Sunday, 29 July 2018

Turkey collapsing

Istanbul’s new airport ~200 million passengers a year when
completed in a decade, makes it busiest airport in the world.

The Yavuz Sultan Selim Bridge has little traffic because of
high tolls.  The government is paying the shortfall.
Turkey's president, Recep Tayyip Erdogan, who has dominated national life for 15 years, was sworn in again for 2nd term on July 9, 2018, following a re-election victory that came with extraordinary new powers. The winner of the presidential race is set to assume extraordinary new powers narrowly approved in a referendum last year that was marred by allegations of fraud. These include complete control of the cabinet and the power to appoint senior judges and officials, including unelected vice-presidents. The president will also have the power to issue decrees with the force of law.
  • He has wielded his influence to deliver relentless economic growth through unrestrained borrowing, lifting debt levels to alarming heights. 
  • In a conspicuous sign of unease among global investors, the value of Turkey’s currency, the lira, has plunged by roughly one-fifth this year, raising prices for households and businesses alike.
  • Once complete by 2028, Istanbul’s new airport will have three terminals, six runways and an annual capacity of up to 200 million passengers flying through to more than 350 destinations across the world. It is double the passenger capacity of the world’s busiest Atlanta airport that currently services 100 million passengers a year. The airport's first phase is to open in October 2018 has been brought to life with heaps of public money delivered to construction companies closely tied to Mr. Erdogan. The government has bestowed upon them guarantees against any losses. The airport might prove grander than the flow of passengers, the public will wind up with the bill.
  • The New Airport is often referred to as a white elephant, given the mammoth funds poured into it. The builder, iGA, is a 100% private consortium with five equal shareholders. They are going to pay approximately €1 billion rent to the government. In addition, they have €10 billion investment cost. The Turkey Economic Impact Analysis, published in June 2016 estimates that the airport will make $40 billion worth of contributions to Turkey's economy by 2025.
  • Turkey's economy expanded by 7.4% last year and the growth has been fed by unsustainable public and private borrowing. But the economy is already stumbling.
  • The government has been subsidizing vast infrastructure projects like the airport and 28-mile-long canal linking the Black Sea to the Sea of Marmara. The canal estimated to cost $15 billion (critics say is closer to $65 billion), and displace some 800,000 people has been dubbed his crazy idea. Environmentalists warn that Istanbul's ecosystem damage would make it uninhabitable. Economists say the project is not financially viable.
  • Many businesses have borrowed in foreign currencies, which means their debt burdens have risen as lira depreciates.
  • Major Turkish companies are persuading banks and other creditors to extend relief, indicating a wave of bankruptcies that could leave financial institutions and taxpayers staring at untold losses. Turkish private sector companies owed more than $245 billion in foreign debt, or nearly one-third the size of the country’s overall economy. And the government is encouraging them to borrow more.
  • Turkey can court money by continuing to lift interest rates, already at 17.75%. But that would depress economic growth and hurt real estate and construction industries.
  • Turkey can continue the growth while inflation mounts and lira sinks further. That may result in several corporations to insolvency, and force the government to seek a rescue from the IMF, a course that entails painful spending cuts.
  • Turkey could be the next country to disintegrate. It has all the ingredients of the beginning of a failed state.
  • Some of Turkey’s problems reflect the troubles assailing emerging markets in general. As the US Fed raises interest rates, investors pulling money out of developing nations like Argentina, Mexico and Turkey has pushed down the value of emerging market currencies.
  • Everyone is in crisis right now. It’s all around us. Everyone who has the slightest intellect and knowledge of the economy knows this. But the government is hiding it ... says a businessman.
  • In Istanbul, merchants complain that they must pay rent in dollars or euros even as they collect lira for their sales. Their rent is effectively going up while sales decline, partly because of a dip in tourism after a spate of terrorist attacks.
  • The Turkish lira is like ice in hot weather. The second you take it out, it starts to melt ... says a trader.
  • The most vulnerable companies are those that have borrowed in foreign currencies. Four years ago, a company borrowed 200 million lira (~$88 million) for its aggressive expansion from banks at 18% interest. In a bid to limit its debt burden, it borrowed an additional $12 million in the American currency, taking advantage of dollar loans at only 5% interest. By the middle of 2017, the lira had lost more than one-third its value and Turkish interest rates were climbing. The company’s monthly debt payments had risen by almost 50% and at the same time revenues plunged that compelled them to approach a court-supervised debt restructuring.
  • A car leasing company insists on pricing his leases in euros to match the loans it takes out to buy new models of cars. With inflation rampant and anxiety pervasive the company, while selling cars after leases are complete, has to discount the vehicles to find buyers and lost money.
  • Housing construction has reached its limit, and two million apartments are unsold in the country. Construction work is grinding to a halt, and companies are offering real estate on soft loans or barter.
  • Turkey actually is not borrowing any money. These are the Turkish firms that are borrowing money; it is individual debt. But the government has guaranteed the loans and the revenue. This financing model is enriching private firms while saddling the country with debt.
  • Inflation has ravaged livelihoods. The village markets have raised prices. Food imported from Romania and Bulgaria, is 50% more expensive than it was a few months ago. 
From soaring bridges to a giant mosque to plans for the world’s biggest airport, President Recep Tayyip Erdogan of Turkey has used gargantuan building projects as an engine of growth and a signature way of leaving an indelible stamp on his nation. The public is weary of Erdogan’s building mania. Erdogan’s projects are guided by an insatiable construction industry that has enriched his ruling circle, raising questions about his management of a faltering economy. Erdogan has created grandiose monuments and infrastructure investments in every town. 

Rupee falling is disastrous

The recent sharp depreciation of rupee is a cause for concern. The depreciation was largely against the dollar, by more than 7.5% in this year 2018. The rupee’s decline is likely to continue due to rise in the current account deficit on India’s balance of payments, intensified by the recent sharp rise in the price of crude oil. The current account deficit rose from $41.6 billion in 2016 to $73.3 billion in 2017. A depreciating rupee affects the local economy in several ways.
  • Periodical rupee depreciation is a symptom that India is a bubble economy. 
  • The success of India's liberalizing reforms is not because it has transformed into a manufacture & export driven economy, but indicates its emergence as a favored destination for international financial investors resulting in large capital inflows. The large capital inflows resulted in stock market values, but the valuations are not warranted by its potential earnings.
  • Large inflows of foreign capital, enhances the liquidity in the system, triggers a credit boom that spurs demand and drives domestic market growth. 
  • The debt-financed consumption and investment results in excess liquidity that drives banks to increase lending. This increases the defaults which can lead to systemic fragility that can intensify the capital flight and exchange rate volatility.
  • The import liberalization fuels the demand funded by debt and in the absence of matching enhance in exports, the import-intensive consumption and investment results in widening current account deficit.
  • The net foreign exchange outflow is due to mismatch between imports and exports and remittances and the deficit gets financed by capital inflows. A country that cannot earn the foreign exchange to finance its current needs is vulnerable to balance of payments difficulties and cannot sustain the value of its currency. 
  • The low oil prices, between 2014-17, had depressed the outflows on account of excess import of goods. Now as oil prices have risen to $80 a barrel, the reality is that India is a country that is vulnerable on the balance of payments front.
  • Liberalized trade and liberalized capital flows have enhanced India’s vulnerability, of which periodical currency depreciation is a symptom which got concealed so far by the large capital inflows and by the benefits of low oil prices. Both those advantages are now under threat.
  • Trade liberalization has increased dependence on imports for consumption and investment and now the depreciating rupee increases cost of imports that aggravates inflation. Increase in the price of crude oil has the potential for much higher inflation. Inflation forces RBI to raise interest rates. 
  • Many companies have outstanding foreign currency loans, either as working capital or acquisition-related debt, will be seriously affected.
  • The liberalizations results in surge in capital flows that in turn increases private foreign debt. Since large capital inflows make the domestic currency appear strong, much of this borrowing in foreign currency is not hedged for possible losses stemming from any currency depreciation.
  • Any plunge in the rupee effectively accentuates foreign institutional investors' losses on their equity portfolios and triggers stop-losses, which forces further sales, dragging markets even further down. 
  • A falling rupee, in theory, should help exporters. But due to other factors export gains due to a depreciating currency may be limited.
  • A falling rupee impacts tourist & business foreign travelers and students joining foreign universities. 
  • FIIs have been supporting the rupee in the last three years, their inflows have dried up. So far in 2018, FIIs have pulled out Rs 46,197 crore from the Indian markets. 
  • The Indian currency's vulnerability is particularly heightened by the fact that among its emerging market peers, India runs a high current account deficit.
  • Large number of expatriates returning from Saudi Arabia and modified H1B visa rules by USA will hit remittances in coming years and impact current account deficit.
When depreciation actually occurs, the rupee costs of servicing foreign debt rise sharply. When the stagflation afflicts the economy hurts corporate profits and makes the burden of servicing foreign debt too much to bear. The distress sale of assets that follows bankruptcies results in asset price deflation, which worsens the problem. Depending on the intensity of these effects, the bubble can burst and the game of speculation can unravel. It is for this reason the bubble economy becomes unsustainable.

India escaped the last two global financial crises, but it may not be as lucky this time. Rising oil prices & increasing inflation and combined with the bad loans & capital flights already occurring, there is trouble looming. Turkey and Argentina, two of the world's biggest emerging markets, have been plunged into economic turmoil. Both the Turkey's lira and the Argentina's pesos have gone into free fall in recent months due to panic-selling by investors. Emerging markets were under performing by 2.5% so far this year. The strong US dollar is putting pressure on other currencies. Turkey's inflation rate exceeded 10%. The Argentine peso has plummeted by more than 10% against the US dollar. In May 2018, Argentina's central bank hiked interest rates from 27.5%  to 40% to avoid further capital outflows. While Argentina had already requested IMF help to rescue its economy, it is only a matter of time for Turkey to request IMF to help rescue its economy. Other emerging markets may be able to adapt to rising US interest rates without facing such turbulence. The strong $ 400+ billion reserves are sufficient for meeting contingencies but uncontrolled current account deficit will compel FII's to withdraw their exposures in India that will spell doom for our economy. Hence reducing current account deficit and inflation control are paramount.

Sunday, 15 July 2018

Economic freedom, informal economy, ethics and corruption


Austrian-British economist Frederick Hayek foresaw more than 60 years ago, economic freedom is required in all aspects of economic life in order for countries to improve their economic efficiency and the living standards of their people. 
  • Corruption is a symptom of over regulation, lack of rule of law, a large public sector and not the root of the problem. 
  • Morality and ethics are hard to measure. Economic freedom removes opportunities for corruption and promotes ethics not just for its moral implications, but also because of its economic value.
  • Ethics is defined as 'rules of behavior based on ideas about what is morally good and bad'. In general, we call unethical those actions for which there is a social consensus that they are a bad thing. 
  • Corruption has several meanings and for most people corruption is something unethical, something considered a wrongdoing. A closer look at human behavior in economic life suggests that corruption does not reflect lack of ethics as it reflects a lack of economic freedom.
  • Economic freedom is defined as “the absence of government constraint or coercion on the production, distribution, or consumption of goods and services beyond the extent necessary for citizens to protect and maintain liberty itself.”
  • The Index of economic freedom provides a framework for understanding how open countries are to competition; the degree of state intervention in the economy, whether through taxation, spending or over regulation; and the strength and independence of a country’s judiciary to enforce rules and protect private property. 
  • Corruption does not always reflect inherent unethical behavior especially for those who are forced out of the formal economy into the informal economy through burdensome regulations, taxation, and weak property rights.
  • As economic freedom vanishes, the informal economy takes a larger share of GDP. The size of the informal economy in economically unfree and repressed economies is almost three times the size of the informal economy in free economies.
  • The economic repression has its perverse effects on the ethics of ordinary people and on the perpetuation of their poverty conditions. 
  • In most developed countries, people have a better standard of living due to credit access.  In USA, without credit, most people would not have a house, a car, a TV, a vacation, or many of the products that add comfort and convenience to my life. Credit makes it possible for middle-class people, to improve standard of living in many ways.
  • To have access to credit, you need to have income or property. To prove that you have income, you need a formal job, and to prove that you have property, you need a property title.
  • The availability of formal jobs depends on ease for people to invest and do business. The friendlier the business environment, the more formal jobs will be available. In most low to middle income countries, it is extremely difficult for small and medium investors to operate, both because of the regulatory environment and because of the lack of a strong rule of law. 
  • In developing economies, the problem with the legislation is that it assumes that all employees are equally good, equally responsible, and equally productive, which is not true. The burden of regulations compels small and medium businesses to create jobs in the informal sector, where the benefits are negotiable and tied to performance, and not forced by law.
  • The rules of the state creates perceived unethical behavior by private employers and employees when what is really in question is the ethics of such a regulatory burden.
  • If they do not have a formal job, poor people can still get access to credit if they have a property title to use as collateral. The poor own many things that they could use as collateral, but it is bureaucratically impossible for them to validate their property rights. As a result, they are unable to raise credit and their standard of living.
  • In the developing world many of the poor people have property but the bureaucracy they have to go through in order to get a property title is huge. The poor own many things that they could use as collateral, but it is bureaucratically impossible for them to validate their property rights. As a result, they are unable to convert what they own into capital and, therefore, raise their standard of living. For example, in Peru, “to obtain legal authorization to build a house on state-owned land took six years and eleven months, requiring 207 administrative steps in 52 government offices. To obtain a legal title for that piece of land took 728 steps.”
  • Informality is a response to economic repression, not to something inherently unethical in those who circumvent legislation. What is most unethical about informality is the condition in which the  government forces the poor to live. Informally employed people are condemned to a standard of living that is significantly lower than that of formally employed people, who have credit access. Informality creates a culture of contempt for the law and fosters corruption and bribery in the public sector as a necessary means to navigate the bureaucracy.
  • As economic freedom vanishes, corruption flourishes. The level of perceived morality in economically free countries is almost four times the level of perceived morality in the public sector in most unfree or repressed economies.
  • Weak rule of law adds to the level of corruption in the public sector as well as the amount of informal activity. A weak judiciary is a 'blind eye' on anything done outside the law. With a weak judiciary, corruption goes unpunished and informality flourishes.
  • In 2003, 108 of the 161 countries received bad scores in both regulation and property rights, undermining the efforts to improve the living standards of the poorest.
  • The unethical behavior stems from the environment and convoluted regulations and weak rule of law foster a culture of corruption and informality both in the private and public sectors.
  • In the public sector, convoluted regulations and weak rule of law provide ample opportunities for public officials to accept bribes without punishment. In the private sector, those two factors push some people to do business informally as a means to survive and others to profit far more than they would if the possibility of bribery did not exist. Both result is an increasingly unequal society, in terms of the opportunity to create wealth and improve living standards.
  • To fight corruption and informality, it is essential to understand that corruption is a symptom--of over regulation, lack of rule of law. A large public sector is not the root of the problem. The real problem is the government action/regulations causing undesired behavior of the private sector. The unethical/corrupt behavior of the private sector, leads to the government to press more on private-sector activities. The solution is to eliminate burdensome regulations so that unethical behavior does not occur.
Countries must advance economic freedom in all possible areas of the economy, with particular emphasis on regulations affecting small and medium business, in order for corruption and informality to decrease. Countries must also preserve the independence and effectiveness of the judiciary to punish corrupt actions. Economic freedom with a strong rule of law will foster a culture of investment, job creation, and institutional respect in massively improving the living standards of ordinary people.

Let no young man, choosing the law for a calling, for a moment 
yield to the popular belief  that lawyers are necessarily dishonest
Resolve to be honest at all events; and if, in your own judgment, you 
cannot be an honest lawyer, resolve to be honest without being a lawyer. 
Choose some other occupation, rather than one of which you do, 
in advance, consent to be a knave ... Abraham Lincoln

The observations in the article are highly theoretical but the reality in India is some what different. The most unethical, corrupt and tax evading people are rich, highly educated, well placed & well connected.  The poor people are ethical and law abiding. The middle classes are torch bearers of traditions although corrupt & unethical. The small bribe paid by a poor man for obtaining birth certificate etc is understandable, the corruption by businessmen in collusion with politicians & bureaucrats, escalating project costs siphoning of funds to tax havens etc burdening the whole nation is a criminal act and deserves harshest punishment. Corruption & lack of ethics is so rampant that today it hard to find and ideal person.

Saturday, 14 July 2018

Criticism is important

Criticism is a useful tool in any relationship. A relationship is the connection, or lack of, between two people. Many people see criticism as something negative. The actual content of criticism carries a negative connotation, but the purpose of criticism is not to insult but to improve. Most people don’t like is being told they are doing something wrong or that their work is not good enough. That is why the delivery of criticism is so important. 

Irrespective  of the dynamics of the relationship, if two people work together for a unified goal then criticism is the only way to keep the relationship healthy, efficient, on task and successful. Taking criticism can be a difficult thing. But you can use criticism to give you a competitive edge. Criticism in its true sense is a feedback and is an opportunity to learn and do more to convert critics into a satisfied customer or audience member. 

Success is limited only by how much attention you can get for yourself, your products and your ideas. The right amount of attention will always attract criticism, even haters. While criticism is never enjoyed, it should be anticipated. The longevity of a project is determined by the quality of what you offer, but the success of your project is determined by how much attention you can get for it. Without the right amount of attention from your target audience, no one will know you or your product, regardless of how good it is. 

The problem with getting attention is threefold:

  1. Taking enough action to get the ‘right amount’ of attention, 
  2. Knowing how to handle the negative criticism that comes with attention,
  3. Continue to get attention, despite the attacks, until admiration.
The goal of criticism is almost never to actually help. When criticism does not offer a solution, it is always with the goal to reduce you and your efforts. Your success in the world is only limited by the amount of attention you can receive in the world. Your ‘haters’ don’t really hate you, at best they are threatened, envious and jealous. Little thinkers and little doers criticize in an effort to keep bigger thinkers and bigger doers small.

Don't take criticism personally even if you feel you're being criticized unfairly. Don't retaliate with an extreme knee-jerk reaction that can harm your reputation as well. Even when the criticism is personal, remember that people are fallible and it's important not be offended by someone's remarks. A good professional will take criticism and even personal attacks to make them work to his advantage or, if all else fails, politely conclude the partnership and leave with their reputation intact.

Here are some reasons why criticism is good: 
  1. For someone to criticize you, it means that he/she cared
  2. You are reaching new people.
  3. People would have ignored you, if you were unworthy to be criticized.
  4. Criticism lets you see things in a different light.
  5. Criticism is a form of honesty.
  6. Criticism helps you to improve.
  7. Criticism lets you learn about your defense mechanisms.
  8. Criticism helps you to learn more about others. 
  9. Criticism sometimes jolts you into action.

I learnt a lot from my critics and nothing from my admirers ... Mahatma Gandhi
A good friend will always stab you in the front ... Oscar Wilde
God save me from the friends. I can protect myself from the hackers.

People should be open to reasonable and well intended criticism and must be open to giving way to the wishes of the other. A good critic will also offer a solution to the problem that had led to criticism. Receiving excessive criticism is a sign to pause and mend your ways. Never waste your time dealing with habitual critics. If the criticism is mainly coming from one person and is in violation of your rights, put these people in their place by asserting your rights. Cut away chronic critics if you have to. But accepting criticism and using it to make you work better is too valuable of a resource to ignore. Without critics, you end up with a stagnant medium that refuses to grow and change with no self-awareness and no real progress.

Friday, 13 July 2018

Expatriates are leaving Saudi Arabia, in droves

Hundreds of thousands of expatriates have been leaving Saudi Arabia as the economy stagnates and the authorities impose more fees on foreign workers. Expatriates constitute about a third of the Saudi Arabia's total population. The collapse in oil prices has seen the biggest Arab economy losing much of its appeal to expats previously lured by petrodollars. 
  • Saudi Arabia is facing hiring crisis as more than 1,500 foreign workers leave every day since the last quarter of 2016, as companies struggle with slower business.
  • The economic forecast is gloomy not only for expatriates but is likely to affect even some Saudi families, who may opt to remove their children from private schools and admit them into public schools to cut costs, look for cheaper housing with limited advantages, or move from villas to apartments.
  • The nation shall witness a massive decline of 2.5 million foreigners by end of 2018. Unbearable costs of living erode incomes of expats, especially those who have dependents staying with them. Saudi has also decided to revoke subsidies on fuel, gas, bread, baby-milk, electricity, and medicine.
  • Dependents fees for lower-income expatriates, as well as greater efforts to nationalize the workforce, make it less economically opportune for foreign workers.
  • Bloomberg reports that the number of foreign workers declined by 6% to 10.2 million in the first three months of 2018, compared with a year ago. The cumulative drop over the five past quarters is about 700,000. Most job losses are in construction, trade and manufacturing.
  • The jobless rate among Saudis aged 15 to 24 stood at 32.6% last year, according to the ILO.
  • Unemployment among Saudis has risen to 12.9%, which further emphasizes the struggle to create jobs as the economy recovers from the “worst economic slowdown since the financial crisis in 2009". Under the National Transformation Programme, the government is aiming to cut the unemployment rate to 9% by 2020.
  • Economists are expecting the rate of job losses for expats to remain elevated over the course of the year, as they attributed the forecast to rising fees, efforts to nationalize jobs and the “weak” economic backdrop. As the kingdom emerges from last year’s recession, job creation will likely lag behind the economic recovery.
  • Crown Prince Mohammed Bin Salman (known as MBS) has sought to expedite the exodus of foreign workers by stepping up the process of so-called Saudization. He is making foreigners to pay fees for dependends, hiking up levies on companies employing non-Saudis and restricting the sectors in which they can work.
  • Indian diaspora in Saudi Arabia was just 34,500 in 1975, increased to 351,000 in 1991, then 1,000,000 in 2000, 3,100,000 in 2015 and is 4,100,000 in 2017. Saudi Arabia is a major source of India's energy requirement as it imports one-fifth of crude oil requirement.
  • In a bid to reduce unemployment, Saudi Arabia has imposed a restriction on the expatriates from working in 12 sectors. The new rules could potentially affect large numbers of people since about 12 million foreigners work in Saudi Arabia, doing many of the strenuous, dangerous and lower-paid jobs shunned by 20 million Saudi citizens.
  • Authorities could relax some of the rules. According to Al Watan newspaper, the government may revise plans that ordered most retail businesses to replace all foreign workers with Saudis, reducing the percentage of nationals to 70%. 
  • The restriction is also likely to affect over 30 lakh Indians who live and work in Saudi Arabia. Several Indians employed in Saudi Arabia are likely to return back soon with the imposition the ‘dependent fee’ for expatriates from July 1, 2018, as they cannot afford to stay there any longer. 
  • Since Saudization is inescapable, it is bound to hurt both expats and Saudi Nationals temporarily. But it is hoped to put the economy back on track by 2020. With increased taxes and cost of living, expat savings become unattractive and voluntary migration to home countries is bound to happen. In order to make a sizable living, it seems expats will have to find newer pasture.
Saudi Arabia's GDP grew 1.2% in the first three months (of 2018) compared with a year ago, the first expansion in five quarters, as oil prices increased. Private-sector growth, however, remained at 1.1%.

In order to provide jobs to half of their unemployed people, Saudi Arabia needs send back 25% expatriate workers i.e. 3 million. Since 4.1 million Indian workers constitute one-third of expatriates about one million Indians may lose their jobs and return to India in 1-2 years. The loss of foreign exchange remittances by them would be about $10 billion or Rs.67,000 crores, in a year. Apart from FE loss, India need to shell out more FE for crude oil purchases and provide livelihood opportunity to these returning Indians. However, all expatriates will not be replaced by Saudis as private firms lack innovation and they are addicted to cheap fuel prices and cheap labor.

Thursday, 12 July 2018

Nitin Gadkari speaks out

The Union Minister for Road Transport & Highways, Shipping and Water Resources, Mr.Nitin Gadkari, talks about a wide range of issues from the state of the economy to the mood of the nation, the Kashmir crisis, the prime minister’s role in the cabinet, the much-anticipated 2019 elections, and his chances at being prime minister.
  • Looking back at the BJP’s ‘acche din’ pitch before the 2014 Lok Sabha elections, Gadkari said that what was considered “good times” may vary from person to person. The expectation of people is always increasing.
  • When asked about the general impression that the PM Modi dominating the Cabinet, Gadkari labelled them rumours, with “no proof, relevance or ground realities.” PM Modi allows everyone to speak. Modi has courage. He listens to everyone. 
  • On his government achieving almost the same or less than the UPA government led by Dr Manmohan Singh, Gadkari pointed to a few parameters on which India could perform better. He added that the expectation from his government in terms of industrial sector was more. 
  • PM Modi promised the creation of 10 million jobs every year, before he assumed office. However, over the last four years, the hunger for jobs has only increased. While some government bodies like the NITI Aayog claim that jobs have been created, pink papers say otherwise. Gadkari stressed that job creation was important for his government, he also said that the growing population increased the demand for jobs.
  • When asked if he will accept that Kashmir was one of the BJP government’s most worrying problems, Gadkari said that their fight was against the Pakistanis and not Kashmiris. It is a proxy war with Pakistan. I am not making Kashmiris responsible for that. It is the import of terrorism, terrorists and terrorist organisations that are constantly creating problems. And it is a fight with Pakistan, not with Kashmiris.
  • When asked why the PM did not speak out in support of Sushma Swaraj, or when Gauri Lankesh was murdered, Gadkari backed Modi, saying that he did not want to “play politics.” Home Minister Rajnath Singh supports Sushma ji. Ex-president Nitin Gadkari supports Sushma Swaraj. The Prime Minister is equally in support of Sushma Ji. When we speak we are representatives of the Prime Minister.
  • When asked about the possibility of Gadkari himself becoming the prime ministerial candidate if the BJP does not get a majority, as he is “more acceptable to the allies”, Gadkari said: I have got way more than I deserved. I do not belong to any race. I follow the party’s ideology. I am happy as a minister. I do not wish to be a candidate. I am fully confident that BJP will get majority. Narendra Modi will be prime minister. 

As things stand today, only mismanagement by opposition parties could make NDA win 2019 general elections. As such BJP's defeat is a foregone conclusion, but there is a meek possibility of NDA winning with BJP falling short of majority which may cause embarrassment to Modi in holding the seat of PM. In order to ensure continued support of NDA allies, Modi stepping down and Nitin Gadkari becoming PM is also widely debated as a possibility. The simple reason is that his ministry is the best performing ministry in NDA government consistently.

Adultery & Stability of marriage

The Centre’s affidavit demands the dismissal of the petition, asserting that Section 497 “supports, safeguards and protects the institution of marriage. It is submitted that striking down section 497 of IPC and Section 198(2) Cr.P.C. will prove to be detrimental to the intrinsic Indian ethos which gives paramount importance to the institution and sanctity of marriage. The provisions of law under challenge in the present writ have been specifically created by the legislature in its wisdom, to protect and safeguard the sanctity of marriage, keeping in mind the unique structure and culture of the Indian society.” 

A three-judge bench of the Supreme Court headed by then Chief Justice YV Chandrachud had,  on  May 27, 1985, upheld the constitutionality of the provision. Three decades later, his son, Justice DY Chandrachud opined during the admission of the case that the wife cannot be treated as a commodity by leaving her at the discretion of her husband to give consent to the act. 

The Bench headed by the CJI Dipak Misra observed that the provision seems archaic in view of the societal progress made so far. The bench is therefore set to consider whether earlier judgments, which had upheld the provision, are to be reconsidered, in view of the social progression, perceptual shift, gender equality and gender sensitivity. The government agreed to the thought that "stability of a marriage is not an ideal to be scorned". The Constitution Bench, to be headed by the CJI, may consider whether Section 497 would treat the man as the adulterer and the married woman as a victim. The larger Bench may also examine why the offence of adultery ceases the moment it is established that the husband connived or consented to the adulterous act. The petition challenges the validity of Section 198 (1) and (2) of the Code of Criminal Procedure, which deems that only a husband can be an aggrieved party in offences against marriage like adultery and only he can go to court.   

The decriminalization of adultery might result in weakening the sanctity and laxity of a marital bond, but the individual rights of women are paramount. Section 497 attempts to safeguard the institution of marriage at the expense of women's liberty & rights. The responsibility of marriage has to borne by husband and wife equally. Adultery is no crime. While man & woman can do what ever they want in this free world, the adultery by one must automatically must give the other -- right to demand divorce without prejudice to alimony rights & obligations.

Monday, 9 July 2018

Legalising Gambling

The Law Commission of India on July 5, 2018 recommended that the government turn match fixing and sports fraud into criminal offences while allowing gambling and cricket-related betting as a regulated activity under the direct and indirect tax regimes. The legal body said it decided to go beyond the apex court’s reference as betting and gambling are “intertwined”.

  • As it was not possible to completely prevent these activities, “effective regulation” seemed to be the only viable option allowing gambling and cricket-related betting as a regulated activity under the direct and indirect tax regimes. The Commission pitched for stronger laws to curb match fixing and incidents of cheating.
  • Regulating these activities would “strike at the underworld’s control over the illegal and unregulated gambling industry”.
  • The commission recommended that various “skill-centric games” be exempted from anti-gambling laws on the lines of horse racing.
  • The Law Commission says gambling and betting should be made taxable under the direct and indirect tax regimes and could be used to attract foreign direct investment. Allowing FDI would bring substantial amounts of investment to states that decide to permit casinos, propelling the growth of tourism and hospitality industries and will also help generate jobs and higher revenues.
  • The commission has also recommended linking the Aadhaar or PAN card of individuals involved in betting and gambling, besides making the transactions cashless, to regulate illegal activities such as money laundering.
  • Commission recommended that gambling be classified on the basis of the stakes involved, with the government regulator deciding how much money people from “lower-income groups” can put on stake. High stakes should only be allowed for people who can afford it. For participants, there must be a cap on the number of transactions an individual can indulge in these activities in a specific period.
  • The panel said that those who are underage, receive government subsidies or do not fall within the purview of the Income Tax Act or the GST Act should be debarred from participating in gambling platforms.
  • FICCI estimated in 2013, that the underground betting market in India is huge at Rs. 3,00,000 crore. Gambling and betting are currently allowed with restrictions in Goa, Daman and Sikkim.

  • Liquor prohibition
  • Gold smuggling
  • Foreign exchange 
  • VDS - regularization of black money
  • Unauthorized constructions in cities
  • Public sector bank loan write offs
  • Several corrupt practices
    .... and many more 
  • Now it is Gambling. Next it will be Prostitution. Where are we heading for?

One of the characteristics of governments in India is to copy western laws, make them unreasonably stricter, fail to enforce them leading to more corruption and then liberalize it in the name of reforms, citing additional government revenues and new jobs. This rewards law violators and punishes law abiding citizens. We have hundreds of Acts which are not being implemented. Reforms are usually a ‘redecoration of the walls of the same prison.’ A well educated and affluent society with strong ethical foundation doesn't require stringent governmental regulations for social well being. India saddled with illiterate and poor people, need not compete with developed countries in this regard. 

Income tax reduction doesn't impact economic growth

No one likes to pay taxes, particularly more taxes. Discussions about tax rates rouse emotions as discussions about where those taxes are spent. The influence of tax rates isn’t as significant as the emotional response to them might suggest. The basic question is: Do tax rates—by adding money when cut or subtracting money when raised—result in economic growth or contraction, meaning more or fewer jobs? The structure and financing of a tax change are critical to achieving economic growth. If the tax cuts are not financed by immediate spending cuts, they will result in an increased budget deficit, which will result in inflation and increased interest rates. The net impact on growth is either small or negative or uncertain. Base-broadening measures can eliminate the effect of tax rate cuts on budget deficits. They may also reallocate resources across sectors toward their economic use, increased efficiency and raising the overall size of the economy. All tax changes will not have the same impact on growth. Reforms that improve incentives, reduce subsidies, avoid windfall gains, and avoid deficit financing will have more auspicious effects on the size of the economy, but may also create trade-offs between equity and efficiency. 
  • The tax policy can influence economic choices, it is by no means obvious that tax rate cuts will ultimately lead to a larger economy in the long run. 
  • The income tax rate cuts would raise the after-tax income to working, saving, and investing, they would also lessens their need to work, save, and invest. The first effect raises economic activity, while the second effect reduces it.
  • Tax cuts financed by immediate cuts in unproductive government spending could raise output, but tax cuts financed by reductions in government investment could reduce output.
  • If they are not financed by spending cuts, tax cuts will lead to an increase in government borrowing, which in turn, will reduce long-term growth. 
  • The historical evidence and analysis suggest that tax cuts that are financed by debt for an extended period of time will actually reduce growth.
  • Tax reform is complex, as it involves tax rate cuts as well as base-broadening changes. Such changes should raise the overall size of the economy in the long-term, but the magnitude of the impact are uncertain. 
  • Broadening the tax base by reducing or eliminating tax expenditures raises the effective tax rate and hence will operate in a direction opposite to rate cuts and mitigate their effects on economic growth. But base-broadening has the benefit of reallocating resources to sectors that have the highest economic return, which should increase the overall size of the economy.
  • A well-designed tax policies have the potential to raise economic growth, but there are many stumbling blocks along the way and certainly no guarantee that all tax changes will improve economic performance. 
  • A tax change will be more growth-inducing to the extent that it involves (i) large positive incentive effects that encourage work, saving, and investment; (ii) small or negative income effects, including a careful targeting of tax cuts toward new economic activity, rather than providing windfall gains for previous activities; (iii) reductions in distortions across economic sectors and across different types of income and consumption; and (iv) minimal increases in, or reductions in, the budget deficit.
  • Debt-financed tax cuts will tend to boost short-term growth, but also tend to reduce long-term growth, if they are financed eventually by higher taxes. Second, revenue-neutral income tax reform can provide a modest boost to economic growth.
  • The tax rate on the average American was around 21% in 1947 and declined to around 15.5%, in 2015. The tax rates for the highest earners dropped from 86.45% in 1947 to 39.60% in 2015.  During this period US economy (GDP) grew from $243 billion in 1947 to $18,905 in 2017. Over that period, taxes increased and decreased; wages climbed and dropped; interest rates rose and fell; and so on. But GDP grew year after. It grew because something other than money drives the spirit.
  • Income beyond $250,000 per annum gets tossed into savings & investment account and gets utilized for vulgar spending like gambling, trading, holidaying, ornaments, real estate, vulgar homes, money laundering etc and taxing this money doesn't make any difference to anybody.
Tax cuts that target new economic activity, reduce distortions to the allocation of capital, and are not deficit financed are more likely to lead to economic growth. Advanced countries that decrease their tax rates do not experience less economic growth as changes to the top individual income tax rate are not associated with economic growth. Studies show that the US economy has not grown in conjunction with large changes to individual income tax policy. In summary, the impact of tax cuts on growth depends on how the tax cut is financed and the assumed international capital flows. Failure of capital to flow internationally reduces the likelihood of success of tax rate cuts.

The income tax created more criminals 
than any other single act of government ... Barry Goldwater

Almost all studies indicated that, income tax reduction has significant and negative impact on economic development. Hence income tax reforms aiming to reduce tax rates benefits only rich to become much richer and is in violation principles of democracy and equality. The present tax regime which taxes class four employees is ridiculous while almost all businessmen pays meager taxes that never exceed 10% of their real income, where as TDS deductions for salaried class starts at Rs.2.5 lakhs pa. The suggested rationalization of tax rates to be as under with stringent penalties for violations.
Since broadening tax base has evil aim of taxing the poor while doling out concessions to the rich with other hand and is unacceptable non-sense as it results in much work and little gain. Riches beyond certain point neither increases consumer spending nor capital accumulation but goes into unproductive spending & laundering that burdens the economy and abuses nature. While intelligence, talent & hard work must be rewarded, the high:low wage ratio of over 10,000 is untenable and must be brought to acceptable 200. Extreme poverty must be subsidized heavily and extreme wealth must be taxed heavily.

Friday, 6 July 2018

Modi's MSP hike is betrayal of farmers

For the previous year 2017
"I am delighted that the promise made by the government to our farmer brothers and sisters of giving minimum support price at 1.5 times the production cost has been fulfilled. There has been a historic increase in the MSP. Congratulations to all farmers," Modi tweeted in Hindi.
In keeping with the promise made in this year’s Budget speech, the Union Cabinet has approved a hike in minimum support prices (MSPs) for kharif crops so that they are 50% higher than the cost of production, not including land costs. Modi announces this proudly and  tweets " We are honored and humbled that we had the opportunity to take a decision on the historic increase of MSP, which will further enhance India’s agricultural transformation." Officials in the Agriculture Ministry proposed much higher rate than advisory body CACP’s recommendation to cover losses due to a fall in prices of crops following bumper production.
  • This MSP meager hike and grand announcement by Modi is in reality a betrayal of farmers. The revision is estimated to cost the central government just Rs 15,000 crore only. 
  • Most farmers are tenant farmers and land costs form major portion of the expenditure. 
  • BJP has betrayed farmers yet again by announcing MSP for kharif crops based on A2+FL costs instead of the promised C2 costs. (A2 costs basically cover all paid-out expenses, both in cash and in kind, incurred by farmers on seeds, fertilisers, chemicals, hired labour, fuel, irrigation, etc.  A2+FL cover actual paid-out costs plus an imputed value of unpaid family labour. C2 costs are more comprehensive, accounting for the rentals and interest forgone on owned land and fixed capital assets respectively, on top of A2+FL)
  • If MSP had been announced on C2 basis, then paddy MSP price hike would have been at least Rs 700 per quintal, but the government has only increased it by Rs 200 per quintal.
  • The major crop is paddy whose MSP was increased from Rs.1,550 to Rs.1,750 a quintal i.e. just Rs.200 or 12.9% in an election year. This hike falls short of 20.8% hike announced by UPA-I for 2008-09, also an election year.
  • The total Paddy MSP hike during NDA regime during 2014-18 to just 41% compared with 69% hike during UPA-II period 2009-13.
  • There are no guaranteed mechanisms for procurement of most other crops. The Food Corporation of India (FCI) buys wheat and rice only from farmers directly at MSP and supply the grains under the food security law. 
  • Higher MSPs alone would not bring relief to India’s distressed farming sector, because penetration of MSP benefits are limited to some states. Eastern states remain largely remained untouched by the benefits of MSP, while states like Punjab, Haryana, western Uttar Pradesh, parts of Gujarat, Maharashtra and southern states are major beneficiaries. Small and marginal farmers are not aware of these benefits.
  • The much hyped MSP increase for coarse grains and pulses is of little use for farmers in the absence of robust procurement system like Paddy. To make MSP functional, Centre should also announce State wise procurement target, which is missing.
  • BKU-Rajewal president Balbir Singh Rajewal said actual input costs were much higher than factored by the CACP and the BJP government. An additional input costs like GST on fertilisers and machines and diesel prices should take MSP on paddy to at least Rs 3,200 per quintal.
  • This year will see three crucial elections in Madhya Pradesh, Rajasthan and Chhattisgarh and distressed farmers will surely teach lesson to ruling BJP who are also facing anti-incumbency.
Artificially depressing the agricultural commodity prices for several decades resulted in the reduced income of farmers and farm labour. If free market existed in agriculture, farm income could have been much higher. Lower farm incomes are negatively influencing unskilled labour prices as they serve as benchmark for rural population coming to cities for work. So there is urgent need for free global agriculture market for better incomes and for unskilled labour.

BJP and Modi as usual does politics with grand announcements only with style and no substance followed with relentless publicity misleading one and all. The MS Swaminathan committee’s widely disseminated recommendation, to fix MSP at levels “at least 50% more than the weighted average cost of production”, remains a holy grail or partial reality at best. The unremunerative procurement prices by government is nothing but exploitation of captive, uneducated and unskilled people who are trapped in farming as subsistence avocation. With fragmented land holdings (82% land holdings are under 5 acres), unless double the C2 prices are realized by the farmers, they can't lead dignified life. Unrealistic loss making farming will only accelerate migration of youth from villages to towns & cities and overburden its deficient infrastructure. And villages will be left with aged, old and sick people who will have to live on government pensions and other concessions.

Tuesday, 3 July 2018

Religion - Jiddu Krishnamurti

Jiddu Krishnamurti was one of the most remarkable and interesting thinkers of the 20th century. Born in 1895 was made head of the international elite organization known as the Order of the Star. In 1929 he completely dumbfounded his followers “I have now decided to disband the Order. You can form other organizations and expect someone else. With that I am not concerned, nor with creating new cages, new decorations for those cages. My only concern is to set men absolutely, unconditionally free.”
  • Truth is the understanding of what is from moment to moment without the burden or the residue of the past moment.
  • You think according to your capacity, to your energy, your experience and knowledge; another thinks differently according to his experience and conditioning. This is a fact, indisputable and actual.
  • Belief is a danger which must be totally avoided if one is to see the truth of what is.
  • We should have a rational doubt, skepticism, because doubt cleanses the mind, it freshens the mind, it breaks down the old habits, the old conclusions, the arcane concepts. 
  • To enquire very deeply into the nature of religion there must be total freedom, freedom from all orthodoxy, tradition, rituals, faith, symbols. That requires a deep sense of doubt, doubt of everything that man has put together through thought what he calls religion.
  • To doubt requires sensitivity. If you doubt everything, then it becomes rather stupid. But to doubt with a light hand, with a quick mind, with subtlety, then that doubt brings about clarity, energy.
  • If you look to a priest for your guidance as a teacher, he will become your destroyer or exploiter. If you accept whatever I am saying, I will also become your priest; therefore I will become your exploiter.
  • To be in self-contradiction is to live in conflict and sorrow. The whole fabric of the self is the result of contradictory interests and values. When the inner contradiction becomes unbearable  we turn to organized religion, with its dogmas and rituals.
  • Your ideals, your gods, your religions: they are the creation of the desire for escape into comfort. 
  • Organized religion does produce a number of positive effects. Primarily there is the psychological solace that comes to the individual believer. No teacher has established these organized, exploiting religions. You yourselves, out of your insecurity, out of your confusion, out of your lack of comprehension, have created religions as your guides.
  • We give significance, meaning, to a life that has no meaning, the way we live, and the significance, the meaning is what we call religion. Religion as the experience of some authority may bind a few people together but it will breed inevitably antagonism; the experience of another is not true, however great the experiencer may be.
  • Religion, organized belief, has carefully maintained, cultivated the sense that you must toe the line, that you must not sin, that you must not commit ugly things.
  • Without religion there is no culture, for religion is the unifying factor.
  • Religion is merely mumbling words, going to the temple, or practicing a discipline – which is all repetitive, copying, imitative, habit forming. And what happens to your mind and to your heart when you are merely imitative? Only dullness, emptiness.
  • As you ruthlessly seek economic security, out of which is born a morality suited for that purpose, so you have created religions all over the world. This morality, this discipline, is really based on egotism and the ruthless search for individual security.
  • In the pursuit of gain you lose sight of the present. You don’t fully understand the immediate experience. Intrinsically, in that incompleteness of experience, in that memory, the ego has its roots. However much it may grow, expand, it will always retain the centre of selfishness.
  • Religions, with their beliefs, dogmas and creeds, have become tremendous barriers between human beings, dividing man against man, limiting him and destroying his intelligence.
  • Religion with its beliefs, its disciplines, its enticements, its hopes, its punishments, forces you towards righteous behaviour, towards brotherliness, towards love. Where there is belief, where there is a following of an ideal, there cannot be complete living.
  • Our whole system of thought and action and living is based on individual aggrandizement and growth at the expense of others. That is a fact and so long as that fact in the world exists there must be suffering, there must be exploitation, there must be the division of classes; and no forms of religion can bring about peace, because they are the very creation of human cravings, they are the means of exploitation.
  • You all want to be somebody in the state, which is based on possessiveness, possessions; and that has become moral, true, good, perfectly religious. It is the same thing. Now we call that morality.
  • Religion is the false result of a false cause, and merely a means of escape from conflict. The more you develop and strengthen the sectarian divisions of religion, the less true brotherhood there will be; and the more you strengthen nationalism, the less will be the unity of man.
  • We will have misery and tribulation so long as religion is organized to be part of the State. It helps to condone organized force as policy of the State; and so encourages oppression, ignorance and intolerance. 
  • Organized religions have nothing to do with the sayings of the great teachers. The teachers have said do not kill, love your neighbor, but religions of vested interest encourage and support the slaughter of humanity. By encouraging nationalism, supporting a special class, with all its organized belief, religion participates in the killing of man. Religions throughout the world not only exploit through fear, but also separate man from man. Such organized religions cannot in any way aid man in the realization of truth.
  • Probably one of the few religions in the world that has not shed blood is Buddhism and perhaps after it Hinduism.
  • An inner revolution is necessary so as to bring about right relationship between human beings; every other form of revolution brings about more misery. The question is how to bring about right relationship between man and man – not through force, not with bayonets, not through organized religions, not through ideologies – for these have all failed. So how is that revolution, that right relationship to take place?
  • Religion is the search for truth, which is of no country, which is of no organized belief, which does not lie in any temple, church, or mosque. Religion is allowing truth to come into being. Religion is the understanding of the thinker and the thought, which means the understanding of action in relationship. Religion is not the worship of some idea, however gratifying, however traditional it is. Religion is understanding the beauty, the depth, the extensive significance of action in relationship. 
  • Religion is the understanding of the thinker, not merely to be caught in a dogma of uncovering of the beauty of life, of existence, of truth. Religion is a total denial of everything which the mind has invented for its own security.
  • Religion is not the acceptance of some dogma, tradition, or so-called sacred book. Religion is the inquiry to find the unknown. Religion is the urge, the intense pursuit of the sacred, if there is anything sacred, that is beyond the measure of time, it is not to be found within the field of the known.
  • There is nothing sacred in the temples, in the mosques, in the churches. They are all the inventions of thought. So, when you discard all that, is there something sacred, that is nameless, timeless, something that is the outcome of great beauty and total order which begins in our daily life. When there is silence, there is immense, timeless space; then only is there a possibility of coming upon that which is the eternal, sacred.
  • Where there is this emptiness and space there is vast energy. And that energy is sacred.
  • We are brought up in the belief of God, thought is influenced, a habit is formed, from generation to generation. Both belief and non-belief in God prevent the understanding of God.
  • God, Truth, or whatever you may choose to call reality, cannot be described. That which can be described is not the real. Memory is the residue of incomplete experiences; therefore, truth, or God, or what you will, is the unknown and it cannot be formulated.
  • The function of education is to bring about a release of energy in the pursuit of goodness, truth, or God, which in turn makes the individual a true human being and therefore the right kind of citizen.
  • In belief of God, there is great security, but that God, you have invented it. So you are seeking security in an illusion which you think is real and that gives you a great sense of security; that means you are neurotic in a belief which is your own invention.
  • The moment I say there is God, the thinking about it is within the field of thought. The man who has not thought at all, to him there is no God.
  • And where there is the ending of fear, there is no god. You understand? It is out of our fear, out of our desire, we invent the gods. When a man for him, in whom there is no fear, completely no fear, then he is totally a different human being and he needs no god.
  • There must be complete freedom, and in that freedom there is a great, tremendous energy because there is an emptiness – not nothingness, emptiness. In that there is that which is beyond all time. This is meditation. This is religion.
  • Meditation is the understanding of the whole of life, both external and inward, the understanding of your daily life, your relationships, freeing yourself from fear, and questioning what is the self, the ‘me’.
  • The conflict in relationship creates the world in which we live every day – the misery, the poverty, the ugliness of existence. Life is a constant challenge, and when the response is inadequate, there is conflict; but to respond immediately to the challenge adequately, brings about a completeness. Therefore it is important to understand oneself, not in abstraction, but in actuality, in everyday existence.
  • Religion is love; You can love, be compassionate, only in the present, in the immediate. We mean by religion absolute freedom, freedom from fear, freedom from conflict, freedom from problems, freedom from sorrow so that a mind, a brain that is completely free, it’s only then there is that quality of love and compassion. 
  • Religion is a way of life: that is whole, that is not fragmentary, in which there is no conflict, contradiction of opposing desires, opposing ideas and demands, a total non-fragmentary life, a whole life, a total mind, a whole mind which doesn’t think one thing and do another, doesn’t say one thing and act contrary to what has been said.
  • The real function of religion is to transform man totally, so that he lives in complete harmony, which means complete order and therefore righteous behavior. That is the total meaning of a religious mind.
  • One religion is not going to conquer the rest of the world. They want to – the Hindus want it, the Christians. And the mechanical world is not going to bring about a new society, a new culture, only religion has always done it – not the present religion. So there needs to be a religion, of not faith, not belief, not rituals, not authority.
  • The problem with reform is that it is merely a ‘redecoration of the walls of the prison.’  Then what shall the earnest man do? The relationship which has created this appalling society in which there are immensely rich people, and those who have absolutely nothing, both inwardly and outwardly – then what is he to do?

Truth is a pathless land. Man cannot come to it through any organization, through any creed, through any dogma, priest or ritual, nor through any philosophic knowledge or psychological technique. He has to find it through the mirror of relationship, through the understanding of the contents of his own mind, through observation and not through intellectual analysis or introspective dissection ... Jiddu Krishnamurti

Sunday, 1 July 2018

Pain in Kashmir ahead of 2019 General Elections

Pakistan News Paper  | The Dawn | Page 14 | July 1, 2018

Arrogant lawyer in Pakistan

An interesting 'Letter to the Editor' in the Pakistani
Newspaper 'The Dawn'
dated July 1, 2017, on page 9