INDIA CAN’T DO WITHOUT SUBSIDIES – AND IT WANTS TO TAX PROVIDENT FUND!

We are a nation where the urban poverty line is Rs. 47 a day while we think that the rural folks can survive at Rs. 32 a day and we arrived at this wisdom in 2014. When we had done so, we had graduated from the poverty lines of Rs. 27 in rural areas and Rs. 33 in urban areas. This is when you can’t arrange even a modest one time meal in Rs. 32.

This directly says the proportion of real poor, in qualitative terms, based on the average living conditions today, would be much higher that the projected figure of around 30% or less. When you go assessing this poverty mess keeping in mind ‘what should be and what is’, you see this is another equal India within India (or Bharat of the perennial India Vs Bharat debate).

Some 75% of Indians are without any health insurance cover. Majority cannot afford medicines for a sustained treatment regime, let alone the costly surgical processes. The attitude of doctors and support staff in the government run hospitals is even worse than scavengers. Finding good people there tougher than even finding God. People who can afford and can access, try to ignore the government run health facilities. And it across India including the metro cities.

Officially, India’s literacy rate is around 75%. But again, if we see qualitatively, it is the same old story of an equal sized Bharat within India. Our primary school system is languishing with deep holes and leakage in the ambitious Universal Elementary Education programme. Our higher education probably produces the maximum proportion of inept professionals and higher education graduates.

Our economy is consistently witnessing a falling gross savings to GDP ratio – from 34.6% in 2011-12 – to – 31.3% in 2015-16. One way to look at it would that people don’t have wealth in that proportion to save – something that is, naturally, very random and without substance. Or it means people are saving less.

But that doesn’t mean the government should use to a stick to discipline people – like the proponents of the EPF tax proposal including Finance Minister Arun Jaitely said – as a report the Economic Times put forward – “The government had justified the move by saying that it was meant to steer private sector employees towards a pensioned retirement by discouraging lump sum withdrawals, especially for, as experience suggests, conspicuous consumption.”

The finger is being pointed at it rightly – that who is the government to discipline us with our personal preference. Yes, it is good for us when we save more – but then, on a macro scale, it is good for the nation’s economic health as well. But, in the name of that, taxing a man’s life’s savings can never be justified especially when you give people dreams save taxes and build a corpus by investing in the Provident Fund scheme.

And from where this thought of ‘disciplining’ the salaried taxpayer came? When you have such ridiculous poverty lines, when you have millions poor to feed, when you have millions poor to heal, when you have millions poor to educate?

India and Bharat cannot become synonymous until we address these existential questions. Subsidy is now addressed as a ‘burden’ in the lingo being used by the economists but this ‘burden’ is lifeline for India’s millions poor who find it hard even to earn Rs. 47 or Rs. 32 a day.

The government is duty-bound to serve them first – with honesty – with integrity – with consistency. Taxing the middle class with another ‘tax burden’ would not serve any purpose here.

©/IPR: Santosh Chaubey – https://santoshchaubey.wordpress.com/

CLOSER ECONOMIC TIES BETWEEN INDIA AND CHINA MAKE SENSE

They are the world’s two most populous nations.

They are poised to be the world’s second and third largest economies.

They are the world’s biggest markets.

One has grown at around 10% for 30 years.

The other has grown around 6% for 20 years.

And as China, the one with an average growth rate of 10%, is slowing down, India is slated to become the fastest growing economy of the world.

And it is in process. India, that has grown at around 6% for past two decades, is expected to grow at 7.5% this year compared to China’s 6.8%, as the International Monetary Fund (IMF) reports.

According to a report by the Harvard University, the projections say India will grow annually at 7.9% for eight years till 2023 while the average annual growth rate for China for the same period is expected to be 4.6%.

India is poised to become the world’s youngest nation by 2020.

India has 65% of its population under 35 years of age – that corresponds to over 81 crores (810 million) of India’s population of 1.25 billion.

When its prime minister, Narendra Modi, who started his first official tour of China today, talks of a demographic dividend, he has reasons to say so.

India is poised to have the world’s largest middle class surpassing China by 2030. The criteria used by the BBC for this projection was an earning potential of US$ 10 to US$ 100 per day. The study projects India’s middle class to be 475 million strong by 2030.

According to a study by the World Bank, United States was at the top of the middle class consumption pecking order in 2009 with 21% global share (US$ 4377 billion). In 2020, China is projected to be at the top with 13% market share worth US$ 4468 billion. India will make a grand entry there with projected market share of 23% worth whopping US$ 12777 billion.

China’s is a manufacturing powerhouse and India is trying to be the one with the Bhartiya Janata Party (BJP) led government’s ‘Make In India’ campaign.

Global companies are vying for Chinese and Indian markets and India and China are eyeing for each other’s market as well.

And closer economic ties between the two giants, the projected second and the third largest economies of the world, the two largest middle classes, the two Asian superpowers and the two neighbours, make sense.

Right now, China is ahead of India in every comparable aspect – in social sphere, in military technology, in infrastructure and in economy – China’s economy is over four times the Indian economy.

But India is the world’s largest democracy and is slowly adopting the features of a free market economy while the Communist China with a one-party system did it very fast.

Now, China is stagnating and is coming around a sustainable growth rate.

And India is poised to take up – at least for a decade to come.

And the two counties together make the largest marketplace of the world – with 24% of the middle class consumption by 2020 that is slated to go up by 17% to become 41% by 2030.

India and China, the world’s two fastest growing economies, are home to over 2.6 billion people now – that is around 30% of the world.

And they are big markets for every country – including themselves.

Xi Jinping’s India visit last year and Narendra Modi’s China visit this year should be seen in this context only – two large economies that see gains in mutual cooperation – even if it means pushing back the contentious issues – including the border issue.

©/IPR: Santosh Chaubey – https://santoshchaubey.wordpress.com/

INDIA: YOUNGEST, FASTEST, AND MOBILE, BUT….

India is slated to become the world’s youngest nation by 2020. The UN (UNFPA State of the World’s Population report) says 356 million (28%) of its population is in 15-24 age-group, largest in the world.

Census of India says around 48% India’s population is below 21.

65% of India’s population is below 35.

While writing this, India’s population is over 1.25 billion, world’s second most populous nation after China, and projected to take over China by 2050.

A report by the US (Special 301 Report for 2015) says India’s internet base is projected to be of 370 million users by this year end, the second largest in the world. The report says 213 users will be using mobile internet by this June.

India’s teledensity is around 100 crores (1000 million). Lowering of smartphone prices has quickened the spread of mobile internet in India, already large enough, especially among the youth and working-age population.

According to the Telecom Regulatory Authority of India (TRAI), the body to regulate telecom and internet business in India, the telecom subscriber base of India reached 97.92 crore this January from 97.097 crorein December 2014. That means a telecom density of 78.16%. According to the TRAI, the urban teledensity was at 148.54 and rural was at 46.69. And that tells us the marketers’ push is in rural India now. That is the latest data available.

The world’s second largest telecom network is India now.

And it is projected to be the world’s fastest growing economy, overtaking the growth rate of China.

According to the estimates, India is expected to grow at 7.5% in year ending in March 2015. That is more than China’s 6.8%. But we need to keep in mind that China grew at 9% for three decades before slowing down and India is nowhere near to that. Indian policymakers will have that in mind while taking the decisions related to the economic policies.

But….

To continue..

©/IPR: Santosh Chaubey – https://santoshchaubey.wordpress.com/

THE UNION BUDGET TO HAVE IMPRINT OF MODI’S POOL OF EXPERTS

The Union Budget tomorrow is going to be the second Budget of the National Democratic Alliance government led by Narendra Modi in nine months.

The first one was presented in July 2014 by the Finance Minister Arun Jaitley after the Modi government was inaugurated in May 2014. Then, the government was just one month into the office, nothing to look back to take steps forward.

Now, nine months into the office, there are developments in retrospect that are needed to be factored in while looking forward. And there will be an intensified level of scrutiny therefore.

In addition to the regular factors affecting the state of the Indian economy, another major element that is going to have its imprint on Budget, is the talent pool of the economists inducted by Narendra Modi in key policymaking functions of his government.

It was already visible in the Rail Budget that focused on consolidating on what is there than to engage in economically insane populism. Sources say the team of experts including the Ministry of Finance Advisor Arvind Subramanian, the NITI Aayog chief Arvind Panagariya and the NITI Aayog member Bibek Debroy and the senior officials of the prime minister’s office played a major role in spreading out the policy concepts on the paper.

They are seen as free market experts believing in the primacy of the market to drive the growth and they are expected to follow the suit with the Union Budget.

We should be ready for a no non-sense Budget that would give enough of talking points, to the proponents, and to the opponents. If there has to be some space for populism, it is expected to be in context of the upcoming Bihar assembly polls later this year and the West Bengal polls in the first half of the next year.

But overall, it is expected to be a balanced Budget intending to kick-start the Modi’s vision of making India a manufacturing hub which can meet its requirements internally and at the same can acts as a hub of the export oriented global financial system.

©/IPR: Santosh Chaubey–https://santoshchaubey.wordpress.com/

THE BUZZ WORDS BEFORE THE RAIL BUDGET PRESENTATION

Railway’s financial health: Indian Railways is in dire financial straits. It barely earns to sustain itself when it needs huge funds to modernize its ailing and ageing infrastructure. The high operational ratio, with expenditure being the 90% of the earning, will be discussed with deliberations on ‘how the new Rail Minister will approach the problem’?

Tariff hike: Fares would be hiked or not? Will the freight tariff come down? Will the passenger fare go up? Will the subsidized segments of train fares see rationalization?

Cleanliness: With ‘Clean India’ campaign being one of the cornerstones of Narendra Modi’s policymaking, the Rail Budget is expected to focus heavily on revamping the image of Indian Railways, a limping behemoth where even the A-class stations have questionable cleanliness record or where the catering of even the A-class trains like Rajdhani or Shatabdi cannot be relied on.

Clean energy/Alternative energy: Extending the cleanliness campaign, another big emphasis of the Modi government is to increase the share of clean/green energy in India’s overall energy consumption to the global norms. Indian Railways being a major energy consuming outfit, the Rail Budget is expected to lay down vision on the same.

Water conservation: Open taps or leaking pipelines are a common feature of all stations. Also, huge amount of water is used in cleaning trains and stations and much of it is wasted. But there are no specific guidelines water usage. Water recycling is still not practiced by most of its wings. The budget is expected to come with plans for the same.

High speed corridors: The Rail Budget is expected to and should focus on the high speed corridors, preferably on introducing semi high-speed trains and increasing speed of the existing ones. India doesn’t need a Bullet Train corridor now. Burdening its economy with huge-investment white elephants like Bullet Train projects, the one between Mumbai and Ahmedabad is expected to cost Rs. 60,000 crore, should be avoided. And we can expect this from the pragmatic professional in Suresh Prabhu, the Rail Minister.

Freight v passenger tariff trade off: What Indian Railways earns through freight is used to absorb the loss made by its passenger segment – the story of cross subsidy. It stands now at Rs. 24,000 crore. Indian freight tariff is among the highest in the world while its passenger tariff for suburban and sleeper is among the lowest. It is sort of a double whammy. The cross subsidy is eating into Indian Railway’s financial health and the high freight subsidy is making it lose market share to the road transport operators. Balancing these is a tough task, given the sensitivity of electoral compulsions. It would be interesting to see how Mr. Prabhu reflects on the same.

Customer satisfaction: It is always the buzz word, improving on services and introducing amenities. Cleanliness, better booking options, cooking hygiene, cuisine quality, better options on trains, efficient information broadcasts, wi-fi expansion and so on. The fare dynamics is an important part of it. If the fares are increased, it will be to arrange the funds for better amenities. It the fare are not reduced, it will again be to meet the fund requirement to provide a better customer experience. And if the fare are reduced, what else can be said, it is always the most satisfying aspect for most of the customers.

Collaborations: Need to infused fund in Indian Railways and as the government cannot meet the requirement on its own, there should be collaborations on the card – within India, from abroad. Privatization is certainly a sensitive issue but collaborations with external agencies on PPP model can be practiced. Also, the state governments can be made partners in projects falling in their region.

Make in India: Make In India is prime minister Narendra Modi’s flagship manufacturing initiative for India, intending to make India a production hub. But given the poor financial condition of Indian Railways, it should not be expected that the Rail Budget would come with new projects to produce its requirements in the country that it is currently importing.

©/IPR: Santosh Chaubey–https://santoshchaubey.wordpress.com/