The Hindu: October 8, 2015 02:29 IST
Dealing with black money
The worth of the new, stringent law against Indians stashing away unaccounted money in foreign destinations cannot be judged by the quantum of assets disclosed within the compliance window that ended on September 30. Assets worth Rs. 4,147 crore, yielding tax to the tune of Rs.2,488 crore, were disclosed within the deadline. If one believes that fabulous sums lie in safe havens abroad, untouched by Indian law, theamount may seem woefully inadequate. On the other hand, if one believes that much of the black money resides comfortably in India, and undisclosed income in foreign countries represent only a small fraction of the total, it may seem a significant disclosure. In any case, the figure falls short of the Rs. 6,500 crore cited by Prime Minister Narendra Modi in his Independence Day address. The stage is now set for the provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to be invoked against defaulters who failed to make use of the compliance window. The true test of the efficacy of the enactment will be two-fold: in its ability to deter any further flight of money to offshore destinations in the belief that tax can be evaded that way, and in the rigour with which investigation and prosecution are pursued against those who still hold assets abroad. Any undisclosed foreign income that is detected will henceforth attract tax at the rate of 30 per cent, a penalty of 90 per cent and a 10-year prison term. With new arrangements in place to share tax-related information among many countries, this will surely have some deterrence value.
However, what ought to be of concern to the public is a fact that Finance Minister Arun Jaitley has also highlighted: the bulk of the black money is within India. A confidential report by the National Institute of Public Finance and Policy on the true extent of India's parallel economy quantified it in 2013 at 75 per cent of GDP. The black economy is powered mainly by the higher education, real estate and mining sectors. The report had spoken of capitation fees contributing Rs. 5,953 crore to the black money component in a particular year, while real estate transactions could have generated Rs. 5,68,879 crore. In recent times, letting money idle in tax havens, which offer safety and confidentiality but not much by way of interest income, is no more the norm. Assets held abroad find their way back to India as investments in business and participatory notes in the market. The real challenge is in having a regulatory regime that promotes tax compliance and income disclosure. Preventing black money accumulation may be more important than even unearthing it.
Equivalent in value to the sum or item specified.
(of regulations, requirements, or conditions) strict, precise, and exacting.
Store (something) safely and secretly in a specified place.
The action or fact of complying with a wish or command.
Deplorably: in an unfortunate or deplorable manner; "he was sadly neglected"; "it was woefully inadequate
Cite or appeal to (someone or something) as an authority for an action or in support of an argument.
The ability to produce a desired or intended result
The process of passing legislation.
Discourage (someone) from doing something, typically by instilling doubt or fear of the consequences.
The quality of being extremely thorough, exhaustive, or accurate
The payment of a fee or grant to a doctor, school, or other person or body providing services to a number of people, such that the amount paid is determined by the number of patients, students, or customers
Find (something) in the ground by digging
The Hindu: October 8, 2015 02:34 IST
Getting down to business
Chancellor Angela Merkel's visit to India and her meetings with Prime Minister Narendra Modi represented a much-needed dosis realitaet, or "dose of reality", for both India and Germany. The fact that Ms. Merkel came to India despite a brewing refugee crisis back home that kept both her Economy Minister and Defence Minister back in Berlin, shows the importance that she accords to the relationship. Mr. Modi, during his third meeting with Ms. Merkel in six months, demonstrated that he sees Germany as an important partner in trade, a provider of technology and means to clean energy, and as a partner on the UN stage. Their meetings in Delhi and Bengaluru were, however, shorn of the kind of pomp, splendour, and joint photo-ops that were the hallmarks of other bilaterals. This was for a reason: both countries seem to have realised it is time to get down to business.
As a result, Ms. Merkel spoke candidly of the problems that German businesses have faced in operating in India, and hoped that the new agreement for a special "fast-track" mechanism would help them secure licences and clearances expeditiously. For his part, Mr. Modi must be lauded for a grounded speech in Bengaluru, telling the Chancellor what India hopes to become, rather than making any bombastic claims on where the Indian economy has reached. "We're committed to doing everything possible to convert these analyses into reality," the Prime Minister said about the recent positive prognoses from the International Monetary Fund and the World Economic Forum about India. He listed 11 initiatives taken in order to achieve the immediate priorities of improving India's ease-of-doing-business ranking, make a push to take manufacturing to 25 per cent of GDP in order to increase jobs, and for investment. Ms. Merkel's response has been welcoming of the sentiments, but watchful of delivery before making any big commitments. Even the German announcements of €1 billion towards solar energy and a like sum for clean energy constitute a fraction of India's requirements, given the decision to increase renewable energy capacity four-fold to 175 GW, for which India has told the UN Framework Convention on Climate Change it needs $2.5 trillion by 2030. The realism was particularly welcome when it came to the Joint Declaration on Intent on education: both reversed earlier positions on language studies, to ensure that modern Indian languages would be available to German students while Indian students would continue to be able to opt for German, without giving up Sanskrit. It is to be hoped that the template of the visit is an indicator of the future: of a government transitioning from the euphoria and excitement of its bilateral forays in its first year, getting down to brass tacks in the second.
· get down to business
› to start talking about the subject to be discussed:
If the introductions are over I'd like to get down to business.
Make (beer) by soaking, boiling, and fermentation
Give or grant someone (power, status, or recognition)
Cut the wool off (a sheep or other animal).
Magnificent and splendid appearance; grandeur.
Honestly: (used as intensives reflecting the speaker's attitude) it is sincerely the case that; "honestly, I don't believe it"; "candidly, I think she doesn't have a conscience"; "frankly, my dear, I don't give a damn"
Efficiently: with efficiency; in an efficient manner; "he functions efficiently"
Praise (a person or their achievements) highly, especially in a public context.
The likely course of a disease or ailment.
A shaped piece of metal, wood, card, plastic, or other material used as a pattern for processes such as painting, cutting out, shaping, or drilling.
A feeling or state of intense excitement and happiness.
A sudden attack or incursion into enemy territory, especially to obtain something; a raid.
· get down to brass tacks
› to start talking about the most important or basic facts of a situation:
Let's get down to brass tacks. Who's paying for all this?
Deepening financial markets
RBI must assess both risks and benefits of its recent moves
Coverage of last week's monetary policy announcement by the Reserve Bank of India (RBI) paid attention almost entirely to the higher than expected reduction in the repo rate. However, this statement also contained the bi-annual Part B of the monetary policy review, announcing regulatory and developmental measures relating to banking, financial markets and other domains in the RBI's jurisdiction. Of particular significance were several measures relating to foreign portfolio investment (FPI) in government securities, the freedom for Indian corporate groups to issue rupee-denominated bonds offshore, and an expansion of the list of eligible participants in the currency markets, both in exchange-traded and over-the-counter (OTC) products. On FPI investments, ceilings on FPI will now be set as a percentage of the outstanding stock of securities (five per cent), which should, according to the RBI, increase in stages the permissible amount by almost 80 per cent in rupee terms over the next three years. FPI will also be allowed into state development loans, with limits being increased over three years. As regards the currency market, registered primary dealers will be allowed to participate in the currency futures market, while the ceiling on hedging through OTC products through self-declaration by eligible resident entities has been raised significantly.
All these measures can be seen as significant steps down the road to full convertibility. Some of them also have implications for a broader financial market development framework. For example, higher FPI limits for investment in government securities bring another source of demand into the market at a time when banks are being gradually weaned away from the protection of mark-to-market exemptions on their Statutory Liquidity Ratio (SLR) portfolios. This will push them to trade these securities more actively; but, without incremental demand, potential price declines may deter trade. More FPI presence will certainly help in the short term. On the issuance of offshore rupee bonds, clearly, the borrowers will now be buffered from exchange rate risks, which the lenders will have to bear.
However, even as they explore the many benefits, direct and indirect, from greater convertibility and a broader market framework, policymakers must also naturally be conscious about the risks, which were brought into sharp focus after the financial crisis of 2008-09. First, India, like most countries, is experiencing what may be a prolonged decline in export earnings. Fortunately, soft commodity prices have nevertheless helped take the current account deficit (CAD) into a relatively safe zone. But declining exports do carry the threat of a sudden reversal in an unquestionably risky global environment. Second, if foreign lenders are to hedge their rupee exposures, the easiest place to do it now is the unregulated non-deliverable forward (NDF) market, which is both cheap and global. Greater activity in this market could pose some threats for an orderly onshore currency market. On the first issue, while the narrow CAD does provide an opportunity, vigilance and the will to act should the situation turn are necessary. On the second, in keeping with the direction of change in the currency market framework, every incentive must be given to lenders to hedge their currency risks on regulated markets, preferably Indian markets. Full capital convertibility has been a long-standing aspiration of the Indian policy establishment. As the economy moves inevitably towards it, policymakers must constantly assess benefits and risks.
› to cause a baby or young animal to stop feeding on its mother's milk and to start eating other food, especially solid food, instead:
The studies were carried out on calves that had been weaned at five weeks of age.
Lessen or moderate the impact of (something)
Continuing for a long time or longer than usual; lengthy.
The action or state of keeping careful watch for possible danger or difficulties
Evaluate or estimate the nature, ability, or quality of.
What's in a number
Lack of transparency and accuracy on the direct benefit transfer scheme could end up undermining its efficacy.On September 30, the International Institute for Sustainable Development released a study that asserted that the Central government's claim of saving Rs 12,700 crore in 2014-15 on account of the direct benefit transfer (DBT) scheme in LPG (or Pahal) was a large overestimation. The actual savings, according to the IISD, were just one per cent of the government's claim. IISD's calculations were based on publicly available information about the number of districts covered, extent of under-recoveries (or subsidy per cylinder of gas), proportion of bogus or fake accounts, etc. But even after assuming the most optimistic scenario, the maximum savings possible were pegged at just Rs 143 crore. This was in stark contrast to the much bigger number that had been widely reported in the past. Chief Economic Advisor Arvind Subramanian's office has accepted that the Rs 12,700 crore figure does not pertain to 2014-15.
Several reports have detailed how direct benefits or cash transfers can reduce the massive leakages that plague India's social-sector spending. The misleading claim on the amount of money saved, therefore, could turn out to be an own-goal, undermining a much-needed reform. Of course, there are many who doubt the merits of a shift towards a DBT regime. Some key concerns relate to the inadequacy of systems in place to make such a reform work. If the DBT scheme is launched without due diligence, the argument goes, it would lead to a lot of people being excluded by design. The failed pilots in Kotkasim (Rajasthan) and Puducherry are repeatedly pointed to. In May 2014, even the S.G. Dhande Committee that looked into the DBT for LPG said that "the speed at which it was rolled out and the inclusion of low Aadhaar districts gave rise to consumer grievances".
This misstep by the government may have given ammunition to those who oppose the reform. But it must be underlined that if properly implemented, the scheme will not only bring significant savings for the national exchequer but also make it possible to target the intended beneficiary. Building a consensus for reform in India has been a tough task. The DBT is one reform that enjoys considerable public acceptance. The government should ensure this trust is not breached. Maintaining transparency would be a good first step.
Erode the base or foundation of (a rock formation).
State a fact or belief confidently and forcefully.
Fix or make fast with a peg or pegs
Careful and persistent work or effort.
A supply or quantity of bullets and shells.
Make a gap in and break through (a wall, barrier, or defense).
Oct 08 2015 : The Times of India (Ahmedabad)
Aadhaar has clear benefits. It must be backed by legislation that guards privacy
It's status quo for the Aadhaar scheme, as the Supreme Court continued to confine its applications to the public distribution scheme and the LPG and kerosene subsidies. Earlier, it had decided that a larger constitutional bench would decide on the question of whether privacy was a fundamental right. Aadhaar's fate rests on that decision too.
The Centre, along with a host of institutions including the Sebi, RBI, LIC, Trai, and income tax department had appealed for the restriction to be lifted, claiming that the biometric ID system was the more precise way to get social entitlements across, and that it was a purely voluntary transaction. Since its inception, the unique ID plan has faced resistance from several quarters, chiefly privacy activists who claim that the poor should not have to forego their right to privacy in order to access welfare benefits that they need. Conceived by the UPA as the enabling architecture for all social provisions, the scheme had been forced to roll out as an executive order, and finally , the Supreme Court had declared that it could not be mandatory .
The upside of Aadhaar is clear it is meant to avoid duplication and ghost beneficiaries, and therefore minimise leakage, and keep public spending honest and accurate. This is a clear problem for instance, according to the 2011census, there are only 21million households in Andhra Pradesh, but there are 24.5 million ration cards. Instead of claiming that the poor would willingly waive their rights to privacy in exchange for social benefits, the government should address these concerns.Setbacks are inevitable in the absence of legislation underpinning the UIDAI. The courts will continue to be the arbiters of its mandate, extending it to this and disallowing that, unless the government makes a convincing case for it and enacts a solid law that guarantees privacy
· status quo
› the present situation or condition:
Are you in favor of statehood, independence, or the status quo for Puerto Rico?
Become pregnant with (a child).
Required by law or rules; compulsoryman·da·to·ry
Required by law or rules; compulsory
Make (a bill or other proposal) law.
Oct 08 2015 : The Economic Times (Mumbai)
Railways as New Growth
Locomotive Reforms are beginning to show results At a time when public investment is sorely needed to crowd in reluctant private investment, it is welcome to note that the Railways is rising to the challenge. It is coagulating capital on a scale far in excess of what would be possible purely on the strength of support from the general Budget, lowering its operational costs, restructuring the decision-making process to make it faster and setting up a regulator to ensure fair treatment of private partners as they deal with the behemoth. The Railways' job is to be a vital component of globalising India's transport infrastructure. Investing in itself to realise this goal also drives India's growth. The goal to invest ` . 8.5 lakh crore over the next five years is ambitious but needed, to add and improve the quality of rolling stock, upgrade signalling and increase capacity along the routes that offer maximum revenue potential. The Railways is raising resources in innovative ways: foreign direct investment in new-age locomotives and coaches, long-term, surprisingly low cost debt from the Life Insurance Cor poration, leveraging railway land aro und stations to develop commercial real estate via private sector partners, and setting up new corporations for new projects. It is also developing pro jects for rail connectivity to many ports and mines. Strikingly , 17 states have agreed to set up special purpose vehicles to undertake projects, raising debt several times its equity to carry out investment. The Railways expects large-scale procurement orders from the enterprises it owns to enhance the value of these companies that can be discovered by stake sales and listing, leading to larger mobilisation of debt for investment.This amounts to corporatisation of the Railways by the backdoor, without much resistance from the unions. The Railways is aggressively moving to lower its fuel costs. The long-term strategy is electrification, while the short-term one is to become a licensee that can buy power directly from generation companies such as the Ratnagiri Gas and Power, which will sell it power at ` . 5 a unit, while the Railways pays ` . 7 a unit. Way to go!
To a very high degree or level of intensity (especially of an unwelcome or unpleasant state or emotion)
Unwilling and hesitant; disinclined.
(of a fluid, especially blood) change to a solid or semisolid state.
A huge or monstrous creature.
view on Turkey: the EU's ambivalent partner
turkey has always had the potential to be at the diplomatic heart of the Syrian crisis. This week Turkey's moment arrived; and it is set to continue. On Monday President Recep Tayyip Erdoğan held talks in Brussels with EU leaders intent on enlisting his help in controlling the refugee crisis. More talks are due on Thursday in Luxembourg at an EU meeting with representatives from eastern Mediterranean countries and the western Balkans. These are meetings with extremely wide implications.
Turkey's centrality is hardly a surprise. It is, if nothing else, a key transit country for those fleeing war and persecution in Syria and Iraq. It is, equally, a Nato member on the frontline of key Middle Eastern conflicts. Moreover, a few days into Russia's air campaign over Syria, Russian Sukhoi fighter planes violated Turkey's airspace. The daunting complexities of the Syrian crisis are now compounded by a fresh security conundrum – the sudden outbreak of Turkish-Russian tensions of the sort that Lord Palmerston would have recognised. Mr Erdoğan is a strong opponent of the Syrian regime, and he regards the Americans as having wavered dangerously – and thus, in the end, of having encouraged the Russian moves.
The EU has obvious reasons to turn to Mr Erdoğan for cooperation on the refugee issue, but it may find it has limited leverage. Consolidating the EU's external borders is hardly possible without Turkish help, which is why joint Greek-Turkish patrols in the Mediterranean are under consideration. But, rightly or wrongly, the Turkish leader now feels he is negotiating from a position of strength, and has made this understood. But Mr Erdoğan is also on the campaign trail for the 1 November general election, in the hope that his AK party will achieve the majority it failed to secure earlier in the year.
Turkey can claim some moral authority on the refugee issue. It opened its borders after the Syrian civil war erupted in 2011. Mr Erdoğan can point out that Turkey (population: 75 million) has taken in 10 times more refugees than the EU (population: 510 million). He is not impressed with the way European and American leaders have avoided committing to the kind of "safe zones" that he has long called for – protected areas inside Syria, along the Turkish border.
Mr Erdoğan's calculation is that EU beggars can't be choosers. His cooperation will come at a price, and that price is a better deal for Turkey in relations with Europe. Donald Tusk, president of the European council, has announced the creation of a joint EU-Turkish taskforce, but so far there is little to show. Last month the EU committed to more than €1bn in aid for Syria's neighbours. The hope is now to get the Turks to accept EU "hotspots", where asylum applications could be handled, but there are few signs that Turkey will oblige without some larger EU gestures, such as a commitment to take in half a million more refugees, or to lift visa requirements for Turkish citizens.
Resetting the EU's relations with Turkey makes sense, but this kind of negotiation is full of risk. Mr Erdoğan is an increasingly confrontational potential partner. The Syrian crisis means that the Europeans and the Turks must work more together. But in the long term, diplomacy will only achieve results as part of a wider reassessment of Europe's relations with all its neighbours based on clear and consistent principles.
This article was amended on 7 October 2015. It mistakenly described Mr Erdoğan as the prime minister of Turkey. He is the president. This has been corrected.
A mark or a series of signs or objects left behind by the passage of someone or something.
The protection granted by a nation to someone who has left their native country as a political refugee.