Category Archives: Economy

Reforms Phase I

politics - Clint's Nolan Chart - 20020718 - sl...
politics – Clint’s Nolan Chart – 20020718 – slightly inaccurate but good (Photo credit: Rev. Xanatos Satanicos Bombasticos (ClintJCL))

#I wrote this on PG on 13th Oct 2010. And posted on FB Notes on 30th Jan 2011. 

We have been for long talking about changing the role of the government from being the regulator to that of a facilitator. It is impossible for the government and its administrators to handle the role of a regulator successfully. Therefore, Indian bureaucracy, which have people selected through one of the toughest exams and who boast of great knowledge and ability, are overburdened. This burden can be reduced if we make them the facilitators and not the regulators. Thus, they will be able to use their knowledge and ability in the right direction.

There is a scheme suggested by Finance Ministry of the alternative solution to PDS system. I would like to implement that. It is based on practical thought and behavioral economics. If you want details then read Chapter 2 of Economic Survey 2009-2010.

In India, we discuss about the bad situation of sports other than Cricket. I would like to implement the strategy used by administrators of cricket to bring it to the fore for other sports as well. A private club consortium structure for all the sports body will be the first step towards that goal and the government will provide tax benefits to the body. The government will act as a facilitator by running stadiums and giving them to these bodies on annual rent.

The foremost reform that I would like to see would be in the working of political parties. I would like to bring in the regulation/law for the internal functioning of the political parties. Members of a political party will follow career service, i.e., they will join at the lowest rung and will have to make their way to the top by working effectively. Pre-independence democratic structure of Indian National Congress will be the basis of any such regulation or law.


Air India and Its Future

Air India 777-300ER VT-ALS
Image by BriYYZ via Flickr

Air India is India’s national flag carrier. Over the years it has lost its fervour and there has been plenty of reforms to make it work and bring it out of the losses it has incurred.  It is continuously facing financial crisis. For instance see the following figures:-

  • As of March 2011, Air India has accumulated a debt of Rs. 42,570 crore (approximately $10 billion) and an operating loss of Rs. 22,000 crore, and is seeking Rs. 42,920 crore from the government [1].
  • For the past three months (June, July, August, 2011), the carrier has been missing salary payments and interest payments and Moody’s Investor Service has warned that missing payments by Air India to creditors, such as the State Bank of India, will negatively affect the credit ratings of those banks [2][3].
  • A report by the Comptroller and Auditor General (CAG) blamed the decision to buy 111 new planes as one of the major causes of the debt troubles in Air India; in addition it blamed on the ill timed merger with Indian Airlines as well [4].

These facts prove that unfortunately none of the efforts to revive have fared well and it keeps on adding to its losses. Despite this, the government doesn’t seem to have lost faith and is not ready to give up. It is still trying to reform it. However, it should be kept in mind that reforming something that malfunctions without understanding why doesn’t it work can only make things worse.  There have been many efforts and we have tried different approaches and all the experiments have failed. Now, is the time to take definitive steps to remove the burden of a lame horse from the shoulders of the tax-paying citizens.

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Consumer Price Index (CPI) – Draft

CPI is a statistical time-series measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation.

CPI is a fixed quantity price index and considered by some a cost of living index. Under CPI, an index is scaled so that it is equal to 100 at a chosen point in time, so that all other values of the index are a percentage relative to this one.

Greater weights are assigned to food items.

Employment and Unemployment Measurements in India

I am copying this from Annual Report to People on Employment (2010) published by Ministry of  Labour and Employment, Government of India. This was the first comprehensive report on the subject. However, it would have been read by intellectuals of our country who would know that such a thing has been published. The billions of others have no means to know that there is such a report on employment. Even unemployed people including my own brother doesn’t know that there is a report on him as well though whether he was part of any sample for the surveys is a different story altogether. Just to bring to the notice of us all, I am starting a series on excerpts from the same report. I don’t think that government will mind my copying parts of their report word-to-word as the main motto behind any report published in public domain is to reach out to the maximum number of citizens of the country. So, here we go!!

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Minting and Issue of Coins

A trussell and a minter producing hammered coins
Hammered Coins (Image by Wikipedia)

 # Taken from RBI website and Wikipedia

The responsibility for coinage vests with the Government of India in terms of the Coinage Act, 1906. The government has the sole right to mint coins.  Government of India is also responsible for the designing and minting of coins in various denominations. The Indian Government operates four mints in the country to produce coins. They are located at:

  • Mumbai, Maharashtra
  • Alipore (Kolkata), West Bengal
  • Saifabad and Cherlapally (Hyderabad), Andhra Pradesh
  • Noida, Uttar Pradesh

Besides minting coins, the mints at MumbaiKolkata and Hyderabad also make coin blanks. Hyderabad, Mumbai and Kolkata mints have gold assaying facilities and the Mumbai mint produces standardised weights and measures.

Commemorative coins are made at Mumbai and Kolkata. Kolkata has the facilities for making medallions too. The NOIDA mint was the first in the country to mint coins of stainless steel.

The coins are issued for circulation only through the Reserve Bank in terms of the RBI Act.

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India Facing Cash Crunch on High Tax Refunds

The Bombay Stock Exchange, in Mumbai, is Asia'...
Image via Wikipedia

Don’t panic. It is temporary cash crunch that the government of India is facing on account of tax refunds of nearly Rs 45,000 crore during April and May. But this cash crunch is prompting it to resort to short-term borrowing.

People might be thinking that this is an annual affair but why is it happening now? While tax refund is an annual affair, the use of electronic return filing and processing has resulted in faster refund of excess income. Corporation tax payment has resulted in the process getting expedited and a lot of bunched payments taking place in the first two months. In April alone, the tax refunds are estimated at Rs 30,000 crore to Rs 32,000 crore and another Rs 10,000 crore to Rs 15,000 crore would be added next month.

During the days of paper returns, a taxpayer’s details had to be punched manually. This was then tallied and refunds, if any, were processed. The whole process used to take time and the tax refund was spread across several months giving the government time to access its credit situation and work accordingly.

Now, with electronic filing the entire information is available at a click of a button. IT revolutionized I-T. The refund which used to be sent through cheques or transferred to the accounts now takes lesser time as instructing banks for electronic refunds is much faster way then it was before.

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Banking the Unbanked

“Banking the unbanked” is the topic that I first heard during Davos 2007 media reports. There are hundreds of reasons for large part of population in many countries – developed, developing and underdeveloped – to stay outside the realms of banking. The reasons vary from logistics to cost of transactions, lack of financial literacy and products that meet the requirements of the unbanked people. The major reasons for the lack of credit available in the less developed part of the world are pretty self-explanatory. Most of the unbanked population is poor, they represent a higher risk and lower return on investment for banks and financial institutions, and as a result, they’re reluctant to get involved in these regions.

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