Tuesday, 31 January 2017

UP Elections ... Who will win?

Despite his dramatics and demagoguery and without any sincerity or honesty, Modi will not be able make BJP win forthcoming UP elections especially without any Chief Ministerial candidate's face. At best BJP could get no more than 100 seats. The effects of demonetization were borne by poor & lower middle class mostly and they will no longer believe Modi's dramas and cheap lies. While middle classes live in dreams that Modi's magic will some how work, a dream is a dream only and never a reality and poorer sections are blessed with intelligence to differentiate friend from a foe. With their livelihoods destroyed or incomes eroded for no fault of theirs, lower classes will surely punish Modi at polls. Mayawati's unpopularity and burden of financial mess she is in, will help SP-Congress combine. On other hand Akhilesh Yadav's graph is reasonably good after his hands down success in inner party struggle, and with Congress vote share of about 10% will easily win majority seats or even 2/3rd seats. The opinion polls projecting BJP's hands down victory are just to please Modi the dictator  but not the truthful picture. While Modi tells lies to people, his chamchas will surely tell him lies but not the truth. Sensing this danger, Modi unveiled 'Ram Mandir' construction now which was forgotten by BJP long ago and was never in Modi's agenda and people will find no reason to believe it, with Modi's track record of blatant lies. The truth is that none of the BJP candidates are sure of their winning as well.

Subsequent to his glamorous 2014 victory, Modi stooped down in his character and personality to establish his one man authority by liquidating all his seniors successfully has dis-empowered his second rung leaders. Surrounded by coterie, Modi is living in a fools paradise with complete disconnect from society, and is thinking that whatever are his thoughts, void of substance, are good for nation and see the result of disastrous demonetization that dented his ability as leader of the nation. People will see no reason to vote for him or BJP not knowing who will be his proxy to become CM. The leader in Lucknow (Akhilesh) will have greater chance of victory than the leader from New Delhi (Modi).

Modi's debacle in UP and Punjab elections will ignite chain reaction and Modi gets entangled in more and more failures and become helpless and ineffective. In run up to 2019 general elections, Modi will face stiff opposition within BJP and outside parties and with faded charisma will lose general election and 'kichidi' of several parties will form government. After some time, the 'kichidi' government will fall apart plunging nation into chaos. Modi's reckless adventures, nation will pay dearly.
Mistakes, usually are very expensive and many times life changing.

These are my personal conclusions based on information & analysis only.

Early Budget is aimed at misleading the Nation

In normal course budget presented on Feb 28 contains economic survey details for 3 of 4 quarters of current financial year. Modi & Jaitley presenting early budget on Feb 01, 2017 will contain economic data for first 2 quarters of 2016-17 where as  Modi's mindless demonetization happened in 3rd quarter and its devastating effects of destroying informal sector, shrinkage of GDP & growth rate and most importantly loss of livelihoods of several millions etc will not find place in 'economic survey' presented to Parliament a day before budget presentation. Thus Modi will be effectively avoiding discussion in parliament about the realities of senseless demonetization.

Eliminating separate Railway budget and merging with general budget is another evil attempt to enlarge governance (more governance means more corruption) and subordinating Railways (by and large autonomous so far) to Finance Minister and Railway officers to IAS officers of Finance Ministry. Needless to say IAS officers have key role for today's pathetic state of India, especially in matters of corruption, black money and abuse of authority.

Avoiding parliamentary discussion is nothing but decimating democracy. 

Friday, 27 January 2017

Modi transforms from reforms to welfarism

On Saturday Dec 31, 2016, it was expected that Modi will give details of success of demonetization and declare further big steps on eliminating black money & corruption. But he went in for some avuncular moralizing and then proceeded to announce a slew of welfarist measures, ostensibly as a balm for the pains that his government’s demonetization has caused thus confirming the disastrous failure of demonetization in achieving its stated objectives viz. elimination of black money, corruption, fake currency and terrorism financing.

Modi’s welfarism is a full U-turn from the promised “minimum government”, but the measures themselves would do little to address the ill-effects of demonetization but deceptively doing some help the citizens in their time of need. In all of these small sops one thing that stood out was that...nothing stood out. A plan to build more houses or a lower rate of tax for some small businesses were so banal that they were worthy of nothing. Few schemes were already part of the government’s policy matrix: the maternity benefit exists as a part of the National Food Security Act, and the RuPay card is hardly a new idea. Other than the optics of managing anger due to demonetization and making a show of the government caring, it is unclear how these small schemes will help India get over the shocks of demonetization.

It is clear that Modi has given up on his 'minimum government' programme. Sops is what the prime minister turns to as a crutch in times of need. The fact that Modi had to now pull out a provision of the UPA’s Food Security Act – which both the UPA and his government had denied to women – is telling. It is unlikely that these small sops will do anything to ease the pain of demonetization. As India steps into the new year, mitron, it’s clear that the pain will continue.

With mounting costs of demonetization for government & nation, loss of millions of livelihoods in informal sector resulting in 60% spurt in MNREGA beneficiries, banks financial condition precarious with unbearable NPA's, GDP & growth rate shrinking and other effects of demonetization will leave Modi without any money to do anything. On the contrary, taxes will go up, welfare expenditure will skyrocket, fiscal deficit gets widened from 3% to 3.5% or even 4% and above all crude oil prices are likely to double in coming months will result in runaway inflation leaving Modi and economic pundits stare helplessly. Worst is that our rating might get downgraded to 'junk status' signalling capital flight to foreign countries.

Nation will be paying dearly for Modi's quack advised economic adventures which are mainly aimed at striking headlines and disarming opposition political parties rather than doing any good to country.

It is necessary to restrict executive taking whimsical decisions like demonetization with wide ranging ramifications, in future, by strengthening institutions with much greater autonomy and teeth and reducing or minimizing discretionary decision making powers at all levels and replacing them with robust procedures. That is the only way our democracy can survive and ensure unity & integrity of India.

Monday, 16 January 2017

Who will compensate demonetization expenses?

My View:
Demonetization effect is estimated at Rs.128,400 crores for the 50 day period, effecting the whole economy but with devastating effects on informal economy.
  1. Direct expenses to RBI & GOI Rs.16,800 crores.
  2. Banks to bear an estimated cost of Rs.35,100 crores.
  3. Cost of queues to exchange currency is estimated at Rs.15,000 crores.
  4. Enterprise* losses are estimated at about Rs.61,500 crores.                                 (includes all businesses including farmers, input suppliers, transporters, wholesalers, retailers, manufacturers, stockists and distributors, malls and other retail outlets, restaurants, entertainment and other enterprises) 
  5. Transaction cost of demonetization is estimated at Rs.128,400 crores. 
While banks (public sector & private sector) have spent Rs.35,100 crores, govt plans to compensate public sector banks only by Rs.25,000 crores. Who will compensate private sector bank expenses?

Who will compensate informal sector for the losses (several lakh crores) inflicted by mindless Modi's unlawful demonetization? 

Why should people lose their money for no fault of theirs for government's authoritarian acts without following even pretense of  process of law?

Saturday, 14 January 2017

RBI's functioning must be open to scrutiny

The RBI Central Board recommending 'demonetization', based on Prime Minister Modi's instructions without following any process, hurriedly within hours, landing the nation into an instant fiasco, speaks volumes about its 'autonomy' in managing country's monetary system properly.

RBI would have been well with in its rights rejecting or delaying or subjecting the Modi's instruction to detailed scrutiny. RBI being a apex body of experts and professionals, accepting Modi's instruction and recommending the same within hours without detailed study of the issue, examining feasibility, estimating costs & benefits, analyzing its impact on civil life & economy, preparations needed by all banks etc is nothing but abdicating its responsibility in managing country's monetary system while pleasing politicians who do things only for political benefits in the disguise of national interest. For this fallacious decision with disastrous effects, RBI must answer the nation with complete details leading to this senseless demonetization which achieved nothing, with huge expenditure of demonetization, impacted common man greatly, derailing informal economy with 80% share of employment and a million jobs lost and economic normalization is about two years away. Responsibility should be fixed and culprits punished.

The RBI annual report shows the its annual expenses in 2015-16 were Rs 14,990 crore. These are comparable to the annual expenditure of many states in India, and many times bigger than that of most central banks and regulators in India and abroad. Nearly a third, i.e. Rs 4,477 crore, is spent on RBI staff salaries, superannuation, housing, maintenance, directors’ fee and board meeting expenses. Such a large use of public money requires adequate scrutiny.

In RBI, all the general powers of the Central Board have been delegated to the Committee of the Central Board*, virtually can do everything that the Central Board can, under the RBI Act. This defeats the spirit of collective decision-making at the Central Board level and circumvents the necessity of obtaining votes of the majority of members of the Central Board. The minutes of the Committee are placed before the Central Board; this serves little purpose as decisions are already taken and members did not participate in them. The Central Board effectively becomes responsible for all decisions of the Committee without deliberations while the Committee has no accountability on how it discharges its duties.

*Committee of the Central Board's members are Governor, Deputy Governors and any Part-time Non-Executive Director/s present where the Governor has its headquarter (generally in Mumbai). EDs also attend as invitee.

The present Central Board of Directors of the Reserve Bank of India are:
  1. Dr. Urjit R. Patel, Governor 
  2. Shri R. Gandhi, Deputy Governor 
  3. Shri S. S. Mundra, Deputy Governor 
  4. Shri N. S. Vishwanathan, Deputy Governor 
  5. Dr. Nachiket M. Mor, Country Director for the Bill & Melinda Gates Foundation 
  6. Shri Natarajan Chandrasekaran, CEO and MD of TCS 
  7. Shri Bharat Narotam Doshi, Member of the ICAI 
  8. Shri Sudhir Mankad IAS (retd), Ex- Chief Secretary, Gujarat
  9. Shri Shaktikanta Das, IAS, Secretary, DEA, Ministry of Finance, GOI 
  10. Ms. Anjuly Chib Duggal, IAS, Secretary, DFS, Ministry of Finance, GOI.
The RBI does not make the Board agenda or minutes public. An RTI enquiry about Board minutes was turned down. Even the minutes of Board meetings held five years ago are not made public. If the Board was required to make its proceedings public, would it have continued to behave in this manner or would public scrutiny have prevented such functioning?

The understanding is that along with transparency comes autonomy. When participants know that discussions of the meeting will be made public, they behave more responsibly. This reduces the chances of the Board being pressured or taking hasty or irresponsible decisions.

Parliament must examine in detail the functioning of the RBI Central Board. The RBI must be required to make public, the agenda and minutes of all past meetings of the Central Board. If there are to be any exceptions based on national security, it is Parliament that should decide. The Board must not be allowed to abdicate its responsibility. Unless Parliament amends the law and enforces a well-functioning of the Board, the RBI will continue to be a weak institution, a fertile ground for further mistakes.

My View:
In this world every body is answerable to some body, no matter how big he is or where ever he is placed. RBI is one of the least controversial institutions so far. Not any more. Urjit Patel, present governor blindly obliging Modi is the cause. Of course these days it is dangerous to oppose or Modi & Company for anybody in India. If Urjit Patel didn't have guts to oppose Modi, he didn't have any right to facilitate destruction of economy as well. He should have silently resigned and left RBI like his predecessor. Due to Urjit Patel's indiligent act, he has been destructor of RBI's autonomy and RBI has become subordinate to Ministry of Finance. RBI decision making process must become more transparent, accountable, due-diligence imperative, and decisions must be in best interest of the nation. Ministry of Finance should be shown their limits and never to encroach into domains which are not theirs, under any circumstances.

Friday, 13 January 2017

Indians under a mountain of debt

It’s not just India which is under a mountain of debt but also Indians who are rapidly shedding inhibitions towards taking loans. With the rampant spread of credit culture, the average Indian is paying around one-fifth of his or her monthly salary towards repaying debt.

For aspiring Indians, debt is no longer a bad word. From white goods to kids’ education, loans are increasingly a favoured option. Until few decades back, households mostly believed in saving for big ticket expenses. Today, they would rather take a loan for any expenditure; be it a a microwave oven, an LCD TV, a car, house and even education. The huge discounts and offers being given by e-commerce firms and consumer product brands are supporting the trend. The phenomenon has been aided by the spread of microfinance institutions and self-help groups in rural India and easy EMI schemes in urban areas.

The off-take of credit has been going up due to rising disposable incomes, increasing consumerism and easier access to credit. Real estate and consumer durables have led the growth in credit. In the last few years, high value goods have been coming under attractive schemes. A lot of credit is being used for creating assets like household gadgets and appliances. Some credit is also being taken for education of children, both in India and abroad, and that is an investment than debt.

Some of the biggest loans are taken in the real estate and auto sectors. About 70 per cent of cars are bought on EMIs. The loan phenomenon will increase further due to demonetization. The rising credit culture would have been a matter of concern had it been used for discretionary spending such as travel and vacations which is just blowing up the money. Creating credit is not necessarily bad especially in cases where it is also improving life style.

It is asset-based credit and helping create more liquidity, which is good for the economy. While living on loan seems to be gaining currency, there is little worry about payment defaults. There is an increasing level of credit discipline among rural people. The default rate is much lesser in consumer credit as against corporate credit. This is because a retail customer has to build his/her credit score, and multiple validation takes place before credit is extended. A lot of assets are given on mortgage, reducing risks.

My View:
The rising debt culture is OK in stable economies without any disturbances and growing steadily year after year. In case of disturbances or economic contractions, who ever is saddled with loans and loses job or bulk of income, will simply become a pauper on the street. All his equity in this loan based purchases will simply vanish. With assets vanished, credit scores below mark and saddled with liabilities, one will have to live on family assets or charity.

For single earners in the family with meager family assets & support and risk aversion people , staying away from credit based purchases and building assets base for some time is better. In this leveraged world, money and its manipulations are OK for high net worth people who can absorb shocks but people with fragile asset base and dependent on monthly earnings staying away from loans & EMI's is better, for peace of mind.

While it is fascinating to buy gadgets & things with least payment and pay monthly EMI, and if one computes the total interest outflow, over two decades, due to credit based several purchases, it works out to be mind boggling amounts. The mortgaged housing & car loans carries moderate interest charges. The unsecured personal loans, which carry higher interest rates. Credit cards usage is OK for convenience of payments and very short term credit purchases. But if used for medium/long term credit purchases, the interest charges are worse than personal loans.

Staying away from credit and saving 25-40% of earnings, is worthwhile for peaceful living.

PM Modi 'ejects' Gandhi in Khadi Udyog (KVIC) calendar & diary

In a surprise development, Prime Minister Narendra Modi has ejected Father of the Nation Mahatma Gandhi in the 2017 wall calendars and table diaries published by the Khadi Village Industries Commission (KVIC), official sources said here on Thursday.

Stunned employees of KVIC headquarters staged “a silent, soul-cleansing” protest. KVIC Chairman said this was “not unusual” and there have been deviations in the past. They were pained at this systematic easing out of Mahatma Gandhi’s ideas, philosophy and ideals by the government. In fact, in 2016 the staff unions in KVIC had raised the calendar matter strongly with the management and were assured that it would not be repeated in future. However, this year it’s a total washout.

Meanwhile, the news was received with consternation and went viral on various social media networks with a vast majority sharply critical of the KVIC move.

The man who wears Rs.10 lakh suit sitting in front of 'charkha' is joke of the millennium and nothing short of Goebbels propaganda spreading blatant lies. Prime Minister Modi flabbergasting blatant lies not only demeans himself but ejecting Gandhi will be emanating wrong things about our nation in the eyes of the world simply because world knows much more about Gandhi than Indians in India.

If I have seen further than others, 
it is by standing upon the shoulders of giants ... Isaac Newton

My View:
In 1977, External Affairs Minister, Atal Behari Vajpayee, when he first entered his new office, looked around the walls, and immediately identified a blank spot. ‘This is where Panditji’s portrait used to be. I remember it from my earlier visits to the room. Where has it gone? I want it back’.  This despite the fact that two years before he became Foreign Minister had been spent in a jail placed by Jawaharlal Nehru’s daughter, Indira Gandhi. He had compelling ideological and personal reasons to reject Nehru and his legacy. Yet he asked for his photograph to be reinstated in his office. Vajpayee must have been embarrassed by this brutal casting into the dustbin India’s longest serving Foreign Minister as Nehru held that office for seventeen years displaying his ability to ‘befriend the opponent and enemy’. Modi cannot grow taller than Gandhi & Nehru by making them shorter are disregarding their contributions.

Now where does Modi stand? Had Modi displayed the kind of respect to Gandhi & Nehru they deserve, these over enthusiastic executives would not have displayed this kind of non sense. What kind of Prime Minister we have at present who doesn't even respect Gandhi and Nehru, who are dead 50-70 years ago? I will not be surprised if RSS leaders replace these icons under Modi regime.

Unless we learn to admire & respect our predecessors, despite their short comings, we lose our moral right to be respected by our successors.

Thursday, 12 January 2017

Why Indians evade taxes?

No body in this world pays taxes most willingly and smilingly. That would be very strange economics and irrational. In India with 40% people being poor and 60% people living on daily wages, the real number of people with liability of income tax in any case can not exceed 10%. While salaried class in formal economy are inescapable, most people in cash based informal economy don't maintain books of accounts and avoid income tax and other taxes as well. In the past there was thinking of expanding tax base and research discovered that this would result in much work and less gain and government then decided to have narrow tax base with efficient realization of taxes. With corruption and tax evasion rampant, the economy is in trouble and unless all loopholes are plugged, citizen trust in government, which is already low,  will vanish. With technological advancements it is not a difficult task to improve efficiency with time.

The tax evasion propensity of Indians stem from some deep seated hangover from feudal times when the state was exploitative and citizens considered taxation system as - exorbitant and arbitrary; fundamentally illegitimate; excessively burdensome; irrationally complex; patently corrupt; simple greed. It is usually a varying combination of the above. As long as people are poor and less educated and governments are irresponsible, inefficient and blatantly corrupt in public spending, efforts for higher tax realizations will be thwarted by its citizens.
  • Tax evasion was determined by the trade off between tax rates and the cost of punishment for noncompliance. Higher tax rates increase the incentive to cheat as one saves more money from evasion, while the cost of noncompliance deters avoidance. 
  • In the United States cheating on taxes is a criminal offence and offenders will be imprisoned as a consequence. In Switzerland, it is a civil offense: they levy a fine, then send you back to work, in order to earn and pay. Some Scandinavian countries with high tax rates and comfortable prisons have low tax evasion.
  • It is the psychological factor of "citizen trust" that is determinant in explaining the pervasiveness of tax evasion in India.
  • With respect to taxation, citizens need to sense three types of trust: (i) The taxes levied will be used to pay for valued services (ii) Their fellow citizens will pay their due share (iii) There is a fair process for revenue collection.
  • In India, less than 2% of the population pays income tax, is that the trust of citizens on all these three dimensions is low. 
  • Taxes are necessary for government for meeting expenses of governance, law and order, defense, welfare, infrastructure, etc. While governments will always be inefficient, because they are spending someone else’s money rather their own, it is a question of how much inefficient they are.
  • It is crisis in trust between citizens and the government. While revenue collection has grown by leaps and bounds, citizens do not see any tangible effects on their lives. Roads are worse, public transportation is broken, the police are viewed as widely corrupt, and government schools and hospitals are always the last resort. Consequently, Indians do not see their taxes being used efficiently.
  • The perception is that the largest tax offenders go scot free, while the more honest or compliant individuals and enterprises are pursued aggressively. To many, it seems there is a penalty for being honest. 

Our distrust is very expensive ... RW Emerson

My View:
It is well known that corruption is rampant at all levels in public domain. Any honest person is either sidelined or crushed. Govt schools and hospitals, in dilapidated condition, are the last resort of poorest person. Firstly, transparency and accountability, legitimacy, checks and balances must be enforced at all levels in public domain encompassing politicians, civil servants, police, judiciary and businessmen by bringing them under Lok Pal and RTI and granting autonomy & teeth to CVC, CBI, ACB etc, otherwise rebuilding public trust & confidence is impossible. Secondly, reforms in elections, justice dispensation systems etc to reduce role of dirty money effecting day to day life of common man. Thirdly, discretionary powers should be replaced with well defined processes at all levels. Fourthly, no public expenditure should be incurred without budget and prior legislative approval with the exception of managing calamities & disasters. All these require several years or even decades, but foundation has to be laid now. Quality education and healthcare should be made affordable and accessible to even to the poorest man. Education, awareness creation and strengthening institutions are the keys. Corruption, tax evasion, crimes etc are at present high profit and low risk activities and should be transformed into low profit and high risk activities, with active vigilance and heavier penalties & punishments. Finally tax administration reforms and tracking data, without intruding citizen's rights and privacy, will yield favorable results over time. Both political will and administrative honesty are necessary for any meaningful reforms and transformation to take place. Integrity, transparency, accountability, legitimacy, honesty, ethics, efficiency, economy, effectiveness, professionalism and social equity are principles of public administration and politics. These traits must be inculcated through continuous training especially in civil servants, who are the face of government with people. Not so easy, but beginning must be made and over time every thing will happen otherwise we will diminish ourselves into rogue nation.

Saddled with corruption, when government becomes unresponsive, people will ignore or bypass it and takes law into their hands or takes help of mafia. Laws can only punish culprits, if caught, but education transforms and empowers society. 

Wednesday, 11 January 2017

Gujarat riots, Godhra train carnage 2002 & Modi

Godhra Train Carnage Feb 27, 2002
On the morning of Feb 27, 2002, Coach No. S/6 of Sabarmati Express, returning from Ayodhya with karsevaks and passengers inside, was set on fire by a Muslim mob near Godhra railway station in Gujarat. The passengers were returning after attending a ceremony at the disputed Babri Masjid.

The karsevaks chanted slogans throughout the entire voyage, all the while harassing Muslim passengers. One family was even made to get off the train for refusing to utter  “Jai Shri Ram!”. More abuse occurred at the stop in Godhra: a Muslim shopkeeper was also ordered to shout “Jai Shri Ram!” He refused, and was assaulted until the karsevaks.

The train made its scheduled stop at Godhra about four hours late, at 7:43 am. As the train started leaving the platform, someone pulled the emergency brake and the train stopped near the signal point and halted in the middle of a Muslim neighborhood. Anywhere from 500 to 2,000 of them, surrounded the coaches occupied by the karsevaks and attacked it with stones and torches. Coach S-6 was set on fire, killing 59 people including 27 women and 10 children were burnt to death, and 48 others were injured.

In 2011, a special court inside Sabarmati Jail convicted 31 people and 63 were acquitted. The death penalty was awarded to 11 convicts. Twenty others were sentenced to life imprisonment.

Aftermath: Riots to Pogrom to Genocide
  • Godhra District Collector had spent the day explaining that the incident was not premeditated, Modi imposed his official version of the event that very evening, stating that it was a “pre-planned violent act of terrorism.”
  • Modi called police officials at his home and gave them orders not to put down the Hindus who would inevitably react to the Godhra attack: the “Hindu backlash” was not only foreseeable, it was legitimate.
  • That very evening, on the government's orders, the bodies were taken to Ahmedabad for a post-mortem and public ceremony.
  • The arrival of the bodies at the Ahmedabad station was broadcast on television, causing considerable agitation among the Hindus, all the more so since the bodies were exhibited covered with a sheet. 
  • The following day, the VHP organized the shutdown of the city (bandh) with the support of the BJP. This mobilization established the conditions for a Hindu offensive in Ahmedabad. 
  • On the evening of  Feb 28, Gandhinagar, the capital of Gujarat, located 30 km from Ahmedabad, was the scene of Hindu-Muslim rioting for the first time in its history. Twenty-six towns in all were subject to curfew. Ahmedabad and Godhra saw the most serious clashes, with 350 and 100 victims respectively in early March, according to official statistics. After these two cities came Mehsana (50 dead ) and Sabarkantha (40 dead). 
  • On Feb 28,  in Ahmedabad, in the Naroda Gaon and Naroda Pattiya areas, an armed hoard of several thousand people attacked Muslim houses and shops, killing 200. Six other neighborhoods in the city were subject to similar attacks on a lesser scale.
  • The Naroda Patiya massacre took place on Feb 28, 2002 at Naroda, in Ahmedabad, India. 97 Muslims were killed by a mob of approximately 5,000 people, organised by the Bajrang Dal, and supported by the BJP. The massacre at Naroda lasted over 10 hours, during which the mob looted, stabbed, sexually assaulted, gang-raped and burnt people individually and in groups and was deemed "the largest single case of mass murder" during the 2002 Gujarat riots and accounted for the greatest number of deaths during a single event. The state government stated that the massacre was "a spontaneous reaction to the Godhra train carnage and the state government and ruling party had nothing to do with it". Modi, talking about the violence, said that the "riots resulting from the natural and justified anger of people".  Mayaben Kodnani, a BJP legislator is the "kingpin of the violence" was later appointed as a Minister for Women and Child Welfare in Narendra Modi's government. Cell phone records showed that she was in touch with the Chief Minister's Office, the Home Minister as well as top police officials during the massacre. She was sentenced to 28 years imprisonment in 2012.
  • The Gulbarg Society massacre took place on Feb 28, 2002, when a Hindu crowd started stone pelting the Gulbarg Society, a Muslim neighbourhood in Chamanpura, Ahmedabad. Most of the houses were burnt, and at least 35 victims, including a former Congress Member of Parliament, Ehsan Jafri, were burnt alive, while 31 others went missing after the incident, later presumed dead, bringing the total deaths to 69. Modi and his administration did nothing to save Mr Jafri and 69 others at the Gulberg Society when rioters attacked them despite his repeated phone calls for help, even to the Chief Minister, but to no avail. 
  • The next day, on 1 March, mainly rural districts were added to the list of hotspots: Panchmahals, Mehsana, Kheda, Junagadh, Banaskantha, Patan, Anand and Narmada. 
  • On Mar 2, Bharuch and Rajkot, which had yet to be affected by communal violence, were hit in turn.
  • On the Mar 4, riots broke out in Surat.
  • The clashes in Gujarat could not have spread so quickly and taken on such proportions unless they had been orchestrated by well-organized actors and the attackers' plan had been prepared prior to the events in Godhra.
  • The evening of Feb 27, two of Modi's ministers, Ashok Bhatt and Prabhatsingh Chauhan, along with 50 other Sangh Parivar officials, organized a rally in Lunawad, a village in Panchamahals, of which Gohad is district headquarters, to plan “reprisals.”
  • It was a far cry from the spontaneous rioting, Modi later described to excuse the Hindus.
  • The lists that the ringleaders had in hand attest the premeditated nature of the assault. These indicate Muslim homes and shops, some of which bore Hindi names, thereby proving that investigation had actually been undertaken beforehand ascertaining the owner's identity. The computer print-out lists had partly been drawn up on the basis of voter registration lists.
  • Several senior civil servants admitted to investigators that on Feb 28, the Gujarat Interior Minister, Gordhan Zadafira, and Health Minister Ashok Bhatt directed the advance of the assailants from the “City police control room” of Ahmedabad.  At the same time, the Urban Development Minister, I.K. Jadeja, a close associate of Modi, had set up his headquarter in the Gujarat “State police control room” in Gandhinagar. All gave the police forces orders not to intervene. 
  • The violence involved looting Muslim shops then blowing them up with gas cylinders. These operations show careful planning and indicate official support. It would be impossible to transport that many men (and gas cylinders) with that many trucks without the benefit of state logistic support. Above all, the protected nature of the clashes over days, weeks, and even months can only be explained by active government cooperation. 
  • The attackers set fire to a few automobiles in the vicinity of police stations to make sure their schemes could be carried out with no fear of punishment.
  • The administration was paralyzed. Since their rise to power in Gujarat, Hindu nationalists had penetrated deep into the state apparatus including police. Hence the standard response, they gave to the Muslims who called them to their rescue “We have no order to save you".
  • An indication that the Modi wanted to see the clashes last, the army, which was already in the vicinity on Mar 1, -- 12 columns with 600 men were stationed at the time in Ahmedabad and other hotspots in Gujarat was kept aside for few “flag marches.”  It was  on stand-by under the pretense that no “official” was available to accompany the troop. 
  • The authorities never took the necessary steps to help the refugees: most of the aid came from Muslim NGOs.
  • Over 1,200 villages were affected, in the districts of Panchmahals, Mehsana, Sabarkantaha, Bharuch, Bhavnagar and Vadodara. The army had to be called in on Mar 5. Over 2,500 Muslims from 22 different villages were moved to refugee camps. These villages no longer had a single Muslim.
  • There exists correlation between the election calendar and the cycle of riots. Both riots and deaths do tend to cluster in the months before elections, and then drop off sharply in the months after an election is held.
  • Modi used Godhra as an opportunity to unleash violence and hoped to capitalize on during early elections. He recommended to the governor S.S. Bhandari, another RSS activist, dissolve the assembly on Jul 19, 2003. He resigned as Chief Minister, while remaining at the helmas care taker CM. These tactics were all the more shocking since the violence had far from subsided everywhere.  On Jul 20, the day after the assembly was dissolved, two people were killed and 14 wounded by stone-throwing and police gunfire, in Ahmedabad. 
  • Vajpayee was blamed for his failure as PM to get rid of Chief Minister Narendra Modi, who reportedly shouted back at a Muslim leader on the phone for seeking help after a mob had gathered outside his house. Some hours later, the Muslim leader was lynched. Modi seemed to be the villain who brought a lot of shame to the central government. Vajpayee instructed  ‘Modi has to go’ but Modi's mentor LK Advani saved him.
  • In such conditions, JM Lyngdoh, Chief Election Commissioner, who visited 12 of the state's districts between July 31 and 4 Aug 4, was reluctant to organise polls, especially since many voters, a vast majority of them Muslims, were still living far from their homes in refugee camps. So Modi and the BJP strove to demonstrate that calm had been restored, leading them first to hurriedly closed refugee camps or lower the number of occupants. 
  • National BJP leaders Dy PM L.K. Advani joined in the call for early elections. Given the objections of the EC, which preferred President's Rule be declared because the election could not be organized and the BJP brought the case before the Supreme Court which refused to express an opinion, referring to the EC decisions. In early November, the Commission set a date for the elections to begin on Dec 12,2013. 
Any one committing or abetting crime is a criminal. 
Punishing depends upon the evidence and process of law conclusively. 

My View:
The role played by Gujarat Chief Minister, Narendra Modi in facilitating, inciting, assisting the rioters, disabling police from their duties and in fact police were assisting rioting mobs, available army were asked only to do flag marches but not used  to control the situation during first few days of riots amply concludes that he is deeply involved in the genocide of 790 Muslims and 254 Hindus and more than 2000 casualties in Gujarat in 2002. How he managed to survive, later got absolved by Nanavati-Mehta Commission and win elections and went on to become Prime Minister 12 years later, only indicates his manipulative capabilities of a shrewd politician.

Tuesday, 10 January 2017

Kleptocracy in India

  • Kleptocracy is a government or state in which those in power exploit national resources and steal; rule by a thief or thieves. Kleptocracy is a government by those who seek chiefly status and personal gain at the expense of the governed.
  • Kleptocracy can be broadly described as a system of non-governance characterized by rampant greed and corruption. Every country suffers from corruption, but not every country is a kleptocracy. 
  • Kleptocracy, or “rule by thieves,” arises when a country’s elite begin to systematically steal from public funds on a vast scale. They do so by undermining democracy and the legal system, gaining control over vital economic assets (usually the banking and natural-resource sectors), and ultimately amassing unimaginable wealth.
  • Kleptocrats manage to nationalize risk while privatizing profits.
  • Examples are as diverse as Russia’s oligarchs under President Vladimir Putin, China’s sprawling Communist Party and South Sudan’s violently failed state.
  • Kleptocrats send money around the world with the click of a button, aided by unscrupulous professionals with the expertise to launder it through anonymous offshore companies and secure it in luxury assets in the West. 
  • According to the IMF, as much as 5 percent of the world’s gross domestic product is laundered money, and only 1 percent of it is ever spotted.
  • Illicit cross-border financial flows have been estimated at $1 trillion to $1.6 trillion per year. Total private wealth held offshore at up to $32 trillion. Elites from 139 low-to-middle-income countries had parked $9.3 trillion in offshore accounts.
  • USA has played an important role in the rise of the globalized kleptocrat. 
  • U.S. real estate then provides an attractive conduit for securing and legitimizing the laundered funds. Properties purchased for more than $5 million in Manhattan in 2014, more than half were bought by anonymous companies that disguised the buyers’ identities.
  • Kleptocracy doesn’t necessarily make governments weak. Some of the most powerful countries in the world are kleptocracies. Russia currently seems to be dictating global affairs. China is the second-largest economy in the world. In the long run, kleptocracy doesn’t just weaken governments. It destroys them.
  • Skewed priorities of greedy autocratic rulers make the countries are weaker.
    Russia can’t afford to honor its obligations to impoverished pensioners, but has plenty of money in Putin’s overseas accounts.
  • Developing countries collectively had lost $16.3 trillion to illicit leakages since 1980. While people struggled, starved and died, exported corruption effectively made these governments net creditors to the world economy. People begin to see government as a criminal racket instead of a legitimate provider of public services. 
  • The United States has strong constitutional safeguards that guarantee democratic participation, free speech and, most important, rule of law. Prosecutors wield a robust set of mechanisms to address official corruption. The United States is far from perfect, it is not a kleptocracy. At the moment, the US is simultaneously the world’s leading enabler and opponent of kleptocracy.
  • India is moving away from democracy towards kleptocracy with politicians, for whom democracy is a tool to capture power and the licence to loot, at the centre of the orbit. Around them in the orbit are the civil servants, the police, businessmen and even judges each feathering their own nest. 
  • Even though India has a democratic political system, the ordinary citizen has to comply with a plethora of laws, rules and regulations and please a battery of officials even to gain access to basic services and amenities. The processes and procedures are so burdensome that the time and resources required to comply with them are simply beyond the means of the average citizen. 
  • Law and the administrative system in the country have become unjust and oppressive because each department, agency, bureau, form and permit was created at the behest of interest groups seeking advantage through the political process. 
  • Ever since 1975 emergency, kleptocracy was on the rise in India. The holders of political power, for the benefit of themselves and their cohorts, commandeered the resources of the state to a shocking extent. 
  • Though politicians are the largest beneficiaries of state kleptocracy, bureaucrats are its main perpetrators either by complicity or through compliance. In a kleptocracy merit is the first casualty and competent and conscientious civil servants have been at the receiving end. Men of undisputed mediocrity were placed in charge of the commanding heights of government through a skewed process of selection and placements. 
  • It used to be said, "a good bureaucrat is one who, when in doubt, mumbles; when in difficulty, ponders; when in charge, delegates; and whose job is to cut the red tape length-wise".
  • Overwhelmed by corruption and non-performance, financial institutions are crumbling and falling by the wayside. Repeated pleadings of the Election Commission for electoral reforms are falling on deaf ears. Functioning of the Central Vigilance Commission is being throttled and Human Rights Commissions are being reduced to toothless tigers. `Terrorism' which is the fallout of all this rottenness is being touted as the `mantra' to garner votes!
  • Unless this degeneration is arrested and good, participatory governance restored the inevitable drift towards `kleptocracy-autocracy' that would drag one sixth of the human race towards political and economic ruin cannot be halted. 
All Politics is dirty business; All Businesses are dirty politics.

My View:
Ever since money started playing important role in winning Indian elections, since 1970's, democracy has come under danger giving rise to kleptocracy. Today, politics has become a business to make abnormal amounts without liability of taxes or fear of getting caught. Today there is no person who is honest and dutiful in public domain viz. politics, bureaucracy, judiciary & businesses who are so much interlaced to protect each other to further their own interests rather than national interest and common man is the casualty. If some one is found honest, either he would be sidelined or crushed. Corruption has become a multi headed hydra and common has lost trust in government or its agencies and tries to live on his own. This has led tax evasion not only by corrupt but also by honest and services degenerating. Systems are heading for collapse rapidly. Constitution and law enforcing institutions are far from strong, in comparison to USA, while autocracy and kleptocracy are ruling and endangering unity & integrity of our nation.

                    Monday, 9 January 2017

                    Modi in war with common man

                    Not withstanding the stated demonetization objectives by Modi such as black money, fake currency, corruption and terrorism financing, Modi's eyes were only on expected unreturned black money estimated at 21% of demonetized currency i.e. Rs.3.19 lakh crores, as detailed below. After demonetization expenses, the clear profit was expected to be Rs. 3 lakh crores. In his affidavit Attorney General informed Supreme Court that they expect about Rs.5 lakh crores of black money which would not be deposited by black money hoarders during the period Nov 8 - Dec 30, 2016.

                    Cash in circulation Rs.17.65 lakh crores
                    Demonetized currency 86% i.e. Rs.15.18 lakh crores
                    Extinguished currency 21% i.e. Rs.3.19 lakh crores

                    Modi needed this much money to induce funds into cash strapped public sector banks whose NPAs doubled in the previous one year and their day to day operations are under jeopardy and also to reduce budget deficit since their lobbying for ratings upgrade by agencies from near junk status was rejected and declined to budge citing concerns over the country's debt levels and fragile banks and stated that ratings upgrade for India was some years away, depending on the progress on reforms.

                    After ascending to power in 2014, riding the 'anti congress' wave, Modi with charismatic and dramatic speeches had engulfed 'middle class segment', who generally live in total disconnect with the realities of rural and lower strata's of society, made them believe that he is Messiah to save save the nation of all its ills and steer it in the direction of development. But in the past 30 months he didn't do anything except hammering past blunders of Congress and enjoying foreign jaunts. Now saddled with all round political & economic failures and, midway he is under pressure to unleash some daring action to win forthcoming five state elections and President & Vice President elections. He was impressed with a 'quack economist' presentation of demonetization and tax reforms, with out getting it evaluated by experts for its veracity and impact on the common man, he saw an opportunity to resolve all his problems in one go and unleashed secretly hatched, unprepared, high risk & wild gamble of demonetization within two months bypassing and destroying institutions like RBI, Ministries and Departments, without even pretense of process of law. Ironically, demonetization was not an economic tool to achieve any of these objectives which would seemingly do good but inflicts unbearable direct and collateral damages.

                    These were the main reasons and all other things told rhetorically by Modi was 'bakwas'.

                    After dramatized high pitch announcement by Modi on Nov 8, 2016 that with demonetization he would save the country from the menaces of black money, fake currency, corruption and terrorism financing, but with in days it was clear that it was a monumental debacle with inept cash replacement arrangements resulted in crores of poorer section people loosing their livelihoods and ending up in serpentine bank queues. Stunned with this Modi invoked 'patriotism' like a scoundrel and demanded that people bear the brunt for 50 days. Some days later he shifted goalpost from 'black money, fake currency, corruption and terrorism financing' to 'cashless economy' which would expand 'formal economy' and shrink 'informal economy' and higher tax realization would accelerate development.
                    • What he has not told is that informal sector will stand to lose at least one third of its working capital (from black sources) and how that informal economy (with 45% GDP share and 90% employment share) would survive and get funded by banking sector.
                    • What he has not told is that 'cashless economy' which is at least 10-20 years away, due to 'infrastructure defects & constraints' and will involve holding and usage costs unaffordable by lower class people of India.
                    • What Modi has not done is that the moment he realized demonetization landed in fiasco subjecting crores of poor people to hardships he should have initiated mitigation measures and instead went ahead with resolution at least six months away. All that he has done is demanding suffering for 50 days, in the name of patriotism. Except some hollow speeches, nothing else.
                    • He was remorseless for people sufferings, 100+ deaths of aged and women in bank queues and 10+ bank employee deaths consequent to abnormal work stress.
                    • Over 60 circulars from RBI, often contradicting, indicates thoughtlessness, unpreparedness, panicky management by concerned authorities. Fortunately riots haven't erupted and that is no credit to government.
                    • Modi instead of participating in the mandatory & obligatory parliamentary debate and explain the nation, abstained from parliament and chose to address public meetings, where he need not have to answer any questions, flabbergasted the nation that after short term pain (to poor), long term gains (to rich) will start pouring in, is nothing but audacity of an arrogant tyrant.
                    • Dramatized speeches blaming opposition parties is OK for a political leader to win elections, but as Prime Minster addressing nation must desist from dramas or blame gaming and harping on blunders of previous regimes, but must be truthful to people of the country exhibiting honesty & sincerity of purpose, upholding principles of democracy and defending constitution and laws of the land.
                    • This demonetization which is under the purview of RBI and Parliament, was done with a mere televised announcement by Prime Minister, himself and followed by a notification of Ministry of Finance and without undergoing even pretense of process of law. Purposeless secrecy was taken as a shelter for violation of all constitutional processes.
                    As PM and leader of parliament, he was responsible for proper conduct of both the houses more than any body else. He took no step for resolving the parliament logjam on demonetization issue except blaming Congress etc. He neither intervened with any statement nor replied to opposition leader Manmohan Singh criticizing the demonetizing process as 'monumental mismanagement, organized loot and legalized plunder'.

                    Now after passing Dec 30, 2016, it was clear that 97% i.e Rs.14.82 lakh crores of cash has gotten deposited with Banks & RBI leaving just 3% i,e Rs. 46,000 crores, unreturned black money. With NRI's having time upto June 30, 2017, the final figure would be much less.

                    The expenses for the 50 day period, direct & indirect, are estimated as below:
                    1. Direct expenses to RBI & GOI Rs.16,800 crores.
                    2. Banks to bear an estimated cost of Rs.35,100 crores.
                    3. Cost of queues to exchange currency is estimated at Rs.15,000 crores
                    4. Enterprise* losses are estimated at about Rs.61,500 crores.
                      * includes all businesses, farmers, input suppliers, transporters, wholesalers, retailers, manufacturers, stockists and distributors, malls and other retail outlets, restaurants, entertainment and other enterprises.
                    5. Total cost of demonetization, during 50 days period, is estimated at Rs.128,400 crores
                    6. Total amount confiscated during raids is Rs. 4,000 crores.
                    With gain of Rs.40,000 crore or less and 50 days expenditure at Rs.128,000 crores, inestimable collateral damages to economy, and crores of workers thrown out of livelihood, bringing informal economy to standstill and impact stories surfacing incessantly for next 1-2 years, leaving all stated problems intact & unsolved with some respite, demonetization is a senseless, politically motivated, one man made, economic disaster.

                    Insanity is defined as doubling the speed in wrong direction

                    My View:
                    Modi's ascending to power in 2014, with a massive campaign expenditure of about Rs.10,000 crores funded by his industrialist friends is not without having made massive and horrendous economic & moral compromises. He is neither a saint nor a statesman but a low class politician with deep roots of RSS ideology. Therefore his secret decision of demonetization even though seems to be in national interest is primarily aimed at deriving political benefits. Ironically, it has become a war with gullible common man.

                    RBI Governor Urjit Patel's perplexing silence sacrificing his & institution's reputation for probity, competence and independence is in tatters indicating that he was not consulted but just asked to implement. Any institution can be independent in its functioning to the extent elected executive desires. In this case Modi & co just bulldozed them.

                    A 'good policy badly implemented' is worse than a 'bad policy well implemented'. In short, we are in a massive mess. Demonetization move would not have any lasting benefits. No politician or upper class person was seen in any of the bank queues and for them life and business were as usual. They just exchanged old notes with new notes through paid agents and several other ways & means. Middle classes armed with with plastic cards and habituating living in total disconnect of realities of rural & poor of India, were not much effected and it is the poor which suffered most losing livelihood and ending up in serpentine bank queues for exchanging paltry sums after several hours of indignity. Even the raids, mostly with political underpinnings, conspicuously excluded politicians and officers. 

                    Modi suffers from worst possible type of corruption: an insatiable desire for personal glory at any cost, an extremely deep moral and spiritual corruption. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. Any difference of opinion is tarred quickly as unpatriotic and anti-national by the troll brigade.

                    It is not that easy to flush out the black money. Projecting that demonetization will resolve issues of black money and corruption is misleading the gullible masses of the country. Reforming the tax administration and tracking data would have given good and lasting results. Modi's inaction during the past 30 months in this matters speaks volumes about his real intentions.

                    Modi's unprecedented act of demonetization, is not only damaging country's economy and threatening destitution to countless millions of its already poor citizens but is also breathtaking in its immorality. What Modi has done is committing a massive theft of people's property without even the pretense of due process; a shocking move for a democratically elected government.

                    The scale and speed of Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. Demonetization was supposed to be a fight against black money but now it seems like a war against the people. Instead of making surgical strikes against corrupt & black money hoarders, Modi has carpet bombed the whole economy destroying informal economy resulting in crores of poor people losing their livelihoods. Shifting the goal post to 'cashless society' indicates Modi's acceptance of failed operation and it is also suspected at creating economic devastation and usurping of an individual's economic liberty.

                    Modi would have truly walked the talk if he had attacked the nexus between the big business and politics which truly nurtures the black money ecosystem. BJP is the most cash funded party these days. So far the pain has been largely borne by the ordinary people. Modi burned down country's economic house in the disguise of eradicating the pest of corruption? Modi has shot himself in his foot and India fell.

                    Saturday, 7 January 2017

                    Black Money - Crime, Corruption & Commerce in India

                    If money breaks laws in its origin, movement or use, and is not reported for tax purposes, then it would fall within the meaning of black money. The broader meaning would encompass and include money derived from corruption and other illegal ways – to include drug trafficking, counterfeiting currency, smuggling, arms trafficking, etc. It would also include all market based legal production of goods and services that are concealed from public authorities for the following reasons:
                    • to evade payment of taxes
                    • to evade payment of other statutory contributions
                    • to evade minimum wages, working hours and safety standards, etc.
                    • to evade complying with laws and administrative procedures.

                    There are three sources of black money – crime, corruption and commerce (business). 
                    • The ‘criminal’ component of black money include proceeds from activities viz. racketeering, trafficking in counterfeit and contraband goods, forgery, securities fraud, embezzlement, sexual exploitation and prostitution, drug money, bank frauds and illegal trade in arms. 
                    • The ‘corrupt’ component of such money would stem from bribery and theft by those holding public office – such as by grant of business, bribes to alter land use or to regularize unauthorized construction, leakages from government social spending programmes, speed money to circumvent or fast-track procedures, black marketing of price controlled services, etc.
                    • The ‘commercial’ limb of black money usually results from tax evasion by hiding transactions leading to evasion of one or more taxes. The main reason for such black economy is under reporting revenues / receipts / production, inflating expenses, not correctly reporting workers employed and avoiding statutory obligations for their welfare. Opening of the economy permits contracts of all kinds, particularly for allocation of scarce resources such as mineral and spectrum, which in the absence of transparent rules and procedures for licenses and non compliance of contractual obligations of the persons concerned, leads to increased generation of black money. 
                    In all the three forms of black money – ‘criminal’, ‘corrupt’ and ‘commercial’ – subterfuges are created which include false documentation, sham transactions, benami entities, mispricing and collusion. This is often done by layering transactions to hide their origin.

                    In high income countries, the official sector with transparency & well defined procedures, provides good governance and proper enforcement of contracts restricting size of the shadow economy. In the developing countries, on the other hand, enterprises could engage in entirely unreported activity such as restaurants, bars, doctors, lawyers and even bigger manufacturing entities may indulge in under reporting. Big companies, though easier to monitor but to escape rigours of taxation takes recourse to inducements. Under such socio-economic conditions, the underground economy and corruption reinforces each other.

                    Developing countries have large parts of their economy in the informal sector, which is difficult to regulate. Further, cash component of the economy is usually higher and leads to problems of monitoring. Lack of regulation and monitoring reinforces the black economy and also helps its expansion. Low level of literacy reduces penetration of the banking sector resulting in a large cash economy.

                    Inflation of expenses takes money out of the system and, therefore, turns ‘black’. Wrong claims of deductions or incentives provided in the law reduce the tax liability and thereby keep more funds with the concerned person than with the State. However, money in this case remains within the system and cannot be said to be unaccounted or ‘black’. Similarly, shifting of profit for taxation outside the country through transfer pricing by related concerns results in organizing a reverse capital flow from poor to rich countries. This also cannot be said to be ‘black’ in that money does not go ‘underground’. However, these aspects reduce the availability of resources for economic development of the country.

                    One of the most important sources of black money within the country is leakages from public expenditure warranting improvement of the public procurement system and allocation of natural resources is needed. One of the main contributors to black money in the country is its out-dated laws and their lax administration by the state governments, such as stamp duty values being completely out of line with the prevailing market rates, and state governments to tackle the menace of black money as important stakeholder in controlling it. Although FICN (Fake Indian Currency Notes) forms only a small part of black money, more effective measures were required to counter its debilitating consequences. Since most of the black money going out of the country through banking channels there is a need for a central repository of such data. Black money holders may be allowed to come forward with disclosure of unaccounted income and assets both in India and abroad, but without any harassment or threat of prosecution.

                    Some of the methods for reducing the menace of black money are:
                    1. Electoral reforms, including state funding of elections.
                    2. Tightening of laws, increasing the severity of punishments, and trial of cases relating to illicit money generated and stashed abroad through fast track courts.
                    3. Confiscation of undeclared assets or money kept abroad.
                    4. Monitoring of persons travelling frequently to tax havens and persons indulging in frequent transactions overseas.
                    5. Existing laws were enough to deal with economic offences but there was a need to strengthen the administrative mechanism to enforce the existing laws.
                    6. Existing information exchange mechanism should be improved and additional manpower and financial resources provided to the investigating agencies to tackle the scourge of black money.
                    7. Better regulation of the real estate sector, the largest contributor to black money. 
                    8. Maintaining the security of currency by upgrading the existing security features.
                    9. The flow of information has improved but the information received can be used only for tax purposes.
                    10. The huge economic cost of de-monetizing higher denomination bank notes of  Rs.500 and ` Rs.1000 is not a feasible idea.
                    11. For deterrent effect, fast-tracking through summary trials. 
                    12. Maximum punishment for serious offences under the PC Act are  necessary to be enhanced from seven years to ten years. 
                    13. There should be limitation of carrying and holding of cash for personal use, for which either the existing laws may be amended or a new law enacted.
                    Rising burden of taxation, increasing burden of compliance are reasons to enter the black economy. Lack of tax morality, non-compliant attitude of the citizenry towards tax laws tends to increase the size of the black economy. In developed countries black money is generated primarily through illegal activities such as drug trade, illegal migration, etc. In the developing countries generation of black money is from all conceivable sources – corruption, siphoning of public resources, trade-based black money, inflation of expenses, and through criminal activities such as counterfeit goods, smuggling, extortion, cheating, financial frauds, narcotics trade, printing and circulation of fake currency, manufacturing & trade in arms, ammunition and explosives, etc.  Therefore fight against black money is far more complex in developing countries like India. This needs stronger legal framework, administrative measures, and stronger resolve to fight the menace.

                    Corruption in the private sector is an issue not much in public focus or debate. Corruption flows from private motive or greed, fueled by discretionary powers vested in an office empowered to distribute resources, goods and services to public. Dishonesty in private sector, for private benefit or profit, is largely responsible for bribery, siphoning of public funds and leakages in public expenditure. It also results in conspicuous consumption, money laundering and sustenance of the black economy. The way to deal with private greed is to design well-laid down rules and regulations, and ensure their proper enforcement and transparency in decision-making without compromising trade interest.

                    Cash as an asset has its own demand. In large cash economies such as India, counterfeit currency poses a major threat to its economy, as it disrupts smooth commercial transactions and has a multiplier effect on mainstream economy. India faces this problem, as immigrants become carriers for small amounts. The Bangladesh, Pakistan and Nepal borders are targeted for this purpose by agencies inimical to the interests of India.

                    Demonetization of high denomination currency notes is believed to be one of the methods to ‘kill’ the extant black economy, and to curb the generation of black money. In India, demonetization was implemented in 1946 and 1978. Experts have criticized that demonetization did not achieve the objective it was aimed at. Further, inflation over the years and a large cash economy requires higher denomination currency notes to keep the cost of monetary management of the economy low.

                    There is no uniformity of methodology or approach, or certainty of estimation relating to ‘black’ money. The ‘shadow’ economy is not distinct, and the ‘parallel’ economy enmeshes the white economy. Thus, ‘black’ money exists to a substantial extent in our economy, its quantum cannot be determined exactly.

                    Generation of black money from legitimate activities, such as businesses or professions, non reporting of income, overstated expenses, etc., undermines the economy, its tax-base and the rule of law, and creates inequalities. The way to fight this menace is through comprehensive and better reporting mechanism, data-mining and analysis.

                    However, fact remains that although several anti corruption agencies have been functioning for several decades, leakages in public expenditure has continued unabated. Both oversight and enforcement mechanisms against corruption need to be strengthened.

                    There are two dimensions of the issue of black money – first, its generation and, second, its consumption and use, including laundering of black money back to mainstream economy. Dealing with this menace has to cover both these aspects. So far as generation of black money from crime or corruption is concerned, its remedy does not lie merely in legislative or enforcement domains but also in finding much deeper socio-economic solutions. There may not be any need to have new law to especially deal with black money and black economy, various existing laws need to be comprehensively reviewed and strengthened accordingly.

                    Aadhaar UID and direct transfer of subsidies will stop leakages in some sectors. Institutions of the Lok Pal and Lokayukta may be put in place at the earliest, in the centre and states, respectively, to expedite investigations into cases of corruption and bring the guilty to justice.

                    My View:
                    The latest methods of corruption by politicians and officers is that they would do no favors but who ever wins the contract have to pay them fixed percentage. Modi was known as 4% Chief Minister in Gujarat but has not violated any law/rule/procedure. This results in inflated estimates. Today the menace has reached 30% of estimate is work and remaining 70% is bribes and profits. If you happen to visit customs clearing at any airport or seaport you will have go with bundles of notes to pay each and every person you may encounter whose prices are fixed (C&F Agent will be helpful) to clear your consignment otherwise you will end up with delays leading to demurrage charges and re-establishing logistics. En-route at border check-posts, your truck will be kept aside and allowed to proceed only after bribe payment is arranged and made in a far away town by way of bank transfer into that benami account. Without socio-economic changes, awareness and campaigns, any amount of tightening of procedures, the corrupt will discover a way around it. 

                    As long as taxes are high and tax compliance procedures are expensive and burdensome, cash will rule informal economy and black economy will flourish. Uneducated self employed people will prefer to remain in cash sector no matter what ever is said and done simply because they see security in cash. Education is the key to growth and prosperity of the nation. The people at large should feel the effect of good governance in comforting them rather than harassing and squeezing a portion of their hard earnings and that alone would result in voluntary tax compliance. 

                    Modi, lacking sincerity of purpose, attempting 'quack economist advised demonetization' for pecuniary and political benefits and risking the entire national economy for his high decibel publicity is not only disastrous for him and BJP but also the nation with its economic pillars crumbling. He simply destroyed country's economy and shot himself in the foot and landed in ditch and is further digging with denial. In the coming month's stories of economic disaster will surface incessantly for next two years. He lacked sense that any weapon unleashed to destroy 'black economy' will also destroy 'white economy' simply because they are so much intertwined and enmeshed.

                    Wednesday, 4 January 2017

                    Police quizzes Isreali PM Netanyahu for suspected of graf

                    If our Prime Minister Modi has an iota of sincerity in his recent demonetization histrionics over eliminating black money, corruption etc, he should at once appoint Lokpal with purview including all political office bearers (including PM, President, Governor, CM, Ministers etc), officials, judiciary, businessmen and grant autonomy and teeth to RTI, CVC, CBI and ACB etc and then only people will believe him to some extent. Otherwise all his talk is just 'bakwas'.

                    While I am not Congress admirer either, it is pertinent to know that UID Aadhaar was Manmohan Singh's brain child to reduce black money and benami properties and RTI as well which gives citizen rights to know what is happening in corridors of power.

                    My View:
                    The framers of constitution Nehru, Rajendra Prasad, Patel Ambedkar thought that persons holding very high offices (President, PM etc) would be as good as them and they thought fit to exclude these office bearers so that they could focus on taking far reaching decisions with ease and without distraction. After 70 years the reality is opposite. Hence it is important for Modi to introduce and maintain transparency and accountability in public domain starting with himself (ironically he talked about these too much during demonetization days, while he did this quack advised demonetization in highly deplorable and autocratic way and landed the nation in turmoil), otherwise he will go down history as a biggest national traitor. My gut feeling is that he will not, because he is not as tall as he projects himself. He is simply a demagogue with insatiable desire for publicity.

                    Tuesday, 3 January 2017

                    Demonetization: All pain & No gain

                    India's demonetization failed leaving "All Pain" and "No Gain".

                    Direct expenses to RBI & GOI Rs.16,800 crores.
                    Banks to bear an estimated cost of Rs.35,100 crores.
                    Cost of queues to exchange currency is estimated at Rs.15,000 crores
                    Enterprise* losses are estimated at about Rs.61,500 crores.
                    Transaction cost of demonetization is estimated at Rs.128,400 crores

                    * includes all businesses including farmers, input suppliers, transporters, wholesalers, retailers, manufacturers, stockists and distributors, malls and other retail outlets, restaurants, entertainment and other enterprises

                    The impact of this loss would reverberate through the supply chain over time. The impact of a broken supply chain would play out over several quarters. It would impact capacity utilisation of manufacturing companies and employment as well. Over the medium-to-long term this will impact investments as well.

                    Government told the Supreme Court that it expects to unearth about Rs.4-5 lakh crores of unaccounted cash. Estimates made by economists range from Rs.2.5 lakh-Rs.5 lakh crores. Most estimates gravitated towards Rs.3 lakh crores by end Nov and to little over 1 lakh crores by Dec 30, 2016. This makes demonetization a monumental economic failure.

                    The most significant casualty is Prime Minister Narendra Modi’s reputation as a sound economic manager.

                    India’s economy will eventually recover from this self-inflicted wound, but there’s no question that demonetization has created doubts about Mr. Modi’s competence. The decision, reportedly hatched in secret with a coterie of trusted bureaucrats, showcases the prime minister’s faith in the command-and-control ethos of the civil service rather than in the “minimum government” he once promised.

                    Some supporters view demonetization as a quick way to invigorate a sluggish banking sector with cheap funds. Even if demonetization ends up producing some gains, the question of whether it was worth its considerable costs will linger. Moreover, the simple fact that no credible expert suggested such a drastic policy before Mr. Modi announced it makes many arguments in its support look like belated apologia.

                    The policy’s shabby implementation—through an avalanche of amendments, rollbacks and patchwork fixes—undercuts Mr. Modi’s reputation for quiet efficiency. It also underscores his overreliance on India’s notoriously heavy-handed bureaucrats.

                    The long-term effects of India’s demonetization gambit remain unclear, largely because no other major economy has attempted such an experiment except during a crisis. But with growth slowing and job losses rising, the short-term prognosis appears grim. The growth estimates for India were trimmed from 7.4% to 6.5% for the financial year 2016-17.

                    Demonetization has resurrected fears that the ruling Bharatiya Janata Party takes policy advice from quacks. It damaged the credibility of India’s central bank. Though a few economists have applauded Mr. Modi, the weight of informed opinion leans heavily against his decision.

                    Two and a half years ago, based on his record as the business-friendly chief minister of Gujarat, Mr. Modi stormed to national power as India’s great economic hope. At least for now, the demonetization debacle has shaken this assumption to its foundations.

                    NPAs recovery by banks only gets worse in four years

                    At a time when bad loans are witnessing a surge, the rate of recovery of bad assets by banks has taken a knock. The rate of recovery of NPAs was 10.3% in 2015-16, against 12.4% in 2014-15 and 18.4% in 2013-14.

                    Demonetisation will put pressure on NPAs especially for SMEs whose turnover has been affected amid fixed interest costs.

                    The lower performance of banks is more due to the extra provisioning that they have done to clean up their balance sheets. As the economy recovers, the NPA levels will come down. The system has better recognition norms is comforting.

                    Rating agencies have voiced concern over public sector banks’ capital needs and inadequacy of funding options. They expect asset quality to be under pressure over next year. Despite government’s plans to increase capital infusions into banks, rating agencies cautioned that more injections were required to support banks’ credit needs, while the latter also manages pressures of asset quality, resolution of problem loans and elevated credit costs.

                    Banks are now pinning their hopes on the Insolvency and Bankruptcy Code, 2016 which can potentially release about Rs 25,000 crore capital currently locked up in NPAs over next 4-5 years. The code is likely to help India’s banking sector catch up with or even exceed the recovery rates of 32% and average time taken of 2.8 years in other emerging markets. Institutionalizing the code will be a long-drawn affair and it may not provide any material capital relief to banks over short term.

                    My View:
                    While Banks are saddled with huge cash due to demonetization improving its liquidity, this has left informal economy with deprivation of working capital and impact on this segment will obviously effect formal economy as well. With banks lowering interest rates, people will withdraw money to invest or lend to informal sector which pays much higher interest rates, despite risks. Since informal economy employs unskilled, illiterate, semi skilled, uneducated and less educated who are otherwise unemployable in formal economy, safeguarding informal economy is paramount.

                    Sunday, 1 January 2017

                    Modi's sops to soothen demonetization fiasco

                    Modi announced on Television, on Dec 31, 2017, a day after demonetization closed, several sops to farmers & poor virtually to neutralize demonetization fiasco's negative effects. While demonetization achieved nothing, the long list of sops contained nothing which created havoc for everyone for two months and normalization is some more months away. Everyone one knows that neither Modi nor BJP are taint less and their past & present are full of scars. Today BJP is the most cash funded party. The worst is that his address is stoically silent about 100+ bank queue deaths of aged and women indicating his remorselessness.

                    Lack of preparation results in mistakes. The best way to handle mistake is (1) to realize, (2) don't dwell on it, (3) to admit the mistake, (4) to apologize and (5) never repeat it. Modi attempting to dwell on quack advised demonetization policy and shabbily implemented as a great achievement and attempting to project it as a battle between the “honest and dishonest“ reflects his hypocrisy and dishonesty.

                    Opposition parties are so much divided, Modi is politically safe now. But in coming months elections in UP, Punjab, Uttakhand, Manipur & Goa will become acid test for Modi. The present indications are that at least 30% of people effected by demonetization are disgusted with Modinomics & Jalebinomics and that would be too much for BJP & Modi to overcome.

                    While Congress was certainly bad in the past, BJP is no better in the present. Time and again BJP following Congress model mismanagement & corruption and in addition meddling with lives and livelihoods of poorer sections has proved that they are worse than Congress. I will not be surprised if Congress returns to power in 2019 and the credit goes to Modi alone and BJP for its lack of inner party democracy.

                    Ironically, no one including his cabinet ministers have any guts to tell Modi about truth and realities. They are worse than Indira Gandhi cabinet in 1975. At least four heads must roll, for this national fiasco. In my view they are Modi, Jaitley, Urjit Patel and Shaktinath Das.

                    My View:
                    You don't have to be an economist to advice to live with in your means, keep debt minimum, save something for winter months etc while managing home. The same thing is more or less applicable even for nation. Modi instead of touring entire world and projecting that India is an investment haven while ratings are just a notch above junk status, would have focused on clean administration, managing national priorities aligning with people's aspirations, especially that of poorer sections. Modi hobnobbing with rich & famous and working just for them is unpardonable. Demonetization is a quack advised, politically motivated economic disaster. Modi lobbying with rating agencies for credit rating upgrading and their blunt rejection is an insult to us. Modi's bullet train project between Ahmadabad & Mumbai at an expenditure of Rs.100,000 crores (despite 70% soft loan) is an immediate drain of Rs.30,000 crores for exchequer and when completed, who will travel by that train with ticket of Rs.3,000 equivalent to air ticket? A well maintained and well managed house or nation will definitely attract foreigners and their investments.