Thursday, November 10, 2005

Evil MIB: Money in Black

When a country like ours is on the threshold of creating ripples across the world economy, let's look at one of the biggest evils that is pegging India back: Black Money. Tax evaders in India should profusely thank Nehru proffered mixed economy. This resulted in building up of black money. It is believed, black money in India has kept pace with white money so much so it is running parallel to the nation's economy!! One cannot really blame the commercial sector or the tax evading individuals if the Congress led government was taxing 60-70% of their income(1950s through 1990) and the resulting accumulation of unaccounted money in trying to evade paying the same. One of the most shocking statistic is, less than 3% of India's earning population is under the tax bracket. Imagine a country of India's size with a huge population finding its feet with such a woefully low amount of tax money. Or the other way of looking at it is how heavily is the salaried class being taxed! The only way forward is lowering the tax percentage and widening the tax net.

Every Indian (tax paying and tax evading) is more or less sure that Mr. P. Chidambaram is going to come out with an amnesty scheme in some form or the other. It is essential for the Finance Ministry to realize that post-amnesty compliance is extremely important if the honest tax paying public is to feel good and also for the larger betterment of the financial backbone of the economy . It is as important as unearthing blackmoney itself.

Let us understand what the developed countries have in place to curb black money, tax evasion, defaulting on loans (which, gives rise to non-performing assets of the financial institutions) and fraud. All developed countries have a social security system or a number system for governance, in place. A number is assigned to an individual when he/she is born or when he/she becomes a citizen of the country. The unique number associated to each individual makes it virtually impossible for the "anti-economy" element to disappear from one bank,and live happily ever after by enjoying credit facilities from another. This system also helps financial institutions by generating personal credit history of individuals who wish to enjoy credit facilities. This ensures that honest people will reap better facilities and the defaulters are penalized. Credit and Debit card usage in Indian economy is on the upswing for the last four years. Keeping this in mind, Reserve Bank of India (RBI) can focus on giving a thrust to credit-card industry by bringing in innovative policies through which we can at least ensure that all future transaction is going to be "white". This will ultimately increase the revenue for the government.

Our FM can definitely take heart from the fact that he was the architect of the most successful amnesty scheme ever launched in India in his previous stint. But, he may know for a fact, similar scheme may not be successful this time. Studies have shown if a tax amnesty scheme is to be successful it should be something of a once in a lifetime opportunity. Opportunity for millions to feel proud that they have given something to their country, opportunity to come clean, opportunity for them to set an example, opportunity to sleep peacefully knowing fully well that they don't have to run and play hide and seek with the taxman. Instead of the government taking a 30-35% cut on an amnesty scheme like VDIS what if FM comes out with a plan which encourages people to invest their black money. By doing so the government may not directly gain for its coffers but at least a major portion of the black money will be unearthed and it will hit the mainstream economy contributing to the infrastructural well being of the country. This will also generate a great deal of employment opportunities ultimately off setting the damage caused by non-payment of taxes. One could perhaps remind the honorable Finance Minister what he said once before, "We can be color blind if black money is invested in certain sectors". Tourist and real estate industries are the most appropriate sectors where investment of black money could be encouraged because they are both labor intensive and are synergic in sustaining the employment they generate. Let us keep our fingers crossed until such a brainwave hits our Finance Minister!

My Blog on "Unionising of the BPO brigade" is still a case of work in progress!! It is going to take some time...

Monday, November 07, 2005

Don't Gimme RED

Oh Yes! I have started to blog. The revolution's nth victim. I am taken in.....

Wow!! What a great time to be in India and be an Indian!! These are the times when we are on the fast track to define what India stands for, what India is and what our capabilities are but before we realize our dreams of being a developed country lets look at a big ticket obstacle-Destructive, non-progressive communist mentality at the grass root level.

I have grown up in JNU Campus(read the red campus)been here for the last 23 years all I have seen coming up during these years is red buildings and yes even more red buildings though the shade of red may have changed from time to time..How? Well as per every bright, young JNU student they believe somewhere deep down that JNU would walk away any day with the title of "capital university-of-world's-intellectual-elites", why they feel like that is highly debatable... These would be the same set of students who go hoarse discussing anti-globalization,and how equality can be achieved in the country which is 1+ billion strong in population without getting more FDI. Same set would create posters with their creative juices spilling all over which would scream physical, ideological, chemical and biological usurpation of their alma-mater by a big MNC. In the process they would also create a Che Guevara poster in which he would staring at the horizon...After his death nearly 40 years ago, Guevara became a hero of Third World socialist revolutionary movements, as a theorist and tactician of asymmetric warfare. Whether or not Che is remembered in the country of his origin i.e Argentina, he is a revered figure in JNU. Does India, which is just a decade or two away from becoming a developed country really require Che's ideology?? My point is fast paced growth and communist ideology can never go hand in hand.

Ironically most poster creating elites would perspire and aspire to go abroad to study, work and probably even settle down! Absolutely nothing wrong in enhancing their career prospects, nothing wrong at all when they want to earn more by dint of their hardwork and capabilities. But why jump-on to the communist bandwagon temporarily for 3-5 years when they are in JNU? Is it peer pressure which makes them masquerade as communist? Or is it identity crisis? Okay some grow up, some go abroad and settle down, others remain hereand become politicians. You see the baton has to be passed on from one generation to the other isn't it? Then they vociferously oppose the FDI which the government wants to bring up in retail, hotel and banking sectors. It is well known that reforms in banking or broadly the financial sector would form the real backbone of our economy because it will consolidate all the financial institution which are scattered at this point. As retail sector is already hotting up, FDI in it would give added thrust that it deserves.

Cosider this, according to World Travel and Tourism Council (WTTC) India is the second fastest growing tourist destination. It is perhaps the most opportune time to go for cent per cent FDI in hotels. If India is to withstand tourism boom we have to really ramp up tourist accommodation and the support system a great deal. Which better place to start than the national capital New Delhi itself which has to get dressed and tressed for a mega-event like Commonwealth Games in the year 2010 and possibly Asian Games in 2014. If we are successful in hosting these mega events it would showcase New Delhi and India largely as the destination of the future for more events. Also needs to be considered is the fact that airline industry globally is going to get into top shape through low cost airlines. Indian airspace is poised for a dramatic image makeover by the entry of private players and India opening up its skies partially for foreign players. We are all well aware that travel, tourism and hotels get us a constant supply of foreign exchange and it generates high quality employment with its multiplier-effect in the economy. To make the FDI environment even more conducive in our country, we can even have relaxed taxation laws, something like no tax if the profit from FDI is re-invested. While we have a fire breathing dragon in our neighborhood which is ready to bend over backwards to make itself more attractive, and even after amazing results India has achieved in the recent 14 years, I fail to understand why the communists are so much opposed to FDI. It is all the more disappointing because it is happening at a time when the communist ruled state of West Bengal is moving ahead with lot of inflows from big MNCs. Since more and more FDI is the need of the hour for the continued well being of our economy, I would request the comrades to lower their red flag let their hammer and sickle rest for some time!

All in all what a heavy duty subject for first time blogging!