Tuesday, November 29, 2016

The Ramayana And The Mahabharata Are Alive And Well In Bali


The Ramayana And Mahabharata Are Alive And Well In Bali

Skill is only a rumour, until it reaches the muscle- Balinese proverb

Bali, a sub- tropical Indonesian island in the southern hemisphere, conjures up an air of  idyllic, ancient mystique, reaching back in time for its wellsprings.  

While forming part of the Dutch East Indies, it was fabled in the colonial world, for its beautiful bare-breasted women. There are myriad representations of those proud breasts, expressive eyes, hand mudras,  svelte bodies swaying to lute-like music.
This alluring image was progressed considerably by 19th century European painters and artists, adventurers who landed in Javanese Malang, or Balinese Denpasar, after the Dutch invasion of 1906.

Many stayed on, marrying their Balinese muses, immortalising their beauty, extolling the virtues of the simple way of life.

And there was also the hit Broadway musical South Pacific, with its Rodgers and Hammerstein composed show-tune Bali Hai –the mystical but unreachable island on the horizon.

This Bali Hai had nothing at all to do with the Indonesian island of Bali, but it didn’t stop it being associated; and for the thousand restaurants, spas, and cocktail bars it spawned around the globe, all using the name.

And then there was the famous Dutch woman, an adoptive Balinese who learned its dance techniques, and captured the imagination of the world. And whose varying legend spawned a host of movies and plays, over the years since World War 1.

Mata Hari,(Eye of the Dawn), with her invented Hindu princess back-story,indu PrinessHind went from captivating young woman in the Netherlands, to promiscuous wife and mother in the Dutch East Indies.

And later still, after her divorce, she became an exotic dancer in Paris, then a courtesan turned enigmatic spy and double-agent, between France and Germany.

She was, in the end, allegedly scapegoated and betrayed by her friends in high places, including the heir to the Kaiser; and eventually executed at 41, by the French.

Mata Hari’s highly publicised career as a femme fatale and its denouement, only added poignancy to her association with the ‘Great War to end all Wars’, and furthered curiosity about Bali.

Today, Indonesia is vibrantly independent, and the Ramayana and the Mahabharata are alive and well in Bali.

The epics, on the shelf in India, are unabashedly read and idealised there. They are known, reverentially regarded, but form part of the common folklore too.
This, alongside Hindi films and serials from far away India, and swarms of Bintang (Balinese beer) swilling Australian tourists, from just 3 to 5 hours flight-time away.

The Balinese ability to carve fluidly in stone, wood, bronze, and cement, and conceptualise wonderful painted and rendered shapes and figures, is evident in the profusion of the island’s statues. They are everywhere, at forks, bends, crossroads, roundabouts, in front of banks, malls, and in foyers.

They are all, without exception, beautifully executed, idolised, but not quite idols for worship, of Arjuna with his bow, tableaux of events from the epics, ascetics, rishis, gods, demons, asuras, apsaras, devis.

And of course, Shiva, Ganesh, Garuda, Jatayu, Vishnu, Rama, Hanuman- also Chinese and Indian Buddhas, plus a profusion of happy animals and creatures, pigs, dogs, snakes, birds, frogs. Mythology, and good luck symbols abound, and big trees wear  chequered sarongs and boast tiny altars.

Balinese Hinduism is called Agama Hindu Dharma, originally from neighbouring Java and Sumatra, from where a number of the local people also hail. It is a blend of Shivaism, Buddhism and an exuberant animism.

It incorporates nature in its ambit, ancestor worship or Pitru Paksha, not just during the fortnight of Shradh, as in India, but daily, throughout the year, with offerings outside every home and place of work – put out fresh  - flowers, food, drink, joss sticks, even cigarettes.

In Bali, people are proud of declaring they are Hindu, and 83% are, though they make up only 1.7% of the overwhelmingly Muslim population of Indonesia. 

There is a tolerance for others in the air, but no diffidence about the broad religious beliefs.  There is beef and pork consumed on the island without any fuss.

But, the Bali practice of Hinduism is very distinct from its Indian or even Nepalese versions. There is a sparseness and symbolism to Balinese ritual, instead of the din and majesty of most Indian Hindu worship.

Funerals are an exception however, with as much pageantry and noise made at the farewell, as might herald a birth or marriage here in India.

Balinese temples have carved, gated, and walled-in compounds, with a number of high altars at comfortable spacing, and almost always a large roofed, but not walled-in hall space, for gatherings and throngs, such as they are.

Balinese homes too, follow the same inside-outside villa ambience, with their temple altars, often gilded, in an inner courtyard, clusters of rooms, ranging up half levels, opening on to verandahs, and gardens; in all four directions around the compound.

Entrance gates are invariably elaborate edifices, assigning status, and also designed to keep out evil spirits. They have two or three ascending steps to a short portico facing a wall, with exits left and right via a couple of steps, presumably because evil spirits cannot make turns at right angles.

And almost invariably, a large statue of a seated Ganesha, in the garden just behind, with fountains, flowing water and Koi fish; before the rooms sloping off behind this arrangement, again to the right and left of the courtyard.

It is like a Balinese version of imagined patrician Roman villas, not necessarily as grand, but not possible to sniff at either.

But, Islamic fundamentalist tendencies are fomenting in Indonesia and Malaysia, with ISIS-like overtones. There are reports, and the long held moderation is under increasing pressure from a radicalised groundswell.  

Knots of flag carrying, bandana- wearing motorcyclists, speed off to rallies in Bali too, the sinister looking riot control armoured vans trundling forward in their wake.

The tattoos on the young folk, both local and foreign, are of bamboo stalks and leaves, betraying a yearning for minimalism perhaps. There are no power symbols being etched.

And modish Vaping bars have begun to open up throughout the island, with cliques of people enshrouded in pleasant nicotinised smells in their effort to give up tobacco use.

The  grand beach at tourist hub Kuta, has surfers as always, but the nightclubs no longer have  gangland pushers selling psychotropic drugs and whores.

There is a memorial to the 202 people killed in the Bali bombing of 2002, by Bin Laden inspired extremists Jemaah Islamiyah, opposite  the since demolished nightclub it struck in Kuta.

But, like trouble in paradise designed to keep the scantily clad Western tourists away, there have been bombings since too, There were a series of car bombs in 2005, both at neighbouring Jimbaran and Kuta again, killing 20, injuring 200.

Even in 2016, Indonesian police have reportedly thwarted a new plot connected with elements in Syria.

However, the police in Bali, never fond of being intrusive or serious for too long, prefer escorting rallies of Lamborghini super cars or Harley Davidson motorcycles.

As they vroom by, you can see, some of the jack boot clad, trying to keep up, senior officers themselves, grinning on BMW police issue motorbikes, hunching forward in concentration.

For: The Sunday Guardian
(1,198 words)
November 29th, 2016
Gautam Mukherjee


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Monday, November 28, 2016

Trumponomics:How To Make America Great Again?

Trumponomics: How To Make America Great Again?

The presidency of Donald Trump, the first Republican businessman-billionaire POTUS since Democrat JFK, is being welcomed. The US dollar, global fund flows into America, the US stock market indices, have all strengthened in anticipation.

Conversely, the left-liberal democracies of Europe, used to American subsidies and bank credits, are apprehensive.

Trump is expected to use his developed business sense to negotiate better deals for the US irrespective of their political correctness.   

Trump wants to reclaim the low-end manufacturing jobs, outsourced mainly to China, righting a severely askew balance of payments in the process. He might however, given the advance of robotics in assembly lines, end up exporting American robots to increasingly higher wage China instead!

He also wants to stop the outflow of trillions of dollars to service military pacts, reversing much of the obsolete Cold War thinking.

Trump will recast priorities, and renegotiate special relationships, terms, and treaties, into bilaterals; so that the rest of the ‘allied’ world, pays for the bulk of its own military needs henceforth.

The strategic fact that America is now energy self-sufficient in petroleum, with exportable surpluses, has also freed it from certain compulsions.

India has come a long way from its unable-to-feed-itself  1950s and 1960s, to routine food surplus, despite a quadrupled population. And, happily, it falls on the right side of America’s geopolitical divide, particularly with reference to Pakistan sponsored terrorism, and China’s hegemon tendencies.

 India, the fastest growing major economy, needs no aid. It not only services its sovereign economic obligations, but pays for every rupee of its hungry military machine, en route to a comprehensive upgrade.

But even as Trump plans to reorient American policy along more nationalist lines, when did America the global superpower begin its march?

It was with the Monroe Doctrine of 1823, that America first demarcated a sphere of influence, and warned others to keep off it.  It ushered in the ‘American backyard’ concept, with regard to Latin America, even though Trump’s euphemistic ‘wall’ now proposes to block out illegal Mexican immigration.

The Monroe Doctrine, not only put paid to Spain and Portugal’s ambitions in Latin America, but also warned off imperial Britain.

The next big move, signalling the subordination of Europe, was the Marshall Plan of 1948. The USSR however, refused the help for itself and its communist allies, to kick off the Cold War.

 Still, America gave $ 12 billion, worth ten times the figure in today’s money, to rebuild Europe.

Soon after, in 1949, the security alliance called the North Atlantic Treaty Organisation (NATO), was born, to combat Communism, in what later became the Warsaw Pact countries.

ANZUS, a similar security treaty with Australia and New Zealand for the Pacific Ocean region, came in 1951. As did another, with Japan, also in the same year.
Other more recent protective treaties, with Pakistan, spawned during the American battle to oust the Soviet Union from Afghanistan, and Saudi Arabia, after America was expelled from Iran, and because of its then dependence on imported oil - may well have run their course. 

The US-Pakistan relationship, with its $ 33 billion in aid alone, paid out by the Obama administration, may be downgraded now.

Trump could stop the aid, and hold Pakistan’s feet to the fire on the issue of terrorism and nuclear weapons proliferation too.

Pakistan meanwhile, has been shifting ground, via its $ 46 billion China Pakistan Economic Corridor (CPEC), and its extensive port infrastructure at Gwadur. It is also wooing Russia and Iran to join the CPEC, instead of the India-Japan-Iran backed alternate, at neighbouring Chabahar.

Meanwhile, NATO, grown to include 28 member states, spent $ 866,971 million in 2015.  But how relevant is it, when the US involvement in the Vietnam War of the 1970s was probably the last gasp of globalised Communism? After all, NATO was used just once, as a fig leaf, after 9/11.

The new threat is certainly from global Islamic terrorism, and Chinese imperial assertion, rather than its communism.

Coming full circle, there are signs of an unprecedented understanding between Russia’s Putin, and America’s Trump.

India will benefit from America’s strategic compulsions under Trump. This will provide greater access to US military weaponry, technology, and intelligence.

The IT activity however, will not only have to meet the challenge of robotics, but probably move onshore, leveraging Silicon Valley connections.

As regards access for American business and industry into the Indian domestic market, this, on most favoured nation terms, will be the key to India’s leverage, as far as the businessman in POTUS Trump goes.

For: ABP Live
(753 words)
November 28th, 2016

Gautam Mukherjee

Wednesday, November 23, 2016

The Global Right Routs The Left: Who's Sorry Now?


The Global Right Routs The Left: Who’s Sorry Now?

You keep rocking with one steady rose-from the jazz-blues song:  A good man is hard to find

Near the end of the first decade of the millennium, the economic boom era, imploded.

Unchecked for nearly twenty years, pumped up by excesses of borrow-and spend-economics, it had it coming.

Banks, ‘too big to fail’, did exactly that. ‘Motown’ closed down. General Motors went broke too, before the US government got to it. And Detroit as a city is still bankrupt.

The American High Street, the quintessence of its smaller towns, teetered on the brink.

The Obama administration pumped in money and bailed despair as fast as it could. It did not want the moral hazard enforcement of the 1930s, that crippled the nation. Only the engines of WWII brought it back to life.

 Still, a diffused great depression, like a nuclear miasma, replaced the earlier exuberance, throwing its canopy over everything. And it took all the Obama years to more or less put America back on track.

Europe, conjoined at the hip, is still hurting badly, and the EU is under considerable survival stress today.

The economic stimulus, a life-support system, cannot be switched off, certainly not in Europe and Japan, even today. Entire countries, Iceland, Greece, Ireland, Spain, Italy, even Britain, all went technically bankrupt, almost simultaneously, post 2008.

And they would be wrecked still, if it were not for the massive bailouts and stimulus packages.

But, no one, on either side of the Atlantic, is ever going to be able to pay the bill for surviving the last 8 years.

The power elites of the liberal-left, finance men, merchant bankers, high flying stock-brokers, far from being dislodged at first, had the effrontery to carry on as if nothing had happened. And, they certainly took no responsibility for the debacle they had collectively perpetrated.

In the aftermath, the old shibboleths of the liberal-left, its assertions of political correctness, an unbridled inclusiveness, that tended towards letting the tail wag the dog, gradually infuriated the so-called silent majority.

Left out, mocked, vilified, victimised, forgotten, as they were, after licking their economic wounds for longer than just these eight years, these faceless people have shuffled to their feet, and worked up the dander, to assert themselves. Americans have lost their jobs to people overseas, and Europeans have lost their economic sovereignty.

To add insult to injury, the propaganda, name-calling, shaming, and derision, aimed at the right, only intensified as the left-liberals lost traction. But, great arbiters of taste and ‘right thinking’ in the media could not influence the mass of popular opinion anymore.

The right-leaning populace  refused to go along with the failed dream of those who wrecked their jobs, pensions, and livelihoods, anymore.

Economic troubles make for a hardening of the heart and emotions.  Most people in America, the EU, including France, Germany, Italy, Britain, are fed up of what they call leftist manipulation and untruth.

In Japan, years of recession has ushered in the right-leaning Shinzo Abe. Thailand has been taken over by its military.

In India, Narendra Modi is wiping the floor with the socialists, appropriating their agenda, whenever it suits him.

In America it was a boorish, sneering, Donald Trump who won. It came  on the heels of the stunning Brexit vote, in the land of its closest ally.

And now, right-wing candidates and parties are gaining traction in France, Germany, Italy, amongst the biggest countries in Europe, and even in sedate Scandinavia.

It has become a topsy-turvy world when it comes to ideology. The Communists of China, have not only been pursuing capitalist policies internally and externally for years, but under Xi Jinping, resemble nothing more than the old hegemon, imperial powers of the 19th century.

China professes ‘free trade’, but implements vastly unequal treaties, using their trillions to their ruthless advantage. And internally, it denigrates other countries to bolster its national pride.

The military juntas turned democratic socialists of Myanmar, are carrying out genocide against their indigenous Rohilyas.

In populous Islamic countries such as Malaysia, Indonesia, and even Turkey, fundamentalist winds are blowing most of their moderation away.

There has been a churn in most parts of the Muslim world, few spontaneous, most induced, with matters far from settled between the fundamentalists and the ruling power structures.

Monarchies and dictatorships have crumbled in places. But they have not been replaced by anything remotely liberal. Muslims slaughter Muslims in record numbers, and not just across sectarian divides.

Ancient tribal and factional animosities have surfaced, and are duking it out for supremacy. This is not left versus right. The left has been expelled from the fray. This is right versus alt-right!  

Groups splinter and reform like amoebas. And so it goes on, in Egypt, Tunisia, Libya, Yemen, Syria, Iraq, Afghanistan, Somalia, Sudan, Ethiopia, Pakistan...

Is there then, any hope of a comeback for the lib-left? Will the pendulum swing back after a spell, as it is wont to do? Or is this is tectonic shift to the right, that will be a while in righting a world gone wrong?

There was a time, towards the afternoon of the Imperial/Colonial Age, when the world first discovered liberty, equality and fraternity.

At first, these seemingly reasonable aspirations, well-reasoned by the political theorists that explained them, did not give a foretaste of the overthrow of an entire world order to come.

But that is exactly what happened, pushing the reality of it into revolution, first in France, then in America, as the rest of the colonial and monarchical world watched, and began to dream.  Unifications came out of it. And liberations. And two world wars, that completely killed off the Imperial Age.

France began it, by destroying its monarchy with its divine right, then its aristocracy, and finally, even its own ‘revisionists’.

Two centuries or so later, the Communists did the exact same thing. First in the USSR, and again, in China.

But now, it was on a grander scale, wiping out tens of millions, practically everyone, who wasn’t a born worker or peasant.

 The original peoples’ revolution in France dissolved into a blood-soaked and paranoid chaos, and took another longish while, to actually come to democracy.

In America, where the objective was to expel a foreign power, it settled down fairly quickly, into a far less volatile thing. But it too, had to endure a bloody civil war, not too long after.

Britain of the Magna Carta, and yet another beheaded monarch,  also helped its evolution.

Happily, democracy today brings about change through voting, that purports to harness the ‘will of the people’. And for its maturing, it has   also traced memory-markers going back to the city state of Athens, and the Vox Populi of ancient Rome.

But, even this modern democracy, dominated as it is, to date, by the rich, the privileged, and educated, did not quite satisfy the cravings of the underclass, bent on securing their own turn to rule.

So, ergo Marxism. It came to power in 1917, but, in a matter of a few decades, Communism was broken. In shards and remnants it exists still, but the great alternate system to a democracy, fuelled by a moderated, welfarist, capitalism, has decisively failed.

Will the new right-leaning nationalists sweeping into power everywhere now, do any better?

The fact is, a great correction is in the works, and the right has the mandate to execute it. Too much political baggage, too many lies, discredited the left-liberal.

The right is being chosen for its apparent pragmatism, for its difference, but there is definitely an implicit, embedded warning, of equal retribution should it fail.

For: The Sunday Guardian
(1,263 words)
November 23rd, 2016
Gautam Mukherjee
















Monday, November 21, 2016

How To Disincentivise The Cash Economy: Carrot After Stick



How to Disincentivise The  Cash Economy:  Carrot After Stick

The last 13 days have already seen Rs. 5.25 lakh crores of the cancelled money deposited in the banks. Most of it, is towards a perfectly legitimate note-swap.

But if black money is to become history, it will take more than demonetisation, and a stiffened tax on about 1% of the most obvious large deposits that beg decent explanation.

It must take the charm out of the phenomenon once and for all.

The only thing that illicit cash can be spent on without obstacle, is petty consumption. It might seem like a lot of things, but comes down to food, drink, restaurants, clothes, jewellery, weddings, holidays, interior décor, the purchase of dollars to spend abroad- that kind of thing.

This is, after all the residue, the part not socked away in gold or property, here or elsewhere, veiled sometimes in other people’s names or companies. It is not the portion sent off abroad via hawala, or retained there in the first place, through creative invoicing of exports.

Some of the rest of the cash is also here, hiding in plain sight, as lubricant that eases the off-the-books raw material inflow in business.  

Everybody productive is literally in on the act- doctors, lawyers, traders, consultants, service providers, politicians, agents. You name it.

But what always nags every hoarder, particularly after many erstwhile avenues of investment have disappeared, is that a lot of cash sitting around is not earning anything.

And this is the very point of convergence with the thinkers in the official economy.

They too miss the fact that ever expanding stores of money, sitting in hiding, was not doing anything for growth, or the national economy.

But how can we rub out the distinction between black and white money, once and for all?

Some suggestions are by way of drastically lowered rates of direct taxes, and expanded tax slabs. But this cannot address the fact that a bare 3% own PAN cards, and only 2% pay income tax.

Companies in the organised sector, except for the larger listed ones, prefer to work their books of accounts to show losses, and spirit away all the profits in cash. Others cheat on their indirect taxes as well, on excise readings, production off the books, clandestine sales in cash, and so on.

The advent of GST will do a wonder of ‘online good’ to the plethora of indirect taxes being evaded joyously. But tweaking income and corporate taxes, however generously, will not provide solutions to the hydra of corruption, counterfeiting of currency, and tax evasion.

And while the profusion of armchair economists can suggest a torrent of punitive measures to contain and apprehend the tax thieves, they forget that the number of people to implement such measures, are limited, and have no incentive to add hugely to their work loads.

So the incentive that will work must be given to all those people out there fond of their illicit tax free cash and evasive ways.

There is a great anomaly, an injustice even, in a system when 98% of the people pay no direct tax, by right. And even dodge as much of the indirect taxes they can, as well!

The Pune based think-tank  Arthakranti’s  suggestion of abolition of all direct taxes, to be replaced by a 2% universal bank transaction tax, will work, because it is so eminently reasonable.

The rich farmers should not mind this small imposition, and the urban successes certainly won’t. The middle classes, used to being taxed ruthlessly at source on their salaries, will be delighted. The poor will not be inconvenienced either, because the impositions on small value transactions will not pinch.

The demonetisation, also suggested by Arthakranti, did not exempt anybody. But the abolition of direct taxes in favour of the universal transaction tax will have people flocking to put their money in the bank!

They can buy all that they have been, legitimately, and in their own names. Their surpluses will earn interest and returns on investment. Corporation need not conceal profits.

Interest rates too are due to be slashed. Loans will be the cheapest they have ever been.

It will also come as no surprise at all to see a great inflow of money, concealed abroad, finding its way back to India; not clandestinely, via the stock market, but straight in through the banking channels.

Corruption, a function of human greed, may well not be eliminated.  But counterfeit currency will find it hard going in a largely banked economy.

For: ABP Live
(746 words)
November 21st, 2016
Gautam Mukherjee





Indian Railways: Mismanaged, Unsafe, Death-Traps!



Indian Railways: Mismanaged, Unsafe, Death- Traps!

The Indian Railways, with an increasingly disastrous safety record over the last decade, continues to lurch from tragedy to crisis, 30 months into the Modi government.

It is clear the entire railway system is in extreme jeopardy, with the basic legacy infrastructure on the brink of collapse, but hopelessly tied up in in metres of red-tape.

The latest accident, took place 60 km short of Kanpur. It is yet another horrendous derailment. This one was ostensibly due to two, ancient, over-stuffed, passenger bogeys,that came apart.  The first assumption  however was of expansion-contraction stress, that had ‘cracked’ the fatigued, old, rails.

Irrespective, what is evident, is that the passenger bogeys, the tracks,  the equipment, even the human processes employed, are all superannuated.

Where was the ‘condition-based monitoring system’ to check on bearings, coach suspension, wheel defects, hanging parts, broken springs… when it was needed?

This latest tragedy has claimed over 140 lives. There is inevitably, yet another ‘thorough probe’ in the works.

The Indian Railways, under current minister Suresh Prabhu, did plead with the finance ministry for a separate dedicated railway safety fund for a strange calculus of Rs. 1,19, 183 crores recently, but was turned down.

Another effort, the Anil Kakodkar report, tabled in 2012, called for just Rs. 20,000 crores per annum for five consecutive years. It never got past the discussion stage.

However, since the British era separate railway budget was merged with the union budget earlier this year, funding railway safety, along with everything else, is the finance minister’s job now.  

The government  apparently has other priorities. It seems unwilling to raise and allocate the necessary finances to modernise, and radically overhaul, the long-neglected infrastructure.

It does however manage to pay for its strategic priorities in the railways. That is why it is pressing on with creating new connectivity to the north-east of the country for the first time.

The chronic central government underfunding, combined with the railway ministry’s inability to raise monies on its own, despite its properties and land banks, is rapidly thrusting the 4th largest railway network in the world, into a catch 22  abyss.

Meanwhile, a manifold increase in user numbers has been responded to only by increasing the number of trains. And increasing freight loads and speed. But all of these pound away over the ancient tracks, directed by antique, manual, signalling/track management equipment.

The reluctance to raise passenger fares sufficiently, in keeping with inflation, if nothing else, also has the entire segment incurring heavy losses.

The stratagem of cross-subsidising passenger fare losses with exorbitant freight rates, has also backfired, and resulted in loss of business to an ever growing road transport business.

Sought after innovations and probable cash cows, such as a series of dedicated freight corridors, have not even made a start, let alone materialised as yet!  

Over the last decade, there have an increasing number of human errors, fires, derailments, bridge collapses, collisions, level-crossing accidents, faulty signals, stampedes, dacoities, rapes, murders, and other security lapses.

The situation can only bet set right at massive public expense. 

Because, no private investment can be expected to sink funds into building such a non-remunerative backbone activity. Unless, like the Chinese will do, in certain third countries like Malaysia, where they  are able to contract deals at a very high price, inclusive of kickbacks for all enablers,  exclusive use of their own men and materials, and massive built-in profits for themselves. Plus, long term loans, to be serviced by the host countries!

Privatisation of existing and legacy railway infrastructure, has not, truth be told, been undertaken anywhere in the world.

Thatcherite Britain did privatise, but only the operations. This resulted in sharp rises in passenger fares, with only marginal improvement in services.

But even  the net realisations from high fares cannot be reckoned  to be ‘profits’, in the true sense, if the cost of improvement and maintenance of the infrastructure, still paid for solely by the UK government, were to be deducted.

Considering the pass things have now come to, it is incumbent on the Modi government to urgently raise ample and massive funds, to completely revamp and renew the Indian Railway apparatus, and give this vital strategic network a new lease of life.

For: The Quint
(701 words)
November 21st, 2016

Gautam Mukherjee

Thursday, November 17, 2016

Demonetisation: Prelude To A Universal Bank Transaction Tax?



Demonetisation: Prelude To Universal Bank Transaction Tax?

Into the second week after prime minister Narendra Modi’s shock demonetisation announcement, the emerging picture is most encouraging.

Kept admirably secret, till 8 pm on November 8th, despite some opposition insinuation to the contrary, it came as a surprise to almost everyone.

About rupees four lakh crores has been deposited into the banking system, since. The banks, flush with money, have cut their deposit and lending rates spontaneously, without prompting from the RBI. Early movers in this regard, include the SBI and Axis Bank.

Veteran banker KV Kamath expects the RBI to also cut its repo rate by 100 bps within 3-6 months, as inflation comes down further.

An estimated Rs.10 lakh crores is expected by December 30th , out of the Rs. 15-16 lakh crores of the demonetised notes in circulation. And more to come in, funnelled directly into the RBI, by March 31st , 2017.

However, the government is not keen to reward those who cannot explain where the money came from. In tandem with the frenetic banking, there are stepped up income tax raids on those suspected of hoarding large tranches of black money, indulging in hawala, counterfeiting, terrorism, money-laundering, extortion, drug and arms smuggling etc. These too have been yielding satisfying results.

Some reports suggest, a little improbably, that as much as Rs. 4 lakh crores of the demonetised currency won’t be deposited at all, resulting in extinguishing of the equivalent liability at the RBI.

That terrorism financing has been badly hit is also immediately evident, in Kashmir, the bad-lands of Bengal, and the Maoist jungles of central India.

Good as all this sounds, this gargantuan exercise involving millions of citizens and massive disruption, would not have been undertaken at all, if it wasn’t part of a bigger plan.

The Modi government knows full well that one time demonetisation is not a permanent solution for black money, counterfeiting, or corruption.

The history of demonetisation, here in India, and elsewhere, tells us as much.
Chief Minister Akhilesh Yadav, of election bound UP, has made the valid point that the Indian cash economy did cushion the impact of global recession after the crash of 2008.

More so, because the RBI then, reacted to the global stress and local boom conditions, by raising interest rates, and compressing all official liquidity. It was afraid of the Indian economy over-heating at the time, and ended up slowing it to its lowest level in a  decade.

Happily, the policy situation today, is almost the opposite of that time.  
Indeed, if this demonetisation stays the entire action, then we can safely expect redoubled activity on all pernicious fronts, after a pause to regroup.  

Meanwhile, it appears to be wildly popular. Initially, the approval-rating was at 82%, in an urban opinion poll conducted on the 8th and 9th November. 

Another poll, conducted at the beginning of the new week, shows 86% in favour.

The downside, of opposition political protests, would have you believe that it is a backfiring, chaotic, disaster. It is painted out to be anti-unorganised sector worker, daily wagers, the poor, the farmer, anti-old people, uncaring of the marriage and crop planting season, and so on.

There are indeed long queues outside banks. Many ATMs are non-functioning, others can disburse only a paltry Rs. 2,000. And yet, the public understands that the dislocation it is suffering will contribute to the greater good.  

Scrapping the Rs. 500 and Rs. 1,000 currency notes, audacious as it seems, comes as the latest in a series of actions. It started with the SIT on Black Money stashed abroad, and the Jan Dhan Yojana for the great unbanked, yielding over 25 crore new accounts, the authentication and linking with Aadhar cards, the introduction of universal insurance  and pensions for the poor, the direct transmission of subsidies where applicable.

Then came the great push to harness multiple indirect taxes, largely evaded, into a hard won single GST, administered online, that will be very difficult to dodge when it becomes operational, by April 2017 or so.

A certain Anil Bokil, a sixty something engineer turned economist and his organisation from Pune, Arthakranti, is frequently mentioned as the inspiration for the demonetisation.

Arthakranti first came to the fore for its advocacy, not only of a cashless economy, but the abolition of income, corporate, and related direct taxes too, in favour of a universal bank transaction tax of 2%. An earlier advocate of something similar is the Harvard economist and Rajya Sabha MP, Subramanian Swamy.

Will the future therefore see all the direct taxes replaced too?

The demonetisation, big as it is, with its multiple objectives, may be no more than a crucial pit-stop, towards getting the entire money using population into the banking universe, that currently has Rs. 100 lakh crores in deposits.

Arthakranti’s ideas, proposed as early as 2013, were, significantly, also included in the BJP 2013/14 election manifesto.

The government has, we know, long been struggling to expand the income/corporate  tax base, without much success. To abolish these, and related taxes, in favour of a single bank transaction tax, would therefore qualify as a major overhaul of the system.

If direct taxation is abolished, all money will be equal, readily banked, and productive. Tax evasion would become a thing of the past. And transaction taxes would actually garner much more from the entire bank using population.

Prime minister Modi’s related proposals, aired afresh at an all-party meeting on the eve of the winter session of parliament, a couple of days ago, revived the idea of state-funded elections, and holding all of them- state/municipal elections, simultaneously, with the general elections.  

Prime minister Modi may well be keen on scrapping direct taxes, sometime before the code of conduct kicks in before the 2019 general elections.

The drive to gather black money from abroad however, an early initiative of this government, has been a damp squib so far. The domestic effort to get people to declare concealed wealth, the Income Declaration Scheme (IDS), did very much better.

At Rs. 65,000 crores declared, it has been the most successful scheme of its kind in India, even at a tax hit of 45%.

Still, it left a lot of money out there, if various estimates on domestic black money are to be given credence.

Clearly, despite the administrative glitches being experienced currently, the boost to the banking system, and the influx of cash into the official economy will, in the medium term, also boost the GDP.

With the advent of GST in place of multiple indirect taxes, and abolition of direct taxes in favour of a transaction tax, if it comes, India is sure to experience a decade or more of double digit growth.

This, backed by reduced inflation, low fiscal/current account deficits, no incentive to hold or hoard cash, and a stable currency, as contributing factors.

For: The Nationalist
(1,134 words)
November 17th, 2016

Gautam Mukherjee