Fools rush in

Deadlines help. Hard ones help even more. After all, years of false starts have turned the goods and services tax (GST) into the boy who cried wolf. Let alone some corporates and auditors, even part of the general government machinery does not seem fully convinced that April 1, 2017 is a realistic start date. For the tens of millions of people who need to prepare for this transformational change, there is nothing like a hard deadline, akin(similar,के समान) to a hanging sword, to focus attention. And that will be needed, for if passing the GST constitutional amendment bill was tough, the steps going forward to get the GST started are likely to be much tougher. We highlight the four major ones here.

The first step: Should we have one standard rate or ten? A large number of rates can distort supply chains and complicate administration as well as compliance, introducing undesirable discretion(sense,विवेक) in the system. At the same time, just one standard rate may be inappropriate because currently each of excise (a central levy) and (state) sales tax schedules has a low band (4-6 per cent) and a standard one (12-14 per cent).

This is to offset the regressive nature of indirect tax: For instance, when buying shampoo, the factory worker and the CEO pay the same sales tax. Items presumed to be consumed by the poor fall in the “low” category, and those by the rich in the “standard” category. So biscuits below Rs 100/kg have zero tax, those priced higher have a low tax rate and cream biscuits get the standard rate. Half of India’s consumption basket currently has zero tax, a third is taxed at a “low” rate, and only 15 per cent is taxed at a “standard” rate. Applying one rate would mean this nuance is lost, and inflation could rise for the poor.

Thus one needs a “low” rate and a “standard” rate. Then what explains the four-rate structure (8 per cent, 10 per cent, 18 per cent, 26 per cent) being proposed to the GST Council as reported in this paper? It could be an attempt to replicate the current tax structure to address the states’ primary concern about losing revenue.

That brings us to the next and what could be the most critical step for the GST: Mapping the hundreds of product and services categories to the few GST rate slabs. It could be a trivial(small.तुच्छ) exercise accomplished in a few weeks, but it should not be. Despite much simplification since 1991, the schedule of taxes remains highly complex and distorts supply chains. Some rates also embody efforts to incentivize(encourage,प्रोत्साहन) “Make in India”: A hurried mapping effort could hurt. A senior OECD economist recently asked: “What is the commerce ministry’s assessment of the impact of GST on India’s trade competitiveness?” I had to tell her with much disappointment that such an exercise in all likelihood had not been undertaken.

The costs of commencing(start,शुरुवात) a major simplification of rates are the time it may take, the one-time disruption, and getting all states to agree to a completely new rate schedule. That said, getting states to agree will be challenging anyway, as sales tax rates already differ meaningfully across states (for instance, biscuits in Gujarat attract 8 per cent sales tax but 14.5 per cent in Karnataka).

The third step would be the GST law itself. Enormous(large,बड़ा) effort has gone into the draft bill put up for public comments as state and Central bureaucrats hammered out a consensus(agree,सहमति). But now that it has started to see public scrutiny(examine,जाँच), the list of necessary changes is growing rapidly.
This is not surprising, given the massive number of new use cases thrown up, particularly as services are to be taxed at the state level (for instance, who should get the service tax on an ad campaign designed in Mumbai but run in UP, Karnataka and Telangana?). A draft of the IGST law, which will deal with contentious inter-state transfers, has not been made public yet. A hurried passage may be inappropriate.

one of the most important expected gains of the GST is improved compliance.

But without a simplification of the compliance process, this improvement could prove illusory: One senses this design intent has been lost. As Bharat Goenka of Tally Solutions pointed out, small enterprises are concerned about the complexity of compliance more than the cost of the tax itself — that is, dealing with the day-to-day maintenance of registers and sometimes with corrupt officials. Easier and possibly automatic filing of returns is likely as important as the invoice matching that is expected to widen the GST tax net.

The fourth step is the software and its rollout. One assumes this is well advanced. However, development can only stop and implementation and training can only start once the rules of the GST are finalised, that is, encoded and passed in every state and the Centre. Vendors of enterprise software like SAP also need to roll out their GST modules, and they cannot do so till the GST software is finalised. All this as the organisational structure in the government(s) itself would be changing.

It is clear the choice is between time and perfection. There is very little time left: Clarity on rates must emerge in the next few months for the next year’s budgets. Moreover, the rollout cannot be too close to the 2019 elections: Economic disruption due to the GST can be minimised, but not obviated(escape,बचना). Further, prices of some items may rise, and for others, may fall: The items that see increases could become poll issues.

It is tempting to think of the process as an incremental one: Get the economy into the GST mode first, and later simplify the tax rates and ease the compliance burden. However, the best time to make structural changes is when a new system is starting; making them later risks creating a patchwork that can never be as efficient. As the GST Council’s internal politics evolves, it may become tougher, not easier, to build consensus on structural changes. As Pratap Bhanu Mehta has said in these columns, the GST is a “constitutional adventure”: Who really owns the GST schedule? The Central government is not the sole driver now and must take the states along.

Perhaps a middle-path exists. A handful of taskforces working in parallel over four to six months could make the whole plan much more considered. A senior bureaucrat appointed to the GST secretariat and put in charge of the whole GST project could improve coordination. It could also help build the necessary conviction among those who need to contribute to the change — deadlines that seem implausible(impossible,असंभव) hurt that conviction.

      

courtesy:indian express

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The bane of a bumper crop

Every day, around 3 p.m., hundreds of lorries loaded with onions queue up at the new agricultural market complex at Lasalgaon, around 45 km from Nashik, waiting for the afternoon auction to begin.

As a group of traders approach, the farmers drop their produce at their feet, as if to tempt them into bidding high. The traders halt and look over the merchandise. A market committee employee calls out the reserve price: “400!” Eyes roll, unspoken words seem to pass between the traders. Then the bidding starts: “1!” “11!” “13!” “17!” In less than 30 seconds, the auction is over. The farmer gets 17 rupees over the reserve price, Rs.417 per quintal (100 kg). A pittance(small amount,अल्प भाग) at any given time, more so now when compared to prices last year.

A trader-controlled market

No matter how united the farmers are, no matter how hard they fight for a better price, they turn into mute spectators in front of the traders when auction begins. The auction is dictated by the traders with money and considerable political clout. Traders decide the price, farmers accept it without protest.

The market complex has a huge parking space for the lorries. Sometimes there are up to 1,000 vehicles at a time. The otherwise deserted place comes alive twice a day. The first auction of the day starts at around 10 a.m. and the second at 3 p.m. Depending on the number of vehicles, the auction can stretch from an hour to three hours.

Once the rate is fixed, the group of traders moves immediately to the next vehicle. The farmer, left with the price decided by the group, starts collecting the onions he has dropped on the ground. An official from the market committee approaches him with a receipt, bearing the auction rate, trader’s name and farmer’s name. With a receipt in hand and onions in the vehicle, the farmer then proceeds to the godown where the weighing process takes place. As per the rules laid down by the market committee, the farmer must get the payment before the end of the day, which is largely followed.

After the produce is dropped off at a shed in the complex, the traders take control of it. Workers start segregating(separate,अलग) the onions according to the quality and the packaging begins. Vehicles are loaded with the produce to be sent off to cities or to different States. Traders then get into a huddle to firm up the retail price of the produce — adding their profits — with nary a concern for the farmer and the price demanded by him. The operation is bloodless and smooth.

Barely breaking even

While onion is one of the major crops in this belt, farmers also cultivate grapes, soya bean, sugarcane, and ginger. Speaking out against the cartel of traders is not easy when the farmer is dependent largely on the onion crop, as it may result in traders ganging against him (or her) by dropping rates for his produce.

Official data from the Lasalgaon Agricultural Produce Market Committee (APMC) says that this year’s prices — between Rs.500-Rs.800/ql., down from Rs.970-Rs.3,786/ql. — are the lowest in the last five years. This year, Rs.1,020/ql. (in June) was the highest rate given to farmers, compared to Rs.6,326/ql. in 2015-16, and Rs.2,626 in 2014-15.

Growing onions costs between Rs.50,000 and Rs.80,000 per acre, and a cultivated acre yields(give,देना) not more than 100 ql. With this year’s average selling price at Rs.728/ql., an acre’s worth of onions would get the farmer around Rs.72,800. This sees some farmers barely break even; many lose money.

Small wonder that Milind Darade, who owns 13 acres of land, is furious(angry,गुस्सा). “This is the only industry where producers have no right to decide the price of their product,” the onion farmer from Karanjgaon, Nashik district, says. “Isn’t it cruel? Shouldn’t we get angry?” The week before The Hindu caught up with him at the Saikheda sub-market committee, Darade was given a humiliating price for his produce: Rs.5/ql., or 5 paisa/kg. If that was not bad enough, Maharashtra’s Minister for Co-operation, Subhash Deshmukh, said on a live television show that his onions were rotten. “Let me give you some information,” he says indignantly(angrily,गुस्से से), “this is the onion you eat at a restaurant. Just peel off two layers and you would wonder whether it was really rotten.”

Darade has preserved the official paper from the market committee with the offered rate; he has laminated it to ensure it doesn’t get dog-eared. He says that he was so angry that he refused to sell his onions and brought the load, some 10-11 ql., back to his farm to use as fertiliser. But, he says, “When I calmed down, it dawned upon me that I must use it to highlight the plight of onion farmers.”

Supply-demand mismatch

Simplistically put, there was a shortage last year, and this year has seen record onion cultivation. Abundant(plentiful,प्रचुर) supply has brought the prices down. The farmers, though, are used to this kind of fluctuation. They don’t blame the bumper crop and supply-demand equation; they say it’s the traders who are conspiring(plot,साजिश) against them and the government has done little — or the wrong things — to help.

To understand the current crisis for farmers, we need to step back a little.

India has three onion crops a year. Early kharif (the crop sowed in the monsoon) onions come to market between October and December. Onions from the rangda, or late kharif, crop arrive from January to March. The winter or rabi crop is up for sale from April to May. Usually, some parts of the rabi crop are stored for a few months to fill the gap from May to October. Traditionally, prices rise from July to October; official data show that wholesale rates rise by as much as Rs.1,000/ql., even Rs. 1,500, later reflected in the retail market with an increase of Rs.5-Rs.10/kg for consumers.

In 2014-15, the onions took a hit following a hailstorm in North Maharashtra which, in turn, affected their storage value. With many rotting, the onions that did make it to market commanded high prices.

Then the drought of the summer just past played a role too; many sugarcane farmers switched to the less thirsty onion this year. “The onion cultivation area in the State has almost doubled in year 2015-16,” says Nanasaheb Patil, Director, National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED). “Farmers hoped that they will get last year’s rate — close to Rs.3,000-Rs.4,000/ql. — which did not happen, as production increased in huge proportions.”

India is the world’s second-largest onion producer (after China) with 26.79 per cent of the planet’s land under onion cultivation and 19.90 per cent of its production. Maharashtra is India’s largest producer, with a 32.45 per cent share of total onion production, and in turn, Nashik district in north Maharashtra accounts for with 41 per cent of the State’s onion harvest. According to the Directorate General of Commercial Intelligence and Statistics (DGCIS), India produced 203.33 lakh metric tonnes (MT, 1,000 kg) of onions in 2015-16, up from 189.28 lakh MT in 2014-15. Lasalgaon, Asia’s biggest onion market, received around 32,680 MT in the previous fiscal year. Five months into this year, it has received 10,874 MT.

To make matters worse for Maharashtra’s farmers, other States — notably Gujarat, Rajasthan, Madhya Pradesh and Karnataka — have reported higher onion yields.

Holding on for a better day

Aside from the production glut(overload,भरमार), another important factor was a 40-day strike by traders in July and August, opposing the State government’s decision to free agricultural market committees from government regulations. With no outlet for their rabi onions, farmers had no option but to store them and wait for the strike to end. In addition, thanks to the low prices, some farmers are choosing to not bring their onions to the markets, and instead are storing them away hoping an artificial scarcity(shortage,कमी) later in the year will pay off for them.

This strategy, however, comes with its own dangers: that of the crop rotting or the onions sprouting. Malti Bodke of Bhuse village points to her rotten onions with disgust. “How long can we store them? It’s been almost four months. Once the onions start sprouting, they lose weight, and it becomes difficult to get a higher price.”

The farmers also say that the traders are colluding(plot,षड्यंत्र) to cheat them. “It’s a cartel of traders which decides the rates and once the market reopened, they ensured prices didn’t cross Rs.1,000/ql.,” says Rajaram Fafale, from Maralgoi village.

The strike gets blame for the glut. But did trade actually stop? Officials and traders seem to want consumers to believe that, but farmers say it never really stopped. Darade says that opportunistic traders discreetly(carefully,सावधानी से) approached farmers and “quoted lowest possible rates. Farmers, thinking it was better to sell, even at a low price, rather than keep them and let them rot, did sell”.

Three years ago, when the farmers were getting Rs.4,500-Rs.5,000/ql., retail onion prices reached Rs.90/kg., which resulted in protests from the then-opposition parties, as well as consumer organisations, in Delhi, Mumbai and other major cities, accusing the United Progressive Alliance government of failing to protect consumers.

The government’s first step was to increase the Minimum Export Price (MEP) to $1,150/MT. This made it difficult for Indian exporters to compete in international markets; whatever stock was available was diverted to the domestic market, which brought prices down. By March 2014, when the late kharif crop got to market, prices had dropped to less than Rs.1,000/ql. in the wholesale market, and consumers got theirs at Rs.20-Rs.25/kg.

This may have played out well for consumers, but has had other consequences(result,परिणाम) for the industry. “There is absolutely no consistency in our approach towards onion exports,” says NAFED’s Patil. A look at MEPs between December 2010 and December 2015 bears him out: the figure has fluctuated wildly, dropping to $0 in May 2012, and with a high of $1,150 in November 2013. “It only enrages our customers overseas,” says Patil. “They are left with absolutely no guarantee of quantity and price of onions exported from India. These customers have instead chosen Pakistan, China and Iran, and we have lost guaranteed markets.”

Patil says that the government’s decision to placate(calm,शांत) enraged(angry,नाराज़) urban customers has lost it both its farmers’ support and its overseas markets. The onion, he says, is no longer an agricultural commodity, it has become a political symbol.

An MSP for onions?

Assuming the government has to balance the needs of consumers with those of producers, what else could it have done to ensure that farmers get some return on their labour?

The National Horticulture Research & Development Foundation (NHRDF) keeps track of potential harvests by collecting information on each district. This year, despite being aware of the possibility of a bumper crop, the government appears to have failed to take any measures to protect farmers. The NHRDF’s estimates say the rabi onions should be selling at around Rs.818/ql., which is significantly higher than what farmers are managing to get. If the government chose to use its Price Stabilisation Fund, it could subsidise the crop, paying, say, Rs.500/ql.

What the State government has announced this week by way of relief — Rs.100 per quintal, up to a maximum of 200 quintals, or a maximum of Rs.20,000 — has, to put it mildly, failed to enthuse farmers. Every farmer The Hindu spoke to called the measure not just inadequate(insufficient,अपर्याप्त) but practically a mockery of their plight.

Fafale, who sold 10 ql. at Lasalgaon for Rs. 220/ql., or Rs 2.2/kg., greeted the news with scorn. “Now I will get one rupee more. What a relief!” he says sarcastically. “We aren’t begging in front of the government. What we are asking is our right. How does this government conclude that this much of money is sufficient as financial aid? Who advises them? Have they bothered to check the ground reality?”

One of the major demands the farmers have is for the government to introduce a Minimum Support Price (MSP) for onions, as it has for sugarcane. “Why don’t the officers understand that we are not independent and traders enjoy a free run here?” says Darade. “Unless an MSP is announced, we cannot be sure of a certain minimum profit. Why this neglect?”

Western Maharashtra, the State’s sugar belt, has seen, in recent times, sugarcane farmers agitating(incite,उत्तेजित for an increased MSP. It became an electoral issue in 2014 when the Congress and the Nationalist Congress Party (NCP) suffered major defeats in the Assembly polls in the region considered a bastion for both.

The Swabhimani Shetkari Sanghatana (SSS; its name means ‘organisation for farmers’ self-respect’), led by Raju Shetti, which was in the thick of the agitation, is now part of the State government and Shetti is an MP. While the SSS has stage limited protests in the State’s onion belt demanding an MSP, it has not been able to take the protests to a wider audience. With the Bharatiya Janata Party-Shiv Sena regime, as with the previous Congress-NCP rule, the MSP for onions issue is far from being solved.

In the village of Bhuse, Ramdas Bodke, 65, is philosophical. “I have seen many seasons and farming has never been easy. We know how to tackle nature. What do we do with man-made problems? We farmers feed the world, but now we wonder whether we will have food cooked at home.” He lapses into silence for a minute, and then his tone turns bitter: “Did the government discuss its proposal to hike MLA salaries for even a day? The government takes an instant decision to increase the salary of MLAs, but it takes a long time to decide about farmers. This is injustice. But there is no one to give justice to farmers.”

As for the urban consumers and their agitations, farmers mince no words when the topic comes up for discussion. Turning towards me, one of them asks, “You get agitated when prices skyrocket, but have you ever wondered what happens when prices hit rock bottom? Why don’t you come out on the streets demanding a fair price for us?”

courtesy:the hindu

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Something for everyone

A landmark meeting of 33 people is currently under way in New Delhi. This is the meeting of the newly constituted Goods and Services Tax (GST) Council, comprising representatives of the 29 States, two Union territories, and the Finance Minister along with his deputy. The GST Council will lay the foundation for the future of India’s cooperative federalism. Can a nation with an extremely diverse and dissimilar set of States amicably(friendly,सौहार्दपूर्ण) transition to a ‘one nation, one tax’ GST regime is the $250 billion (of indirect taxes) question.

Rainbow nation

The GST Council has a minister representing the median 30-year-old matriculation-educated Tamilian, earning roughly Rs.1.4 lakh per annum. It also has a minister representing the median 19-year-old primary school-educated Bihari earning a mere one-fourth of her fellow Tamilian. The Finance Minister of Maharashtra representing one-seventh of the entire country’s GDP will attempt to strike a fair deal on equal terms with the minister representing Sikkim with less than 1 per cent of Maharashtra’s GDP! Neither the European Union nor the United States nor even China exhibit(show,दिखाना) such stark contrasts in demographics, human development and economic parameters across their large provinces as India. In this context, this transition to a uniform GST regime is both extremely audacious(brave,साहसी) and laudable. Reconciling diverse preferences of all the member States of the GST Council to determine a uniform set of indirect taxes across the nation is a ‘Mangalyaan’ task. But it is possible to accomplish this mission by adhering(follow,अनुकरण) to some basic guiding principles. We present below a five-point thematic framework for the GST Council. But first, it is essential to remove some misplaced notions(belief,मत) around GST.

One, the revenue neutral rate (RNR) is a utopian(imaginary,काल्पनिक) chase. It is best to acknowledge that under a new GST regime, it is impossible to predict how tax collections will be in the short and longer term. It is futile(useless,व्यर्थ) to agonise(pain,व्यथा) exact rate at which there will be no loss of tax revenues for all the States.

Two, fear of loss of revenues to large States due to a lower GST rate is exaggerated(overstated,अतिशयोक्ति). Large States can also benefit from a significantly higher share of service tax revenues to their kitty under the destination-based GST regime.

Three, it is a false notion that high GST rates will not affect the poor since half of the consumption basket is not taxed. This assumption, that the government knows precisely(clearly,स्पस्थ्तया) what the poor and rich consume, is bizarre(weird,अजीब) and outdated. The government decides that regular biscuits is an ‘essential’ good and is not taxed while cream biscuits is a ‘luxury’ good that is taxed at the highest rate. Meat may be a ‘non-essential’ food item for the poorer Bihari but ‘essential’ for a richer Keralite. Given India’s stark economic diversity, there are no uniform standards for the poor across the country.

Five guiding principles

The five guiding principles for a possible consensus(agreement,सहमति) on GST:

One, forget RNR, instead guarantee a minimum for each State: States are bound to be apprehensive about potential revenue losses in this transition to a GST regime. The leaders of these States have budget commitments to keep and elections to fight. Guaranteeing the States a minimum amount of GST revenues will relieve them of the risks of tax buoyancy(boom,उछाल). Every State can be guaranteed a minimum combined GST (Central and State GST) revenues for a period of five years or a State election, whichever is earlier. This minimum revenue formula should include all of the State’s 2015-16 non-petroleum, non-sin goods indirect tax revenues.

Two, keep it small and simple: A simple and low standard GST rate should be set to incentivise tax compliance and boost overall tax collections. In order to minimise overall inflationary impact, the standard GST rate slab should be 15 per cent, equal to the current services tax rate including all cesses. There can then be a slab for low rate, a merit rate and a high de-merit rate. It is then up to the GST council to categorise goods and services into these four slabs.

We acknowledge that a guaranteed revenue stream and a minimum GST rate can be potentially hazardous(dangerous,खतरनाक) to the Centre’s fiscal situation. In the impossible trinity of keeping rates low, reimbursing States and keeping fiscal prudence, it may be worth relaxing fiscal discipline, as an investment into the future of a smooth functioning GST.

Three, no more State-specific tax incentives; increase threshold for exemption: Different States have different thresholds under which businesses are exempt from State taxes. Typically for large States, any business with an annual turnover of less than Rs.10 lakh is exempt. Since a uniform GST will remove the States’ ability to attract new businesses with tax incentives, there is an understandable fear of new job creation in the more developed States. Raising this threshold for GST exemption from the current average of Rs.10 lakh to, say, Rs.40 lakh can incentivise existing small businesses to grow faster, thereby creating new jobs. While outwardly, this may seem unfair to the smaller States, they may actually stand to gain in the longer run as this can attract larger businesses to smaller States where land and labour are ostensibly(seemingly,प्रकट रूप से) cheaper.

Four, minimal categories of exemption: Petroleum and petro products along with sin goods such as alcohol and tobacco are already exempt from the current GST law, allowing States to levy appropriate taxes on these goods. With a guaranteed minimum GST revenue for each State for a certain period and an overall low GST rate, it is in both the interest of the States and the Centre to then not allow for any more goods or services to be exempt from GST.

Five, incentivise States for GST collection: The key to a successful GST regime is increased tax revenues to States failing which it is bound to get fractious(uncontrolled,बेलगाम) in the years to come. Since GST is a destination tax concept, it is best to give each State the greater responsibility to collect both Central and State GST taxes within its State. The more the States collect, the more they get back.

It took three years post-Independence for the Constituent Assembly to draft the Constitution of India that has remained the edifice on which the Republic of India still stands firm. The GST Council has a similar weight of responsibility in cementing the economic unity of India on a seemingly shaky pluralistic foundation. It is an onerous(heavy,भारी) task that deserves debate, discussion and consensus.

Praveen Chakravarty is Senior Fellow in Political Economy, IDFC Institute. Ajit Ranade is Chief Economist, Aditya Birla Group.

courtesy:the hindu

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know your english

What is the meaning of ‘moxie’? (K Rajesh, Delhi)

First, let us deal with the pronunciation of this word. The first syllable rhymes with ‘box’, ‘fox’ and ‘pox’, and the ‘ie’ in the second sounds like the ‘i’ in ‘bit’, ‘sit’ and ‘hit’. It is pronounced ‘MOK-si’ with the stress on the first syllable. The word is mostly used in informal contexts to mean determined. A person with moxie is a fighter; he does not give up easily - no matter how often he is knocked down, he gets up. He is courageous in adversity.

Suraj showed a lot of moxie when he questioned some of the CEO’s decisions.

The girl has a lot of moxie in her. There’s no way she’s going to give up now.

The word comes from the name of a soft drink that was quite popular in the States in the early twentieth century. The advertisements claimed that the drink would ‘build up your nerve’. It is possible to buy a can of Moxie even today.

What is the difference between ‘terrified’ and ‘petrified’? (V Radhika, Madurai)

Both words suggest that you are extremely scared or frightened of something or someone; you are in a state of panic. When you are ‘terrified of’ something, you may choose to run or you may stand still because you are too scared to move. When you are petrified, you become paralysed; you stand there like a stone. You are too scared to move. The word ‘petrified’ comes from the Latin ‘petra’ meaning ‘stone’.

When they saw the tiger, the terrified villagers ran into their houses.

When the villager saw the tiger, he was petrified.

What is the meaning of ‘in the groove’? (Ajit Kumar, Vizag)

The ‘oove’ in ‘groove’ rhymes with the ‘ove’ in ‘prove’ and ‘move’. A ‘groove’ is a long, thin cut on a hard surface. For example, sliding doors and windows have grooves cut into them. They make it possible for a person to slide the door/window easily. When you say that you are ‘in the groove’, what you are suggesting is that you are doing something quite easily, without any real effort.

When Federer returns in 2017, it’ll probably take him time to get in the groove.

Anand didn’t like being a Manager at first; but now, he’s getting in the groove.

When you are bored of doing something over and over again, you say you are ‘stuck in a groove’. You have been doing the same thing for a long time and have become very set in your ways.

Anita’s job no longer excites her. She’s stuck in a groove.

Is it okay to say, ‘It’s high time you clean the motorcycle’? (M Priya, Chennai)

No, it is not. It should be ‘cleaned’ and not ‘clean’. The expression ‘high time’ is mostly used in informal contexts to mean that it is time to do something that should have been done a long time ago. In other words, you have unnecessarily delayed doing something. It’s high time Laxman bought a new car.

It’s high time that the children went to bed.

courtesy:the hindu

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Lend aggressively but responsibly

Developing countries today target high growth through investments in infrastructure, modernization and expansion of manufacturing and service facilities, and in agriculture and allied areas. At the same time, they seek to enable disadvantaged sections to upgrade their standard of living. In this, the developing countries expect financial institutions to act aggressively as well as responsibly.

The global financial structure, as it is evolving, is a technological marvel. Assets originating at the base are securitized, packaged in different forms for sale to investors all across the globe. These assets, if infected with a high probability of default, will always carry the germs of a systemic crisis. The lending agencies therefore have an enormous(large,विशाल) responsibility; while a high-growth economy offers opportunities for profits, lenders need to be (despite insistent pressures from powerful borrowers and politicians) extremely cautious and desist from taking on high-risk assets.

A good example in this regard is the subprime crisis in the US during the decade just gone by. The lending ambience was congenial(favourable,अनुकूल) : a continually rising property market, a flood of liquidity fed by an upsurge in global savings and an accommodating credit policy. The lenders had two options: low profit, low risk from sound but relatively few mortgage assets, and high profit, high risk from high risk but abundant(excessive,अत्यधिक) mortgage assets.

Lending agencies chose the second option—a choice dictated by the inexorable(harsh,कठोर) logic of a profit-driven market economy. They lured(entice,लुभाना) subprime borrowers with a slew of “innovations” to create assets at any cost: progressively relaxing margin money, dispensing with the requirement of income investigation and dismissing borrower concerns about unexpected shortfalls in their disposable incomes. All this they did, not out of any philanthropic(generous,परोपकारी) zeal but out of the urge(force,मजबूर) (given the opportunity) to make quick profits. The major premise underlying their behaviour was that if the property market collapsed, leading to a systemic crisis, the state could not but step in, as it had indeed done several times in the past.

State intervention in a crisis is a must, but the challenge before any polity is to intervene before the crisis erupts and to do so in a manner that helps the lending agencies generate a sustainable level of good assets. Such intervention must be planned and designed such that a balance is struck between the aspiration of marginal borrowers (to create and own assets) and the continued viability of lending agencies—critical for the efficiency and stability of any financial system. If we are to grapple(fight,लड़ना) with the recurring problem of non-performing assets and continue uninterruptedly with pushing social sector lending and infrastructure development, the polity has to act innovatively: There has to be a partnership, so to speak, between the state and the financial system.

But what kind of a partnership? Two points need to be made here. The plea for state participation is not to seek a return to the “loan mela” days of political patronage, to open the purse strings for subsidies, to interfere with the credit decisions of lending agencies, or to justify the oft-talked about practice of lending at political behest. This is a plea for selective public investment aimed at enhancing(increase,बढ़ाना) the viability of private sector projects and the income and employment potentials for the disadvantaged sectors.

Take housing, for instance. Our desire to have a pool of affordable houses has hardly made any headway, primarily because of the prohibitive cost of land. The state has to do some out-of-the-box thinking to clear the hurdles(problem,बाधा) in the availability of land at a reasonable price. The flow of funds from the state and the lending agencies, made available in tandem(one behind other,एक के बाद एक) and planned and targeted at select locations, should be the basis for this partnership.

A second point. Admittedly, we have to push private sector investments into different types of infrastructure projects, industry and agriculture for sustaining growth and generating employment. In this regard, a good many projects are clearly viable and remain good candidates for institutional funding, even as several others continue to inhabit the penumbra zone. Given the technological complexities and demand in today’s dynamic global economy, and with the kind of in-house skills currently available, the projects of the latter variety do not lend themselves to easy appraisal. It is also next to impossible for individual lending agencies to cost-effectively build in-house skills for the accurate evaluation of these projects. If investments in all key sectors are to be pushed aggressively, we must have special institutions with the mandate to assess these projects and to provide such critical financial assistance as can induce the lending institutions to lend appropriately to them.

We had set up development finance institutions in the early stages of our industrialization in the 1950s and early 1960s; nearly 75% of the cumulate private investment was canalized through these. However, we committed the grievous(serious,गंभीर) mistake of scrapping these institutions in the 1990s. On the other hand, China, years after it had switched over to a market economy, set up its National Development Bank in 1995; the institution is estimated to have financed over 60% of the total private investment in that country since then. Brazil is another illustrious example in this regard, while even Germany and Japan are continuing with these types of development banks.

Back home, in India, we must recognize that, without the critical support, financial and otherwise, that such national-level development finance institutions can provide, our objective of creating a sustainable level of good assets and maintaining a steady rate of growth is bound to remain hamstrung.

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One-dollar labs for the ‘citizen scientist’

Frugality(economical,कमखर्ची), crafting inexpensive knock-offs and making do with little may be the ethos(character,प्रकृति) of India’s pharmaceutical industry, its manufacturing sector and the spirit with which our scientists conduct their research but an Indian-origin bio-engineer at Stanford University has just won one of America’s grandest prizes — the MacArthur ‘Genius’ grant — worth Rs.4 crore for designing a $1 microscope.

Towards do-it-yourself science

Manu Prakash from Rampur, Uttar Pradesh and an engineer from the Indian Institute of Technology, Kanpur, has made a name for fashioning ingenious(simple,सरल) devices that make the essence of science — observation and experiments — accessible to those who can’t afford expensive instruments.

His best-known is the ‘Foldscope’, a microscope that can be fashioned out of paper that comes pre-fixed like in a jigsaw puzzle set. Most of these kits have been distributed free so far and the aim is to have it cost less than a dollar. The kits come with a glass slide that can be slipped into the do-it-yourself microscope and can be used to check for microbes in a soil or water sample, closely observe the anatomy of a water lily or the striations of an earthworm.

Another of his inventions, according to a press statement from the MacArthur Foundation, is a sticker-like microfluid chip that can be used to collect thousands of nanolitre-sized droplets of saliva from mosquito bites in order to test for pathogens. Dr. Prakash also recently demonstrated a novel diagnostic tool, a “water computer”, which involves building a computer out of tiny(small,छोटा) air bubbles travelling in a microfluidic channel.

India has been an early adopter of his devices. The Department of Biotechnology (DBT) has signed a Rs.1.5-crore agreement with the Prakash Lab at Stanford University to procure 10,000 Foldscopes that could then be given to schools, colleges, forest field officers and help encourage an interest in field observation and research. Already workshops with schools, students and colleges in Delhi, Guwahati and Kaziranga (Assam) have enthused students and teachers, says Shailja Gupta, a DBT official who coordinates the Foldscope programme. “I’ve used it, my daughter likes it. The charm of the device is that anyone can use it to see their surroundings differently… the microbes on your food for instance,” she says.

Earlier this year, Dr. Prakash’s lab came up with a new device that modifies a child’s toy, whirligig, into a device called a ‘paperfuge’ that — he and his colleagues claimed in a June research paper — could be used to “isolate malaria parasites in 15 minutes from whole human blood”. The device can be used to separate pure plasma in less than 90 seconds.

Just what India needs

Expanding the materials used could mean new kinds of devices that don’t need electricity to develop point-of-care diagnostics, especially in resource-poor settings, the paper added. India accounts for over 17 per cent of the world’s population while spending less than 1 per cent of the world’s total health expenditure.

The healthcare expenditure stands at 4.1 per cent of its GDP, which is among the lowest in the world, and dealing with challenges like these requires affordable interventions, something that both public and private healthcare experts have repeatedly emphasised through the years. “If there were more devices like Prakash’s, there’d be uses for them that we can’t yet envisage(imagine,विचारना),” says Ms. Gupta, adding, “We are exploring options like a manufacturing facility to scale up these devices.”

Dr. Prakash’s approach to engineering allows a wider range of professionals to become so-called ‘citizen scientists’ and bring new facts about nature and solutions to technical problems to the fore. The Foldscope allows images of samples to be relayed via an app to a central site that stores information, about an intriguing(fascinating,लुभावना) microbe or a new earthworm or the beginnings of a new plant infection from a place that may be otherwise inaccessible to scientists.

“It certainly isn’t a replacement for the lab microscope,” says Vibha Narang, coordinator of the Botany Department, Atma Ram Sanatan Dharma College, Delhi, “but we saw a lot of fervor(enthusiasm,उत्साह) among school students.”

Her college was part of a workshop organised by the DBT and Dr. Prakash to explain the Foldscope. “But for collecting samples during a field trip or a quick survey, I think this is a very handy device,” she adds.

courtesy:the hindu

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Railway Budget, a vanishing trick

So finally, the almost century-old practice of presenting a separate Railway Budget ahead of the General Budget is to be dispensed with from the next financial year (2017-18), and the Railway Budget “merged” with the General Budget. The Union Cabinet has just cleared the proposal.

What are the reported reasons for this merger? According to earlier media reports, a separate Railway Budget is being dispensed with so that the Indian Railways need not pay the annual dividend to the Government of India on the budgetary support given each year, saving the financially stressed Railways about Rs.10,000 crore annually; over the years, the Budget has been misused by politicians as a populist platform to enhance(increase,बढ़ाना) their own image; no other Ministry has a separate budget and the practice exists in no other country today; the Bibek Debroy Committee has recommended discontinuance of a separate Rail Budget and it is part of the Prime Minister’s reform programme. Besides, it is a colonial legacy.

A point particularly stressed by the Finance Minister in the press conference announcing the Cabinet decision was that the Railways’ share in the General Budget has progressively reduced over the years, making a separate budget an anachronism.

Each of these “reasons” does not present the true or complete picture. It is necessary to separate fact from fiction.

It is a review

There have been sporadic(periodic,छिटपुट) calls in the past for doing away with a separate Railway Budget for various reasons, but the matter was never pursued seriously. One of the more publicised reasons is that it will free the Railways of the obligation of paying the annual dividend, as mentioned earlier. This is only partly true. The dividend is paid not only on the budgetary support extended during a year but also on the total “capital at charge” which includes the gross budgetary support (GBS) of previous years. By this merger, a “loan-in-perpetuity” is converted to a grant. Shorn of officialese, it is a loan waiver; and loan waivers are granted to individuals or institutions in extreme financial distress — something not to go to town about.

In popular imagination, the Railway Budget was seen as a grand spectacle, with the Railway Minister using it as a platform for populism and political grandstanding. What is not appreciated is that the Budget is not merely a statement of allotment of funds to various projects and programmes, unlike other ministries, but comprises a fairly detailed performance review, physical and financial, of the previous year and prospects for the current (Budget) year. Perhaps nowhere in the world is a political functionary called upon to present a financial report card of the country’s largest public undertaking in the full glare of publicity. A separate post-Budget discussion in Parliament on the Railways, as indicated by the Finance Minister, is no substitute, as the focus most likely will be on allotments to various projects, not on financial performance.

Talking of populism, the recent announcement by the Finance Minister of the proposal to set up a new Railway zone to placate(calm,तसल्ली) a State government as part of a “special package” is proof that it is possible to be “populist” outside a separate budget.

Why should there be a separate budget for the Railways? The fact is that the Railways is indeed unlike any other Central ministry in size and scope: It is an operational ministry; it earns as well as spends, unlike other ministries that only spend. Its gross earnings (Rs.1.68 lakh crore in 2015-16) are among the highest for any Indian organisation, public or private; it has a staff strength (13.2 lakh) that exceeds that of the Indian Army; it fully meets the pension liabilities of its retired employees (13.8 lakh) out of its own earnings unlike other ministries; it follows an accounting practice, though not up to the standards of a purely commercial establishment, that has a number of features of a commercially-run organisation. So, if the Railways is to be treated like other ministries, will the government also fund its pension liabilities which are estimated to be about Rs.45,500 crore in 2016-17? That should be some “savings” indeed!

Part of a package

Perhaps the most misquoted reason given for the merger is that the Bibek Debroy Committee has recommended it. That is being economical with the facts. The committee has recommended it not as a stand-alone step, but as part of a slew of measures such as: complete overhaul of the project financing architecture of the Railways involving ruthless weeding out of unviable/long-pending projects; comprehensive accounting reforms; separation of infrastructure and operations; and setting up of a rail regulatory authority. Pending these steps, each of which is a major project in itself (some politically sensitive), the move to give a hasty send-off to the Railway Budget is perplexing(baffling,हैरान करने वाला).

The Railway Budget is indeed a colonial legacy; but so are English, the Railways, Rashtrapati Bhavan and the sedition law. Enough said. All this is not to say that the Railway Budget is a holy cow that cannot be touched. Far from it. The question is not “why”, but “why such a hurry to bury it”?

The answer, in one word: Obfuscation(anxiety,घबराहट). By all accounts, the Railways’ financial position is precarious(uncertain,अनिश्चित) due to the triple whammy of a fall in revenues, a sudden spike in expenditure due to implementation recommendations of the Seventh Pay Commission, and an increasingly unsustainable interest burden on market borrowings. A separate Budget would have meant having to openly declare an operating ratio in excess of 1.0 (in layman’s language, that means one is living beyond one’s means): not a very good advertisement for a system that aspires to have high-speed tilting Talgo trains shortly and Bullet trains in the not-too-distant future. So why not banish and “vanish” the Railway Budget into anonymity as one of the myriad(infinite,असंख्य) annexures in the General Budget and earn a fat “bonus” of about Rs.10,000 crore in the bargain? A smart move indeed! It seems now the Budget is more valuable dead than alive. However, what should be a matter of serious concern to the aam aadmi is that the Railways’ finances are sought to be shored up, not by improving efficiency, increasing revenues and cutting costs, but through a dexterous(skillful,कुशल) bureaucratic sleight of hand, taking cover behind the smokescreen of “reforms”.

Finally, a suggestion to the government: Do not throw the baby out with the bathwater; table an annual “Indian Railways Report” in Parliament on the lines of the Economic Survey prepared by the Chief Economic Advisor under the Ministry of Finance. That will signal reforms with transparency.

courtesy:the hindu

click here for official link

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