharti III sought help from Tipu Sultan. The Mysore ruler had sent funds generously for the restoration of the temple and re-consecration of the image of Sri Sharada. The temple has secured its correspondence with Tipu Sultan in its archives. It includes letters in which Tipu had requested the Swami to perform Satachandi and Sahasrachandi japa to help him gain divine blessings. Separately, the Kollur Sri Mookambika Temple in Dakshina Kannada district performs Salam Mangalarathi, a special puja in the name of the Tiger of Mysore, every day to commemorate his visit to the temple.

Srikanteshwarar temple in Nanjangud, near Mysore, has a Shiva linga made of emerald donated by Tipu Sultan. According to the temple literature, Tipu’s pet elephant, which went blind, got its vision restored after it was made to perform a ritual at the temple. Hailing the local deity as Hakim Nanjunda, Tipu Sultan had made the donation. There are several other examples of Hindu temples keeping alive fond memories of Tipu Sultan. The Editor of Mysore Gazette, Srikanataiah, has listed 156 temples to which the former Mysore ruler had regularly paid annual grants.

At times, the Mysore ruler did target Hindu and Christian communities, But, according to historian Kate Brittlebank, “this was not a religious policy but one of chastisement”. The communities he targeted were seen as disloyal to the Mysore state. Tipu had also acted against Muslim communities such as the Mahdevis, who would support the British and find employment as horsemen in the East India Company’s armies. Even as Tipu Sultan attacked Hindus and Christians from outside Mysore, the historian Susan Bayly says, he “was careful to foster close ritual and political relations with Hindus and even Christians with his own domain, provided these groups posed no threat to this authority”. Interestingly, Tipu’s right-hand man and chief minister was a Hindu. His name was Purnaiya.

The ongoing row over Tipu Sultan, Taj Mahal and Babri Masjid provide a ringside view of how modern politics uses history to create and reinforce present-day identities.

letters@tehelka.com

Focus on jobs, infra, SMEs key to economic growth

It was the October 15, 2017 issue of Tehelka when we wrote in our cover story ‘Awaiting Stimulus’ that “Modi Government is planning stimulus to boost the economy”. Less than a month from then, Prime Minister Narendra Modi’s Government has unveiled a nine trillion plan of which seven trillion has been earmarked for road projects and two trillion would be infused into public sector banks to shore up the sagging economy. For a media house, there can’t be a better calling than its story setting the government’s agenda.

l20171022115657The latest announcement by the Government says that it has decided to build 83,677 km roads entailing an investment of 6.92 lakh crore over the next five years. It has already cleared 5.35 lakh crore for the Bharatmala Road Project under which around 34,800 km of roads including in coastal and border areas will be constructed. This is sure to spur the economy and give it a boost. As the opposition was repeatedly hitting the government on the downtrend in the economy and shrinking jobs, the new umbrella programme ‘Bharatmala Pariyojana’ is also aimed to generate 14.2 crore mandays of jobs.

Bharatmala Project

The Bharatmala project will include economic corridors (9,000 km), inter-corridor and feeder route (6,000 km), national corridors efficiency improvement (5,000 km), border roads and international connectivity (2,000 km), coastal roads and port connectivity (2,000 km) and Greenfield expressways (800 km). The government has also identified new routes between economically important cities that would be longer in terms of distance but will reduce travel time as the new routes would avoid congested roads and small cities. Roads will be built along the borders with Nepal and Bhutan. Funds for the new project would come from the market (2.09 lakh crore), Public-Private Partnership (1.06 lakh crore) and asset recycling of NHAI’s toll assets while the remaining amount would be financed from the Central Road Funds, Toll-Operate-Maintain-Transfer monetisation proceeds and toll collections.

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Infusion into Banks

Alongside, the Government has come out with another ambitious plan to pump in 2.11 lakh crore capital over the next two years into public sector banks. We all know that these public sector banks are plagued with alarming non-performing assets and because of these NPAs, these banks are shy of further lending. The infusion of funds into the public sector banks would enable them to lend to business and industry to revive private sector investment and boost economy. The funds to be pushed into the banking system would come from the budgetary provisions of 18,139 crore and the sale of bonds totalling 1.35 lakh crore. The balance would be raised by these public sector banks by diluting the government’s equity share. The government’s capitalization package for public sector banks is likely to provide a strong booster dose to the capital-starved banks. The infusion of funds into public sector banks should help revive growth momentum.  The stressed assets of close to 10 lakh crore had led the banking sector to a near crisis and it was wary of lending fresh loans. The bank credit growth had slipped to a 60-year low of just five per cent this April. The banks have been seized of the twin balance-sheet problem and it was only late last year that a new bankruptcy law was introduced and Reserve Bank of India asked banks to invoke insolvency proceedings in the case of 50-odd accounts.

Strong fundamentals

Interestingly, while the Modi Government has come out with Rs nine trillion plan to lift the economy, the Finance Ministry has defended the state of the economy with Finance Minister Arun Jaitley asserting at his press conference that it was on strong macroeconomic fundamentals. The key data indicators such as low inflation, comfortable current account and fiscal deficits, point towards a positive outlook for GDP growth in the coming quarters. There is expectation of very good growth from second quarter of current year itself. Significantly, this year the Government has already collected 30,000 crore from disinvestment and is on way to even exceed the 72,000 crore targets for the year. In fact, the gross FDI flows to India in 2016-17 amounted to $60.2 billion, as compared to $55.6 billion in 2015-16 and $45.1 billion in 2014-15.

Rekindling hope for ‘Achhe Din’

The result of the new stimulus package is that it has instantly brought cheers in the stock market and instilled new confidence in the economy. The current euphoria following the stimulus may also help the ruling party calm down the GST-stung businessmen and boost the economy. The bank recapitalization proposal is a positive move that should go a long way in strengthening the banking system. Another positive in this development is the government’s admission that all is not well with the economy and the stimulus was aimed at its revival. The initial stand of the government was that the opposition was trying to spread pessimism. A yet another positive is the flexibility shown by the Union Finance Minister, Arun Jaitley, who was initially not in favour of any stimulus package fearing that it will further widen the fiscal deficit. The direct benefit of the stimulus would be for the micro, small and medium enterprises (MSME) sector as the plans are for a guaranteed payment to MSME suppliers to public sector units within 90 days and end to end solutions for credit delivery. The new road projects would mean more labour absorption in the MSME sector with creation of 14.2 crore man days of work. For millions of job seekers, there is a ray of hope and chances of good times at long last.

Like the great bard and blind optimist, Robert Browning who penned “God’s in his Heaven, All’s right with the world”, one is tempted to assume that the new measures by the Modi Government will boost the economy. Let us hope that the promised “ache din” which were hitherto elusive, may now actually become a reality and rekindle the dreams of billions.

letters@tehelka.com

Rajasthan’s questionable law aims to gag press, whistle-blowers

The Rajasthan Government has come out with a Bill in the State Assembly to replace an ordinance that aims to protect serving and former judges, magistrates and public servants from being investigated without government sanction. Though under fire from various quarters, the State Government has now referred the controversial Bill to a select committee of the Assembly; the intent seems sinister. The Criminal Laws (Rajasthan Amendment) Bill, 2017, seeks to replace the September 7 Ordinance which was brought in a hush hush manner. The proposed law appears to shield the corrupt, threaten the independent media, by making it a punishable offence to disclose the names of public servants facing allegations of corruption before the government grants formal sanction to prosecute them. On the face of it, the new law appears to be a threat to freedom of press and the public’s right to free speech and expression. It gives immunity to serving government officials and members of judicial services from being investigated without prior sanction of the Government.

Rajasthan controversial bill (2)If this Bill becomes Law, the Vasundhara Raje government would be able to prohibit the media from writing or publicizing any story against public servants till the government approves their prosecution. The Rajasthan Government also calls for the insertion of a new provision that provides for imprisonment up to two years if the media violates this provision. The newly introduced Section 228-B of the Indian Penal Code clearly states that “Whoever prints or publishes the name or any matter which may make known the identity of any person against whom an offence under section 376, section 376A, section 376B, section 376C or section 376D is alleged or found to have been committed shall be punished with imprisonment of either description for a term which may extend to two years and shall also be liable to fine”. It is a direct threat to the functioning of the media and whistle-blowers. The new love of Rajasthan Government for its public servants is tantamount to infringement of the public’s right to be informed about the conduct of public servants. Where was the need for such a law when there already exists a legal frame work for public servants under Section 197 of the Criminal Procedure Code? This is the first time a section prescribing punishment for disclosure has been introduced in the country. There was actually need for the Lokpal Act to be fully operationalized and for the Union Government to device a legislation to punish the corrupt and protect the media and whistle-blowers who raise issues in national interest.

Does personal liberty include right to die?

Suprem Court by Shailendra (14)
Life, everyone would agree, is the most precious gift. Yet there are times when living becomes extremely difficult. There are situations when people wish they were dead or had never been born. Suicide seems to be the only way out. More so when a person is terminally ill and eagerly seeks death for relief from pain and misery. Under the Constitution, right to life is considered as the most important fundamental right. “No person shall be deprived of his life or personal liberty except according to procedure established by law,” reads Article 21.
Thus, the Supreme Court has held that the right to life guaranteed under the Article 21 includes the Right to Live with Human Dignity. Now the question arises: Has a person who is confined by a disease or disorder and is too crippled to lead an independent life, requiring assistance of another person to sustain his life the Right to Die by virtue of his Right to lead a Dignified Life under Article 21? The apex court’s answer to it has so far been negative.
A constitution bench, Chief Justice Dipak Misra and Justices A K Sikri, A M Khanwilkar, D Y Chandrachud and Ashok Bhushan, on October 11 re-clarified that Right to Life does not mean right to die. It, however, said that a dignified life would certainly include right to die with dignity, as advance directive would take effect once a medical board affirms that the patient comatose state is irreversible. “One cannot say that you have a right to die, but you have a right to dignified death. If we recognise the right to dignity in death, then why not dignity in dying,” the bench observed, adding that life must be preserved but not prolonged in suffering.
The Supreme Court bench also hinted that it might recognise the execution of ‘living will’ in cases of passive euthanasia, as right to die peacefully is part of fundamental right to life under Article 21 of the Constitution. The apex court, however, said there should be adequate safeguards and implementation of living will would be subject to medical board’s certifying that the patient’s comatose state is irreversible.
It has been decided that every district should have a medical board whose duty will also be to decide the validity of the living will — a written document that allows a patient to give explicit instructions in advance about the medical treatment to be administered when he or she is terminally ill or no longer able to express informed consent. The decision of the board, whose preliminary duty will be to ensure that there is enough reason to pull the plug on a dying person, will be final. Thus, the medical board needs to be extra cautious. “A person suffering from terminal illness should be granted the decisional autonomy to state that he no longer wanted to be under continued treatment, especially in a country like India where medical facilities are woeful and often prolong a person’s suffering even if he is not clinically certified as dead. This autonomy should be treated as part of a person’s right to die with dignity, which a previous constitution bench held as being a part of the right to life under Article 21,” said senior counsel Prashant Bhushan, appearing for petitioner NGO Common Cause, as he stressed on the need of “iron-clad” safeguards while deciding on a life support withdrawal of a patient. The issue concerning Right to Die initially came before the Bombay High Court in the case of State of Maharashtra v. Maruty Sripati Dubal. In this case, the court held that the Right to Life includes the Right to Die and declared Section 309 of Indian Penal Code, 1860 which makes attempt to suicide as punishable offence, unconstitutional. This was followed by the Supreme Court in the case P. Rathinam vs. Union of India and Anr wherein the court the court held Section 309, IPC as unconstitutional as it is violative of Article 21 of the Constitution. In this case it was held that Right to Die is included in Article 21 of the Constitution. But the same court in Gian Kaur vs The State of Punjab held that, Section: 309 of IPC is not violative of Article: 21 and the right to die is not a part of the right to life. The court held that Article 21 guarantees the protection of life and personal liberty and by no exaggeration can extinction of life be included in protection of life. The Supreme Court stated that: “Right to life is a natural right embodied in Article 21 but suicide is an unnatural termination or extinction of life and, therefore, incompatible and inconsistent with the concept of right to life”.
Separately, the apex court had recognised passive euthanasia in 2011 in Aruna Shanbaug’s case in which it had permitted withdrawal of life-sustaining treatment from patients not in a position to make an informed decision. She had been in a permanent vegetative state for more than two decades when the court passed the judgement. While the court declined to intervene in her case, its general guidelines came into force. The Supreme Court held that passive euthanasia is allowed in certain conditions but only on approval by the High Court following the due procedure. An application for passive euthanasia must be filed before the Chief Justice of the High Court. On
receipt of such application, the Chief Justice of the High Court should constitute a Bench of at least two Judges with discretionary powers over the approval of the application. The Bench should obtain the opinion of a committee of three reputed doctors, nominated by the Bench after consulting with medical authorities/medical practitioners. The High Court Bench must issue notice to the State and close relatives e.g. parents, spouse, brothers/sisters etc. of the patient, and in their absence his/her next friend, and supply a copy of the report of the doctor’s committee to them. The High Court bench would give their verdict after hearing the contentions.
The government, on its part, is finalising a draft law on passive euthanasia called ‘The Management of Patients With Terminal Illness — Withdrawal of Medical Life Support Bill’, which has been drawn up in line with the recommendations of the Law Commission of India that life support can be withdrawn for patients in persistent vegetative state or suffering an irreversible medical condition. The Centre, however, has objection to legalising the concept of ‘living will’. It pointed out that this may lead to the abuse and neglect of the elderly, especially if they were financially well-off. Additional Solicitor General PS Narasimha, on behalf of the Centre, has opposed recognition of ‘living will’ ,saying the consent for removal of artificial support system given by a patient may not be an informed one and without being aware of medical advancements. The government is of the view that the living will is a concept which contradicts a person’s instinctive urge to survive. Besides, the Ministry of Health and Family Welfare has, in an affidavit filed in January 2016 before the apex court, had refused to legalise ‘active euthanasia’, saying it would lead to potential misuse and is practised in “very few countries worldwide”.
The 241st report of the Law Commission, which stated that passive euthanasia should be allowed with certain safeguards, may go a long way in making Right to Die a fundamental right. Till then, withdrawal of supporting devices to sustain cardio-pulmonary function even after brain death, shall be decided only by a doctors’ team and not by the treating physician alone.
letters@tehelka.com

After 100 days of GST tryst, the Council moves to cheer up a few

l20171006114740About 100 days after its tryst with the new Goods and Services Tax regime began, the GST Council has lowered the rates on 27 items. The Council has done well to lower GST rates on certain goods including dried sliced mango, khakhra, unbranded namkeen and, more importantly, yarn and sewing threads to soothe the textile industry that has been be a major jobs provider. Prime Minister Narendra Modi has described the relief as arrival of Diwali before Diwali.

The decision to do away with the requirement of filing three monthly returns and an annual return to only a quarterly return for firms with a turnover of 1.5 crore is welcome because it will ease the burden of compliance on small businesses. Some of that burden has, no doubt, been reduced by the decisions taken by the GST Council headed by Union Finance Minister Arun Jaitley. Also, the reverse charge mechanism under which receivers of goods and services are liable to pay tax on supplies by unregistered vendors has been deferred till March 31, 2018. This, along with the creation of a proposed ‘e-wallet’ facility from April 1 in the form of an advance refund or notional credit that can be used to pay IGST and GST on inputs may somewhat address the severe working capital blockage currently being experienced by exporters. Surely, it is an attempt to woo back the trading community. The announcement has also exempted jewellers from reporting data on buyers’ purchases of over 50,000.

The exemptions to small businesses and to exporters will elicit cheers. However, there still is need for the new tax regime to be made simpler because of compliance hassles. There is need to strive for “ease of doing business” by simplifying the tax regime by reducing multiplicity of taxes. The new regime shows that out of 54 lakh registered entities, only about 10,000 have contributed two-thirds of the total 94,000 crore mopped up in July. That makes a case for investigation and the best way is to keep the tax regime uncomplicated and simple. The lowering of GST rates on 27 items should spur fresh confidence among small firms and help expand the tax base. The announcement of faster tax refunds should be re-assuring. The suspension for six months of the payment of integrated GST (IGST) on inputs used for exports will bring immediate relief bringing jubilation amongst exporters. The government needs to act fast to provide relief on all the grey areas. The impression should not go around that the GST decisions to provide relief to different sections is aimed at the forthcoming elections in some states.

General election in 2018?

l20170925114118There is a buzz in the corridors of power that the BJP is of the firm view that by holding Lok Sabha and Vidhan Sabha elections together, the party can reap benefits of its sway in the State Assembly elections too. The party leaders are of the opinion that in the event of Assembly and General elections coinciding with each other, national issues take precedence over State issues and that can help the party perform better in the states going to the polls. The overwhelming view is that national issues would overshadow the anti-incumbency factor that is being witnessed in a couple of states. Luckily for BJP, there is no major issue before the Opposition on which it can take on the party in power. Madhya Pradesh, Rajasthan and Chhattisgarh State Assembly elections are due in November-December 2018 and these states can send proposals to hold elections alongside the general election if the latter is preponed to 2018.

CMs meet Modi, Shah

Sources in the party told Tehelka that 13 chief ministers and six deputy chief ministers from BJP-ruled states have had a meeting with Modi and Shah recently. The conclusion that emerged from the meeting was that Modi still remains an undisputed leader and no opponent can match his towering personality. Despite some major decisions, the personal popularity of the PM was still intact. Another view that emerged from the meeting was that the party should prefer to sacrifice the remaining 10 to 12 months of power till the scheduled dates in 2019, to tilt the balance and clinch power for another five years. It is in this context that the way party chief Shah is consolidating BJP at the grass root level, it seems that the party is gearing up for an early General election.

Zero Income Tax

Political analysts believe that the BJP’s win in Uttar Pradesh was largely due to the effect of demonetization that the party was able to market perfectly in the poll-bound State. The party was victorious in 73 out of 80 seats. This time it is considering a much bigger shocker. Sources confided that the BJP is toying with the idea to altogether abolish Income Tax and come out with a flat Banking Transaction Tax (BTT).

It might sound surprising, but there are countries where people do not pay Income Tax. These countries include UAE, Qatar, Oman, Kuwait, Cayman Islands, Bahrain, Bermuda, The Bahamas, Saudi Arabia, Brunei Darussalam, as per KPMG’s 2012 survey of 114 countries. People in these countries, however, do need to contribute towards social security. Most of these countries have managed to use natural resources to fund government expenses. Zero Income Tax may sound utopian but it can again be a game changer for the BJP just as demonetization proved to be in Uttar Pradesh. The Government may come out with Consumption Tax or Expenditure Tax. It is quite like Income Tax, with one basic difference being that the tax is levied on expenditure and not on income. The view is that it encourages consumption.

In our country, Income Tax is largely a tax on the middle class salary earner. The poor hardly pay any income tax. The revelation by Finance Minister Arun Jaitley in his last Budget speech that only about 42,800 people had declared taxable income of over 1 crore annually came as a shocker to many in a country of 120 crore people. This makes a strong case for doing away with Income Tax. Why coerce only a particular section to pay Income Tax? If the BJP’s core-thinking groups are to be believed, the party is planning to pursue this idea vigorously.

Game changer UBI

The idea of universal basic income (UBI) could become a reality before the election is announced. The basic premise of UBI is that in a modern civilised society it is unacceptable that a person is unable to fulfil his basic needs simply because he cannot find a job. It would be a major attack on the issues of poverty and inequality. A periodical transfer of basic income close to or equal to the poverty line has the potential to lift 375 million poor Indians out of poverty in one stroke and keep them there. The benefits of UBI are aplenty and even go along with the political narrative of the government to combat corruption and ensure “minimum government, maximum governance”. A lot of recent debates have been around the ways and means in which the government can fund the scheme.

Slew of pro-poor schemes

The announcement of a slew of new schemes targeted at the middle class, farmers, poor and marginalized is an indication of things to come. The relief in the Goods and Services Tax, bringing down GST rates on 27 items, is aimed at silencing government critics. It is learnt that the Finance Ministry has sent a circular to all government departments to come out with draft proposals to launch new welfare schemes for poor. The launch of 16,000 crore scheme, Saubhagya, under which all households across the country will have access to electricity is one such scheme. Under this scheme power connections with be provided to the poor free of cost.

“Under the PM Sahaj Bijli Har Ghar Yojana, or Saubhagya scheme, every household in the country will be given an electricity connection. No price will be charged for the poor to get an electricity connection and the government will go to their houses to give them the connection,” Modi had announced on September 25.

The government will bear the expected 16,000 crore cost of giving electricity connections to four crore households in the country. The Prime Minister regretted that these households are yet to get electricity and haven’t seen a light bulb. “It’s been over 125 years when the famous scientist Thomas Alva Edison invented the bulb and who had said: ‘We will make electricity so cheap that only the rich will burn candles,” the PM stressed, highlighting that it is unfortunate that many households are still lit with the help of candles or lanterns. “Forgot about conveniences, even the women of the house have to cook in the dark, which is why most of them are under pressure to try and finish the cooking before sunset,” Modi said after inaugurating the Deen Dayal Urja Bhavan, a new green building built by public sector oil explorer ONGC in the capital.

bjp meeting with chief ministersArguing that few would have imagined a government will come that will give bank accounts to 30 crore poor people, insure 15 crore people at a cost of 90 paise per day, reduce the prices of stents and knee replacements, the PM said the dreams of the poor are the dreams of his government. “Did anyone ever think such a government would come that thinks of freeing women from smoke in the kitchens, did they imagine a government would think of enabling those who wear Hawai chappals to ride on an aeroplane?… Reducing the problems faced by the poor, the troubles they face in their daily lives is my government’s biggest responsibility,” the PM asserted.

Maintaining the Prime Minister’s assertions, BJP President Amit Shah had commented, “As part of government’s effort to fund the unfunded, more than 7.45 crore entrepreneurs have been given bank loans worth 3.17 lakh crores under Pradhan Mantri Mudra Yojana. Of this, 70 per cent of beneficiaries are women.

Under the Mudra Yojana, a loan of up to 50,000 is given under the ‘Shishu’ plan, between 50,000 to 5 lakh under ‘Kishore’, and between 5 lakh to 10 lakh under ‘Tarun’. Banks have sanctioned more than 22,000 applications worth 4,699 crore under ‘Stand Up India’,” he claimed.

Election Commission prepared

The Election Commission of India earlier this week said that it will be logistically in a position to hold simultaneous polls to the State Assemblies and the Lok Sabha by September 2018. Election Commissioner O P Rawat, who was in Bhopal for the launch of the ERONet software that will check inaccuracies and duplicity in voters’ lists, said that the government had sought the commission’s response on the possibility of holding simultaneous state and national polls. The Election Commission has informed the government that funds to the tune of 3,400 crore and 12,000 crore would be needed for the requisite number of Electronic Voting Machines (EVMs) and Voter Verifiable Paper Audit Trail (VVPAT) machines respectively. Rawat said orders had been placed with two government undertakings and the
delivery of machines had already begun. All these machines are likely to be delivered by September 2018 after which the Election Commission would be in a position to hold polls to both state Assemblies and Lok Sabha.

Feasibility of synchronised polls

The BJP has been talking about the possibility of holding simultaneous elections to the state Assemblies and the Lower House of Parliament ever since it came to power at the Centre over three years ago. The party has been claiming that in doing so it is motivated by the need to save the country’s resources. The demand to hold concurrent polls was also raised a few years ago by senior BJP leader L K Advani, who has now been moved to the party’s periphery as a ‘margdarshak’. The National Institution for Transforming India or Niti Aayog, chaired by Prime Minister Narendra Modi, had also said in August this year that it was in favour of holding simultaneous state and central legislative polls in the country from 2024, calling it a move in “national interest” to put the least strain on the country’s resources.

Significantly, Vice-President Venkaiah Naidu has also supported the idea. It is true that holding elections in the country is an enormous exercise that puts excessive pressure on the public exchequer. While almost all parties flout caps put on election expenses to be incurred by them, the ruling parties often use money from the state treasury to fund populist measures to ensure their win in the event of an upcoming election. Government works come to a halt once the code of conduct comes into effect in the event of an imminent election, bringing the economy to a standstill. Moreover, a large number of manpower in terms of election officials and security personnel is needed to hold an election.

Will holding simultaneous elections solve the many problems of wasteful poll expenses being incurred especially by the state treasury? There cannot be a clear answer to this question. Mandatory inflation makes it tedious to compare calculated costs of subsequent elections held at gaps of a few years. For instance, the Niti Aayog in a discussion paper titled Analysis of Simultaneous Elections: The “What, “Why” and “How” prepared by Bibek Debroy and Kishore Desai said that the 2009 Lok Sabha election cost around 1,115 crore while the 2014 election cost 3,870 crore; which means that the official cost of holding a General election more than tripled in five years. The paper states that the expense of holding various state election in between was additional and cites a Election Commission estimate of an expense of around 4,500 crore to hold both state and central elections together. However, this figure of4,500 crore is also bound to increase with every subsequent simultaneous poll. Though there will be some relief to the national treasury in terms of election expenses being reduced, there will be some mandatory additional costs such as the thousands of crores being borne by the nation’s treasury to procure forty lakh machines to facilitate the mammoth process of simultaneous polling.

Some questions remain

Questions arising out of the switch in the country’s electoral practices go much beyond economics.

Questions arising out of the switch in the country’s electoral practices go much beyond economics. While next year elections to only a few state Assemblies are likely to be held concurrently with the General election, the long-term plan is to make it a practice to hold all state legislative polls and the central one together, as has been suggested by the Niti Aayog. However, simultaneous elections might give undue advantage to a single political party in a particular state that might be victorious in both the Assembly as well as General polls held concurrently. For instance, Assembly elections in Odisha and Andhra Pradesh were held simultaneously with the Lok Sabha election in 2014. In both states, the same parties emerged victorious in both elections.

In Odisha, the Biju Janata Dal (BJD) secured the maximum number of seats — 117 out of total 144 in the state legislative assembly and 20 out of total 21 in the Lok Sabha. In newly-bifurcated Andhra Pradesh, the Telugu Desam Party (TDP) emerged victorious in both synchronised polls by winning 106 out of 117 seats (along with ally BJP) in the Assembly and 16 out of total 25 parliamentary seats.

It’s worth mentioning that federalism is a key feature of the Indian Constitution. By introducing a one nation, one poll system on the lines of a Presidential system of polling, our federal system could be turned unitary in nature which is against the core principles of the Constitution. Imposing a single poll system on the people could also be a hindrance in the free political development of the Centre and the states. Big national issues will become the dominant themes of elections and the issues concerning the states and smaller constituencies will get a backseat which will be a drawback for small and regional political parties. India is a diverse country and every region has its distinct issues. Regional issues will receive a major setback if concurrent elections are enforced.

If we go back to the early elections in India, we find that elections to the Lok Sabha and State Assemblies were synchronised after independence in 1952, 1957, 1962 and 1967. Thereafter, the system got disrupted because of reasons such as unstable governments, coalition politics, imposition of President’s Rule. The possibility of such disruptions in governments will be there in the future too and the cycle of simultaneous state and central polls is bound to break. How will a solution be found to this pertinent problem?

As per the law, Lok Sabha election can be held six months prior to the scheduled dates and there is no need to make any Constitutional amendment regarding the same.

The BJP under the leadership of PM Modi and party President Shah has already started working towards the Lok Sabha poll and it is expected that an announcement for preponing the General election could be made after the
Gujarat Assembly election scheduled to be held later this year. However, to enforce the decision the BJP will need to take into confidence Opposition parties. Though that seems to be a tough task, who knows what the spinmeisters will now achieve.

letters@tehelka.com

Poor policies add to pain of the poverty-hit people

Hunger in Bihar by Vijay Pandey (13)India, where nearly 38 per cent of the total population or 380 million people are very poor, is trying hard to lift its general public from the acute poverty. Chairing the recent IBSA (India, Brazil, South Africa) Foreign Ministers’ Meeting, External Affairs Minister Sushma Swaraj had urged the international community to work for complete elimination of poverty as part of the UN’s 2030-deadlined Sustained Developments Goals.

The country, as per the World Bank’s Atlas of Sustainable Development Goals, extricated 120 million people from extreme poverty between 1990 and 2013. The process, however, was relatively slow as China slashed the number of people living in extreme poverty from 756 million to 25 million during the same period. This is one version of India’s economic story.

There is another version too. Interestingly, that too is being supported by data and statistics. Most of the reports suggest that India contributes 2.99 per cent to the world’s GDP but it shares 17.5 per cent of the world population and 2.4 per cent of the world surface area. It is now the seventh-largest economy in the world and expects to cruise to the third position by 2050. During this period, the economy could move towards low-end of single-digit inflation from the high-end of double-digit, the latest data point out.

In its apparent bid to enhance the country’s economic transformation, the present government came up with a slew of measures — including demonetisation and GST — in recent past. On the face of it, most of these steps seem to be painful for the general public. India’s GDP growth has slowed down to 5.7 per cent this year. Opinions stay divided over the government action plans. One can smell differences even within the the ruling BJP over the new economic policies.

Former finance minister Yashwant Sinha recently made very interesting remarks on the initiatives of the Central government. “Demonetisation has proved to be an unmitigated disaster,” he said, adding that the GST was badly conceived and implemented. Highlighting that extra jobs have been lost under Modi-Jaitley, he hinted that there is no hope for recovery, especially with Arun Jaitley as finance minister. And the masterstroker was: “The prime minister claims that he has seen poverty from close quarters. His finance minister is working over-time to make sure that all Indians also see it from equally close quarters.”

Politics apart, the policy woes need to be addressed on an urgent basis. Population growth, which is likely to hit 1.5 billion by 2026 to make India the largest nation in the world, should be curtailed. With four out of every five of India’s poor living in rural areas, progress will need to focus on the rural poor. The policy focus must be on the welfare of poor across the country, 60 per cent of whom are still living in Bihar, Jharkhand, Odisha, Madhya Pradesh, Chattisgarh, Uttar Pradesh and Uttarakhand.

International poverty line stands at $1.25 per day. Sadly, 32.7 per cent of the total population in India lives below it. The government must act to halt the ever-increasing prices of even basic commodities. Industry wise, the unorganised sector must be pulled up a bit as owners do not bother the way their workers live and earn salaries.

Capitalising on growing connectivity between rural and urban areas, and between the agriculture, industry and services sectors, has been effective in the past two decades and holds promise for the future. The link between these must be strengthened. The government must also address job creation in more productive sectors, which has until now been tepid and has yielded few salaried jobs that offer stability and security.

Monumental policy blunders, as former prime minister Manmohan Singh had said, can also be rectified if there is will and appropriate measures are in place.

Modi Government plans stimulus to boost economy

14-15

Prime Minister Narendra Modi has constituted the Economic Advisory Council to the Prime Minister (EAC-PM) which consists of economists of high repute and eminence. The EAC-PM would be headed by Dr. Bibek Debroy, Member, the National Institution for Transforming India also called NITI Aayog, who would be its Chairman. Other members of the Council would be Economist Dr. Surjit Bhalla, Director, National Institute of Public Finance and Policy, Dr. Rathin Roy and Professor at Indira Gandhi Institute of Developmental Research Dr. Ashima Goyal. Ratan Watal, Principal Advisor, NITI Aayog, would be the Member-Secretary.

The formation of EAC-PM comes in the wake of the economy hitting a rough patch in the past few months with India losing the status of being the world’s fastest growing economy. It assumes added significance as BJP’s ‘Margdarshak Mandal’ member and twice Finance Minister Yashwant Sinha opined in his recently published column that the economy is on a “downward spiral” and specifically blamed demonetization, which he claimed was an “unmitigated economic disaster”, and a “badly conceived and poorly implemented” Goods and Services Tax (GST) that has played “havoc” with businesses. What followed thereafter was more interesting as Sinha’s son Jayant, a minister in the BJP government, came in defence of the government. The crux of his defence was that short-term pains must be endured for long term gains. The meretricious ploy of a son taking position against his father has led to trolling on social media . Finance Minister Arun Jaitley too took a dig at Yashwant Sinha reminding him of his tenure from 1998-2002 when non-performing assets (NPAs) of banks stood at a whopping 15 per cent of total advances and when Sinha demitted office the foreign exchange reserves had dipped to a meagre USD four billion.

Ironically, slowdown has been witnessed in India when most economies are beginning to bounce back. This must have caused concern to the government as economists have begun criticizing demonetization and implementation of the Goods and Services Tax. The recent spike in the diesel and petrol prices coupled with shrinking jobs has led to nasty posts on social media. Indeed, growth can be given a push if the two engines driving it viz government spending and consumer buying are accelerated. There is an urgent need to encourage public and private spending through tax cuts because with less liquidity to buy things, pay wages or run small businesses, demand and jobs are bound to collapse.

Narendra ModiThe newly constituted EAC-PM would analyze any issue, economic or otherwise, referred to it by the Prime Minister and advise him thereon. It would also address issues of macroeconomic importance and present views thereon to the Prime Minister. This could be either suo-motu or on reference from the Prime Minister or anyone else. It would be an independent body to give advice on economic and related issues to the Government of India, specifically to the Prime Minister.

Significantly, a Council existed earlier but it had been rendered defunct after the previous UPA government demitted office in May 2014.

The formation of the Council at this juncture suggests that it could play a vital role in reviving the economy to retain the lost growth momentum that has gone down over the past few quarters, with the first quarter of this financial year clocking just 5.7 per cent growth, down from 7.9 per cent a year ago. It seems that a set of weak economic numbers has left the Union Government scrambling to do something to set things in order. This comes after the gross domestic product sliding to 5.7 per cent in the first quarter of 2017-18 and industrial growth dropping to 1.2 per cent in July, compared to 4.5 per cent during the same period a year earlier. In addition,
retail price inflation which was hitherto under check has jumped to a five-month high of 3.36 per cent in
August from 2.36 per cent in July.

There is little doubt that the government had been put in a tricky situation because increased fiscal spending can provide only short-term relief to a sagging economy. The fact is that further loosening of the fiscal deficit would only affect India’s standing among global investors. The risks of fiscal loosening are grave at this time when many State governments have either announced farm loan waivers or are in the process and these could push up interest rates and affect fresh lending. The real antidote to the current slowdown, on the other hand, is known all too well. No major investment seems coming to the country and it is reflected in the sluggish credit offtake numbers.

A need was being felt that the Modi Government must rise to the challenge and enact tough structural reforms and the formation of EAC-PM is a step in that direction. The GST is surely India’s biggest tax reform since Independence. However, GST has not yet delivered the results that the Government expected. About 100 days into its inception, the GST Network is still trying to cope up with the millions of invoices and returns being filed electronically by the assesses across the nation. Was the GST network not fully tested before launch? A ministerial group formed by the GST Council has said that “the 85 lakh tax payers be assured that 80 per cent of the GST related problems would be fixed by the end of October”. There is a need for two tax slabs and a single tax filing, not multiple tax slabs, multiple registrations and multiple return filings. The GST should be targeted to have one market and one tax.

18-19

It is not only that glitches have resulted in a slowdown of the economy and resultant public anxiety. The hikes in diesel and petrol prices which have touched a three-year high have hit the pro-establishment sentiment and there is a demand to cut taxes on oil. In 2008 when there was a global slowdown, the high oil prices were considered to be one of the factors for it and now many fear that the economy is at the verge of another recession. And this time the reason could be low oil prices. The price of crude oil remained above USD 100 per barrel from 2011 to 2014. These prices halved to USD 50 per barrel in 2015.

Dharmendra Pradhan, Petroleum and Natural Gas Minister, has ruled out any intervention as Oil companies fix prices on a daily basis. Opposition parties are making a hue and cry alleging that diesel price hike has hit farmers. Since the year 2014 crude oil prices had come down in the international markets but this benefit has not been passed on to the consumers. The result is that profits of marketing companies have shot up and so has the resultant dividend to the government. How the states and the Centre have benefited could be understood from the fact that there has been a 300 per cent increase in Central and States Taxes on Diesel and a 112 per cent rise in taxes on petrol since 2014.

The Reserve Bank of India last month said that its industrial outlook survey had “revealed a waning of optimism in Q2 about demand conditions across parameters and especially on capacity utilization, profit margins and employment.” Since the infamous global economic slowdown of 2008, exports have been hit hard. The global economy has bounced back and led to a rally in exports from most Asian countries. However, exports from India have yet to pick up.

Even though dark clouds loom large over the Indian economy, the situation is not irreversible. Chief of the State Bank of India (SBI) too shares optimism and expects the country’s economy to rebound in another couple of quarters. “Plans are getting off the table, with a number of infrastructure projects being tendered out. Growth should come in a quarter or two,” SBI chairperson Arundhati Bhattacharya has said. She said “The government now needs to do some heavy lifting and already some traction is being seen in sectors such as roads and fertilizers. There are talks of a stimulus programme to revive growth in the economy, with the Central government facing the task of balancing expansion imperatives and fiscal rectitude”. There is still a silver lining as service sector is showing signs of recovery. The services sector continues to remain buoyant. Quarterly Gross Value Added across this broad swathe that encompasses hospitality, transport, communication and broadcasting services accelerated to 11.1 per cent from 6.5 per cent in the fourth quarter. Similarly, the civil aviation sector saw passenger traffic rising by 15.6 per cent.

Another sure shot engine of demand that can pull the Indian economy forward is the government expenditure that can prove to be a bail out. Infrastructure sector needs huge investments in rural electrification projects, irrigation and basic research. As infrastructure sector has a long gestation period, private sector investors always shy away from pumping in funds. This is the sector where government needs to step in and invest to boost up the infrastructure. This in turn would facilitate foreign direct investment and propel domestic players to invest thus reversing the downtrend in the economy.

letters@tehelka.com

Pushing Rohingyas back to conflict zone may not be right!

IMG_9047It was not long back when the present Secretary General of United Nations and then High Commissioner for Refugees at the UN Antonio Guterres had lauded India for opening its doors to refugees and asylum seekers, providing them safety and sanctuary and in the process setting an example for others to follow. Ironically, India is now trying to push Rohingyas back into the conflict zone treating the refugees from Myanmar as a potential security threat. It seems nothing more than a knee-jerk reaction. Admittedly some caution is required while dealing with a sudden flow of refugees from a conflict zone because some may have radical links. But to consider all of them as potential threat to the country’s security would not be right. To the discomfiture of India, Myanmar’s de facto Prime Minister Aung San Suu Kyi has made a volte face and she is now willing to welcome the return of her fellow citizens — the Rohingya refugees. Significantly, the United Nations describes Rohingyas as the world’s most persecuted minority is their faith. The policy related to Rohingyas seems to be ill conceived and poor strategic thinking. Unfortunately, India seems to be a self-conceited power that is not empathetic towards refugees from neighbouring nations. Policy makers need to implement Prime Minister Narendra Modi’s homily and try to find out ways so that unity and territorial integrity of Myanmar is respected.

The government’s affidavit in the Supreme Court submits that refugees would have an adverse impact on its citizens, as they would be deprived of their legitimate share in education, employment and other facilities. The intention to deport them back is tantamount to going against humanitarian principles. Our country is a proud example of giving shelter to refugees from many countries since Independence. We should remember that all have the right to life and the Rohingyas are stateless refugees in need of help. In fact Prime Minister Modi during his visit to that country had shared Myanmar Government’s concerns about extremist violence in Rakhine State where unprecedented violence had taken place, forcing Rohingyas to flee to India and Bangladesh. Sadly, the Rohingyas have been like the nowhere people since 1982, when a Burmese law rendered them stateless with the government arguing that they are Bengali. This backdrop should be considered because taking a position on the wrong side of the human angle would leave a question mark on India. As an emerging super power under Prime Minister Narendra Modi, India must understand that when it is driving out Rohingyas, the stateless people, where does it intend to send them? To the conflict zone again?

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