After All is Said and Done: Budget 2015-2016

As usual it is that time of the year when the Finance Minister has had his say on the proposals for garnering revenue and the expenditure. To me it makes little difference on where the money goes and as is usual for politicians of any hue, the proposals are based on political considerations and the immediate exigencies of political life.

Be that as it may, my concern is more on the revenue side and in that lies the answer of how the Government hopes to bring in the moolah to fund various schemes that it sets itself to conclude to fruition.

Here is an extremely short version of what the Govt hopes to do

(Rs in crores)

2014-15 2015-16 Increase over previous year Percentage Change
Tax Revenue 1251391 1449490 198099 15.83%
Non-Tax Revenue 217831 221733 3902 1.79%
Total Revenue 1469222 1671223 202001 13.75%
Capital Receipts 554863 655902 101039 18.21%
Capital Expenditure 170543 217319 46776.08 27.43%
Revenue Expenditure 1488779 1536046 47267 3.17%
Debt Position 6278553 6894690 616137 9.81%
Contingent Liabilities 270628 249502 -21126 -7.81%
Interest Payments 411354 456145 44791 10.89%
Rupee Loans 3866079 4325485 459405 11.88%
Corporate Tax 426079 470628 44549 10.46%
Income Tax 278599 327367 48768 17.50%
Disinvestment 26353 41000 14647 55.58%

Every budget is simply a statement of what is to be extracted from the populace and what is to be spent on them. There is an element of injustice in that people that the Govt. spends on are generally those who do not contribute to the exchequer, directly. But that is the price one pays for living in society. There is another injustice in that the Govt. plucks only low hanging fruit, namely the salaried class that has no escape from the amount of tax deducted at source. On the other hand a businessman has the choice of first charging all his expenses to the business and then paying tax, if at all, on the net income. So his car expenses, the interest on his car loan and who knows, his home loan as well are all paid for by Jaitley uncle, who in turn extracts the money from toi et moi! All his expenses on food, whether at home or outside becomes entertainment expense. His new BMW is a part of corporate purchase and he uses it happily for his personal purposes, ferrying his children to school and the memsahib to the club or the mall or wherever! This is because he is supposed to be taking a ‘risk’. Well, the only risk is with the bank that has so happily lent money to this person or his company. When his company goes belly up, there are some assets in his wife’s name or minor children’s names and are thus untouchable.

The above list is merely illustrative rather than exhaustive. The salaried class people are the biggest suckers and will still vote for the BJP or Congress or whoever. Nonetheless, the congress never ever tried to cater to the middle class, concentrating on the Muslims, the dalits and adivasis as also others considered poor.

Here the BJP has totally betrayed the salaried class. What else can one say if there is not single sops for the salaried class except, the you save and you save tax kind of nonsense? Still, they have managed to fool the commentariat who believe that this is a ‘balanced’ budget. All budgets are balanced, in the sense that the two columns of income and expenditure add up to the same amount. The entire budget is built on smokescreens and illusions. For instance, the reduction of corporate tax to 25%, fine print saying we will do this over five years. 2019 is a big illusion. BJP may or may not be in power after that election! The new Govt. will always try to do just the opposite of what has been done by the BJP.

To me the BJP should have addressed the asymmetry of taxation loaded against the salaried class. They should have spread the burden to everyone, except those who are really poor. To illustrate the asymmetry, please go through the next para.

We have a total population of 1.2 billion people, of which roughly 50% are below the poverty line. So that leaves us 60 crore people who can pay some taxes. You have an Aadhar card which will become compulsory. Filter out all those who are BPL. Here is an analysis of how many Indians pay taxes and how much (thanks to Mr Arun Prabhudesai for this nugget : –

And here are the figures of how much is collected from people in various tax slabs: –

Slab (Rs. in crores) Percentage of tax collected
0-5 lakh 15,010 10.10%
5-10 lakh 21,976 14.80%
10-20 lakh 17,858 12.10%
>20 lakh 93,229 63.00%
Total 148073

So we are dependent on a miniscule 1.3% of taxpayers to pay 63% of the taxes. Most of these people must be salaried and cannot escape taxes. What of the vast unwashed who buy the BMWs and still come in the first two categories.

To me, it is impossible that only 1.3% or roughly 4.21 lac people are in the top bracket. In India paying taxes is a mug’s game. Let us start concentrating on those who earn substantial monies like the chaatwala who owns two houses and five plots or the panwala or the kirana store guy. Most of these persons pay no taxes. They would form at least 20% of the population. Create a presumptive tax of RS 6000 or Rs 500 p.m. for each of these worthies. Renewal of licences can be made dependent on payment of presumptive tax. This proposal itself would fetch Rs 72000 crores. Suppose we are able to get a tax base of roughly 25% of the populace or 30 crores. Going by the Pareto principle, 80% would fall under the lowest bracket. That is 24 crore people who have incomes that can be covered by presumptive taxation. The revenue yield will be 1,44,000 crores and this is a new stream. Create three slabs, one lowest or 6000 p.a., second 12000 p.a and a third of 24,000 p.a. Assuming an yield of 18000 p.a. on an average from the remaining 6 crore people, the total tax revenue would be 2.52 lac crores. The total individual income tax budgeted for the current year is Rs3.27 lac crores.

This is only one small illustration of the possibilities of collecting taxes from the untaxed. However, we are still keeping a large portion of people out of the direct tax net. And there is a painless way by which all people will pay tax and without cribbing. It is entirely possible to abolish income taxes and other claptrap such as service tax, sales tax, excise duty etc.

I was fascinated by Baba Ramdev’s proposal of a Banking Transaction Tax or BTT. So I did a bit of research into the feasibility of imposing such a tax. To begin with, it is a tax that can easily be computed and collected as the onus would be with the banks that do the transactions. The amount per transaction can be calibrated such that the maximum payable amount would not be in excess of say 5% of the debit and credit legs of one transaction. Here is an illustration. Let us say a person gets an income of Rs 50,000 a month. He or she would pay Rs 500 on the credit to account, if BTT is fixed at 1%. Per annum this would be Rs 6000. Assuming the person saves RS 10,000 p.m., the amount spent would be RS 40000 p.m. on which there would be a BTT of Rs 400 p.m. Hence, the tax payable would be Rs 10800 p.a. At current rates of taxation, the tax payable would be Rs 25000. This does not include indirect taxes that are levied on whatever goods or services purchased by him or her. Assuming that is 10% on an average, he or she ends up paying a total of Rs 4000 p.m. or Rs 48000 p.a. as tax

Point that arises is whether the tax collected thus will be adequate for compensating the revenue lost from direct and indirect taxation? For this I took the figures of banking transactions only of RTGS, ECS and NEFT. This excludes the figures of cash transactions in banks, transfers, clearing etc.

As an illustration, I collected the figures regarding Banking Transactions, only from ECS, NEFT and RTGS. The total transactions as per RBI’s site are as under (until January 2015 this fiscal): –

Total ECS Transactions                                                   Rs 309000 crores

Total NEFT Transactions                                          Rs 9496000 Crores

Total RTGS Transactions                                          Rs 123233000 crores

Total of ECS, NEFT and RTGS till January 2015      Rs 133038000 crores

Expected Transactions till end of current fiscal        Rs 159645600 crores

Transaction Tax at 1.5% of transactions                  Rs 2394684 crores

Transaction Tax at 1.1% of transactions                  Rs 1463418 crores

Total Central Taxes Budgeted for 2015-2016        Rs 1449490 crores

This illustrates why a completely new paradigm is necessary for collecting taxes. The current machinery is grossly inefficient and also prone to corruption. While the presumptive tax can replace personal taxation, the BTT can replace all other taxes. Now, no VAT, no Sales Tax, no Service Tax etc. would need to be collected. All these would just vanish. This money can be collected easily and without hassles. Give banks three to four months to get their systems compliant for collecting BTT and automate the collection process as well as submission of returns.

Imagine how easy it becomes to move goods around without having to worry about this and that tax. How much time would be saved by businesses? Further, the tax on banking transactions has only covered electronic transfers. The vast transactions through cash in banks and clearing transactions have not been mentioned here as there are no dependable sources of information on these transactions. But these will also yield a big bonanza. My estimate is that a BTT will result in revenue of over double the current year’s fiscal budget

The government can work on exceptions such as subsidy transfers for people below the poverty line etc. The surplus revenue gained from all these transactions will be more than adequate to fund infrastructure and create employment for all.

The question therefore is whether the Government will implement such an idea that makes collection of taxes easy and allows the people to breathe freely. Moreover, since the burden of transaction tax collection falls on the banks, submission of returns etc. by the lay public etc. will be unnecessary. Since the taxes are themselves not onerous, there will be very little resistance. Further, black money generation will also get reduced.

We now come to the trillion dollar question on what to do with the vast bureaucratic army that will now become redundant virtually overnight. Here is one possibility, let them handle arrears of taxes and clear all backlog in the next two years. You will still need some people to handle the returns, do audits of banks for proper compliance etc. One will also need to start educating the lay public of routing all transactions through banks.

The second phase should see a reduction or elimination of other duties such as stamp duty. This would reduce undervaluation of properties and other evils. Ideas for what to do with excess staff are welcome.

If the Government does not seriously work on elimination of virtually punitive taxation and create a mechanism as above to create a genuinely easy to comply taxation, thus eliminating a plethora of useless bureaucrat enriching and expenditure bloating system, we voted for this Government for no reason at all!

As for the rest of the budget, just a few things tell me this is a Babu ka Budget.

2014-15 2015-16 Increase over previous year Percentage Change
Tax Revenue 1251391 1449490 198099 15.83%
Non-Tax Revenue 217831 221733 3902 1.79%
Total Revenue 1469222 1671223 202001 13.75%
Capital Receipts 554863 655902 101039 18.21%
Capital Expenditure 170543 217319 46776 27.43%
Revenue Expenditure 1488779 1536046 47267 3.17%
Total Expenditure 1659322 1753365 94043 5.67%
Debt Position 6278553 6894690 616137 9.81%
Contingent Liabilities 270628 249502 -21126 -7.81%
Interest Payments 411354 456145 44791 10.89%
Rupee Loans 3866079 4325485 459405 11.88%
Corporate Tax 426079 470628 44549 10.46%
Income Tax 278599 327367 48768 17.50%
Disinvestment 26353 41000 14647 55.58%

Out of Rs 1671223 crores collected as revenue, 92% is revenue expenditure! This is an improvement over that of the previous year where revenue expenditure exceeded revenue collected. What this means is that the revenue being collected, including non tax revenue goes to fund daily expenditure.

There is an increase in debt to the extent of Rs 6.16 lac crores. I still remember Nani Palkhiwala’s lectures on the budget at the Brabourne Stadium that I attended three times in the late 80s. The one thing he repeated year after year was the debt position where he warned about how debt would consume the country.

There should have been one proposal, to provide an avenue for people to invest their savings over the long term for infrastructure. This should come through the banks that in turn should be able to lend the money to borrowers who take up long term infrastructure contracts through a BOT mechanism. India’s homemakers are big savers and need to be respected and complimented. A Govt. guaranteed scheme for lending for the National infrastructure development can only be a win win for all. There has to be some kind of training to bankers to appraise long term financing for infrastructure projects.

Stupid thinking is never accidental. The Government looks at everything from the prism of enhancing complexity and thereby the power of the establishment. Putting a lawyer in charge of the Finance Ministry is also an idiotic step. Here is why. A lawyer thrives on arcane knowledge of the law and anything that makes it intelligible to the vast unwashed will make him or her redundant. One needs to put someone like Dr. Swamy who thinks that income tax is an unnecessary burden on the salaried class as the Finance Minister.

Oh Dear! If only wishes were horses…..


Acche Din a Reality

First let me say that I am an unabashed voter of BJP from the day I first cast my vote. And I have supported the Jan Sangh before the BJP was even formed. Further, to me, Narendra Modi is the best administrator that Gujarat had since its formation. Lots has been written about Gujarat and how development, from the most basic requirements of adequate water and uninterrupted power, to better roads and highways has been made a possibility. Further, this example indicates how NM governed Gujarat in an efficient manner making people work and produce results.
The original blog authored by well known writer Sandeep Balakrishna (@sandeepweb) is now not available.
This is not about Gujarat. It is about how some transformations have taken place in governance. Shall keep this short and mention only two examples. In one I quote verbatim from an email received from a friend of mine. This relates to the Indian Consular Office in Sydney and the transformation since NM became PM. It is self explanatory.
“———- Forwarded message ———-
Date: Wed, Nov 19, 2014 at 6:58 PM
Subject: Fwd: The Transformation in Govt offices overseas – An Experience

Let me tell you the experience my friend had at the Indian consulate in Sydney yesterday. He had gone there for the life certificate and was amazed at seeing the transformation . Excerpt from his email from Sydney.

• The man at the reception asked me even before I could say anything ‘sir have you come for the life certificate’. I said ‘Yes’. He asked me to give him the documents, take coffee and have a seat
• Some guys were already sitting and some kept coming. After some time, the councillor came out (I was told later that he comes out every half hour), called out the names, made them sign the certificate, signed it himself and handed it over. I was off in half an hour when the web site says it will take one day
• As though this was not enough, there was an old Anglo Indian pensioner from Railways – William D Fransis on a wheelchair accompanied by his grand daughter. Frail and unable to speak. The consular saw him and asked for his form first. With the form in hand, he went to him and said ‘Sir from next year onwards, please do not come here for this certificate. Just go to your treating GP (Doctor), he will sign this certificate. After that please post it to us along with a photo copy of your passport. You will get it back in a day and if you desire we will also send it to your paying office
• All pensioners present were amazed at the transformation. As though in unison, they all said ‘I am going for Modi’s public appearance next week’
Being a bit curious, I stayed on and started asking the receptionist about this noticeable transformation. He told me the following:
• We have to send to MEA, a monthly report highlighting the problems faced by visitors to the consulate and what actions have been taken to remove or reduce them? This is the result of that
• I asked him to tell me a few other improvements. He started off with a whole list. Let me tell you one of them. They have started a new emergency service. Say after office hours one learns that ones father has passed away. You SMS your visa request on a given number. If the officer on duty considers it to be an emergency request, he will call you back and speak to you and in all probability for such a case give you a visa the moment you are able to reach him with your passport. I remember my son’s tears when he pleaded for a visa to get home after my wife’s death. While the Indian embassy tried its best to delay it, his Australian boss in Canberra had to intervene. My eyes are flowing with tears as I remember it while trying to bring this transformation to you. Only one thing has changed since then in the consulate – the PM. The same building the same staff
• I left the consulate with my chest high – 56 inches
Guys, this is a National Opportunity for us to redeem and rediscover ourselves. Let us contribute in the effort and not derail it. The least we can do is to have patience. Things are happening

Please do pass on this First Hand Account of Transformation to those who may not be knowing and to the media which will never publish such good deeds of the man. From my side, I sent an immediate e mail to the PMO with a copy to the Consular and the Ambassador.”

The second experience is my own. It was the simple act of getting my passport renewed as I had run out of pages and I expect to be travelling shortly. To put things in perspective, I would like to preface this experience with the events of the last two times I had to get a passport.
The first time was in 1994 when I had to get one for my wife. The process was to get an appointment at the time of getting the form and then standing in queue in front of the passport office. Since the form I had obtained was prior to this rule of appointment as a prerequisite, the gentleman at the door refused us an entry into the premises. Some arguing and we got in. When we reached the counter inside, the clerk refused to take the application on the same grounds that I did not have an appointment! Again some arguing and a threat to barge into the Passport Officer’s cabin did the trick. This was not all. We waited and waited till around 2 PM. When my wife’s turn came the counter was banged shut in the sensitive way that Government officials treat the hoi polloi. The clerks at the counter sat in plain sight of people waiting who were trapped within the office and had their lunch. There was no canteen or any way that we could eat. Finally, at 3:15 PM, our turn came and 5 minutes later we were on our way. To get the passport, we had to do a haziri at the passport office after a few days and just a day before the deadline for applying for my wife’s visa expired.
The next time was in 2005 and this time a similar experience awaited us when we applied for passport s for my wife and son. The passports arrived just in time for travelling to Singapore on a family holiday.
Contrast this with my experience a week back. The start was a little more propitious. No getting form, just filling up a simple online application, uploading the application onto the passport authority website and getting an appointment for a personal appearance at the passport office. The last part took a couple of days as there were holidays in between and one has to log in at 16:30 hours to pay and get the appointment. Since I applied for a tatkal passport, the appointment was given two days later. I paid half the fee online and the tatkal amount was to be collected at the passport office.
On the day of my appointment, I landed at the passport office more than an hour before the time given. Since this was in the morning, I had time for a darshini breakfast and went to the office. At 9 AM I was let in, no queue desperately waiting at the door as had been the case a few years ago. The office itself is spick and span. It is manned by well trained executives who are familiar with information technology. There is a nice cafeteria inhouse and public conveniences such as drinking water and washrooms. But I had no occasion to use the facilities as will be evident from the next two paragraphs
The appointment was at 9:45 and one of the employees first went through my documents for address proof and also the old passport. Since I am a senior citizen (I use that status when convenient!), I was called within 10 minutes and had to go through a four stage process, the first of which was issue of token, second was scrutiny of my documents, submission of self attested photocopies, taking a photograph for the passport (no submission of passport sized photos now), payment of fees and obtention of biometric data. The third and fourth stages were to verify all the form data and ensure it is in order. Lastly one is given an acknowledgement for ones application. Last time the old passport was taken by the passport authorities. This time it was cancelled and returned to me.
I was out of the door by around 10:20 AM, well before time for the family lunch at my sister’s home to celebrate my Mother’s birthday. Took me a lot longer to get back home about 10 km away!
After the appointment, I was kept posted through email and SMS of the status of my application. The next day, I was informed that the passport had been sent for printing and would reach me after it was quality checked. On the third day, I got the passport to my hand through Speed Post. Less than a week from the time I uploaded my application, the new passport was with me. I do have one complaint though! As the photograph for the passport is taken at the passport office, it is a pretty ghastly looking me on it. Maybe I do look ghastly now! But I will take this over having to jostle with the great unwashed.
Both examples given by me of improvement of services to the public, one abroad and one in India, relate to the Ministry of External Affairs. This Ministry is headed by Ms Sushma Swaraj. Big thanks to her for the improvement in the working of offices under her. And for ushering in Acche Din!
There is no way that a TRP hungry biased and crooked media will highlight the good. So this is my contribution to disseminating information about good work done in a quiet and efficient way by our own Modi Sarkar! And by Sushmaji who is making the least noise among the Ministers in office! Am sure we will see more transformations in days to come and a much better India in 60 months.

How Modi’s Opponents Gave us Narendra Modi the PM

There is a scene  in The Lion King, where Scar tells little Simba where not to go. You bet little Simba went there and the consequences were almost fatal. Here is a little test for you. For the next one minute, try not to think of a pink hippopotamus. You can bet that you will not only think of a pink hippo but, if your imagination is active, you will probably see more than one pink hippo.

There are a lot of people who have managed the difficult feat of screwing up things in India after 2004, when the NDA left an economy bursting with activity and boasting of healthy indicators. To not only manage to damage the economy and the country but to virtually handover the Govt. on a platter to the NDA took some doing. There are several Match ke Mujrim or those who are guilty of having facilitated the ascent of Modi to the Prime Ministership. The media (no doubt funded by the Government directly or indirectly), various persona involved in scamming the country belonging to  the Congress party and its allies, various NGOs, scribes, TV talking heads and so on.

My experiences have made me believe that negative affirmations result in bringing the opposite of what one desires. The negativity that has been spewing out of TV channels, the Press and assorted NGOs has helped drive Modi home to the head of Government in New Delhi. A caveat though, is that Modi could never have ridden to power without the backing of his performance, something which the talking heads of TV and the scribes tried very hard to deride and deny. Precisely though, all this only made NaMo stronger.

In my last post I tried to fathom what the rivals of Modi had to offer and found that it was virtually nothing.  Modi’s rivals kept beating the drum of secularism, talked of Modi’s ‘divisive’ politics (unproved as Muslims in Gujarat have done very well economically in his state, Gujarat!). Their message in effect was ‘Don’t vote for Modi’. But negativity can only take you so far. What negativity does is to almost drive the idea of Modi in the minds of the voters. One of the principles I learnt in the course of my life is “What you resist persists.” The human mind, especially the subconscious mind is a literal minded creature. It does not register the negative part of any sentence. For instance, you tell a small child, “Don’t climb on the table!” What the child hears is “Climb on the table!” The consequences could be harmful for the child but communication occurs at two levels. The conscious level is “Don’t do this, don’t do that”. At a subconscious level the message that reaches is Do this and Do that.

I have a healthy respect for the people of my beautiful country, India. They have an abundance of brains and this is evidenced by the numerous discussions that occur at tea shops and street corner, village squares and drawing rooms. However, they are also influenced by the communication coming to them subconsciously. In the past twelve or so years, the media and the Press have been relentlessly painting Modi as a bogeyman. What they did was to provide mindspace to Modi in the collective consciousness. Modi himself has acknowledged this many times in the interviews he has given in the recent past to TV channels. He said that if the TV channels had ignored him, he would no doubt have been like any other Chief Minister of a state, working in anonymity. He is a smart man and has figured out what I say here!

Would just negative communication have sufficed to push Modi into collective consciousness? No! What Modi realized was that the entire media and the Congress was ranged against him and there was no way he could fight their negative perceptions. What he did therefore was to create a positive perception in the minds of the people of Gujarat, which he has served for the past 13 years.  He is in any case a workaholic and a scrupulously honest man. So he set about providing good and clean governance to the people he served. During the past 13 years, Gujarat has seen enormous development. Some of the things that are conspicuous by their absence in the rest of India are good roads, perennial and quality electricity supply, good infrastructure, clean water available on tap, good public transport, personal security, and safety for women. Modi has ensured that the people have all this and also piped cooking gas for homes, easy processes for accessing Government services and a very good grievance redressal system. Gujarat is one state that has used Information Technology in many innovative ways to make life easier for people. This has spanned the entire economic spectrum, whether it is the farmer looking for the best price for his produce, the middle class person who needs to pay his taxes and prefers to do this online, public wifi for all, and broadband in almost the entire state. Modi has ensured that growth has created opportunities for employment and the growth of industry, agriculture etc. has been impressive.

Best communication, experts will tell you, is through word of mouth. Gujarat employs people from all over the country and these people are the ones who have spread the word far and wide. That Modi was like a rockstar when he campaigned across the country was because the people believed that he would transform their lives for the better, and they flocked to his rallies in great numbers. Modi’s communication was direct and to the point. He merely pointed out what people were missing and he mentioned what he had provided to Gujarat. This resonated in the minds of voters and they gave a massive mandate to the alliance led by his party, the Bharatiya Janata Party. Leading by example, putting in punishing hours of work during the elections, and sometimes addressing five rallies a day across the country was one more highlight of Modi’s campaign. This was Modi.

On the other hand Modi’s main rival, the Congress Party, led by a hapless mother and son team, were hamstrung by a series of scams and swindles that had resulted in a large flow of illegal money out of India. Fearing no doubt that an impartial investigation would not spare members of their party involved in the scam, the campaigners had only one main message to the electorate, Don’t vote for Modi as he will  create a cleavage of religious groups. The riots of 2002, horrific as they were, did not recur due to excellent law and order in Gujarat. Further, attempts to link Modi directly with the riots have failed, with the Supreme Court of India having exonerated him after extensive and thorough investigation. As mentioned earlier, the effort expended in demonising Modi only helped to entrench him firmly in the public mind. The people also sense fear and lies. What the campaigners of the Congress party managed to convey to the people was that they were scared of Modi coming to power and they had something to hide. This is what negativity does. It creates a positive impression of the one you wish to negate.

One other rival of Modi was Arvind Kejriwal. His Aam Aadmi party (AAP), which was an offshoot of a movement called India Against Corruption or IAC, started off with the laudable idea of fighting endemic corruption in the body politic of India. This party won a large number of seats in the election for the Delhi assembly. Their premise was that the Congress and BJP were both corrupt and that their party was the only honest one. However, the party failed to cobble up a majority and ended up in second place to the BJP in Delhi. Nonetheless, Kejriwal managed to get the support of Congress party members and ran the State Government for a total period of seven weeks. It would appear that Kejriwal’s heart and mind were not in it, as he was perhaps eyeing greener pastures. This lead to him resigning on some specious grounds and pursuing the Parliamentary dream. He also chose to fight the Parliamentary election against Narendra Modi, the PM candidate himself. If Kejriwal had offered a clean alternative and a track record, he could have hoped to put up a bit of a fight. But his effort was in pandering to the lowest form of communalism and virtually begging for the Muslim vote. But Kejriwal’s efforts were ab initio to show Modi in bad light and to claim that there was no development in Gujarat. Never mind that one of his able lieutenants, Ms Meera Sanyal had been on a visit to Gujarat a year back and had been quite fulsome in her praise for the development in the state.

Kejriwal also tweeted that there was no development in Gujarat, using free wifi provided by the Gujarat Govt.

What happened with all the negative propaganda unleashed against Modi was cognitive dissonance in the minds of the voters. On the one hand they could see very positive signs of development in Gujarat, bolstered by the stories told by their relatives and friends based there, and on the other they were told that there was no development or that the development had not trickled down to the poorest. The message of the Congress and other opponents of Modi, who ganged up against him, was ‘Don’t vote for Modi’. If everyone else gangs up and tries to deride one person, it creates a credibility gap. This is precisely what happened and the people were convinced that Modi was being derided wrongly.

Modi knew that to counter these opponents, he had to use positive messages. Communicating across India with its varied terrain, different languages, culture etc. is a very difficult process. The strategies employed by Modi involved nonstop rallies taking him from one corner of India to another during a single day, addressing five rallies per day on most days. In addition he used a 3D hologram of himself to reach where he was unable to be physically present. He also communicated through Chai pe Charcha, a virtual teashop where people gathered around teashops across India and actively interacted with him. Brilliant though the communication methods were, only someone who had complete credibility could pull it off. People had total belief in Modi’s ability to take India forward. Conviction was evident in the fact that Modi spoke spontaneously without referring to notes.

In conclusion, one has to accept that there was strong performance behind Modi’s victory but the negativity of his opponents brought him a larger majority. 

NaMo Namaha!

One of the articles I read on the Modi effect is by Chetan Bhagat . It is a reasonably well argued piece but falls short of pinpointing reasons for a Modi wave, a phenomenon that only the blind, or those pretending to be so, cannot see.

Ahem Ahem, let me say I saw it coming at least two years back! Here are my pieces where I more than broadly hinted that the Modi effect was coming: –

September 2013  (NaMo is a concept whose time has come.)

July 2013 (Last Para… We have one hope and he will come in on the back of huge expectations.)

June 2012 (…..Yet there is hope in the form of Narendra Modi and it looks like his time is well nigh. Pray and hope my countrymen, for that is all you have!)

September 2011  (One of my Indian friends here in Bahrain told me that he would like to vote for the BJP only if they make NaMo PM. Precisely my view too!)

Some of my predictions have gone wildly wrong and that goes with the territory. However, this is one that will not go wrong unless the heavens conspire against India.  If that is so however, I feel that India can never recover in a thousand years.

Let us now see what the rivals of Modi are cooking up. The one, who thinks he is a rival, and is actually one in Varanasi where Modi is contesting for Parliament, is part of what I call the Anti Industrial lobby. The most vile and rotten persons are involved in furthering the agenda of some anti Indian forces, the Ford Foundation and other anti Indian lobbies are a case in point. Arvind Kejriwal is pure evil and it really surprises me when I see how many well meaning and apparently intelligent people are taken in by him. The reason I think he is evil is that he is a Communist, his mindset well camouflaged by concepts such as Swaraj, anti corruption etc. His career has been built on betrayal. Each time he kicks the ladder that he uses to climb up one level. Do not be surprised if he tries to merge his party with the BJP and try sabotage from within.

Each time the media has been playing nursemaid to this evil entity Kejriwal by publicising his Dharnas, mindless statements and all the venom that he spews on Modi.  But Kejriwal has unfortunately managed to sweet talk his way into the hearts of a number of well meaning educated morons. This is another dangerous set, reminding me of the saying of Saint Bernard of Clairvaux  “L’enfer est plein de bonnes volontés et désirs” (hell is full of good wishes and desires). The more ‘contemporary’equivalent is “The way to Hell is paved with good intentions”. In the case of Kejriwal, good intentions are patently absent. He bores me pallid and I am not interested in detailing the litany of his sins of deliberate omission and commission.

Let us see what the Congress has to offer. Nothing much I am afraid. They took charge of a growing and mostly prosperous economy and managed to run it to the ground. I have detailed the entire modus operandi in this piece. How did the people of India hand over the country to such a bunch of twits, led by a half literate Italian who, after 46 years in India, can barely speak passable English or Hindi? This was after they got a Govt that brought the country up from atrocious fiscal management and high inflation to a stage where low inflation and growth was expected. After scamming the country at a scale unheard of, these nitwits had the gall to talk of the ‘rights’ they gave the great unwashed. As if the country idiot was not enough, we had his sister talking of the ‘sacrifices’ made by her mother, her grandmother, her father, her grandfather etc. So what if the deaths of her father and grandmother were in the line of duty? So what if the deaths of her grandmother and her father were a result of their gross errors of judgement? Did the lady’s heart ever bleed for the soldiers of Kargil? Did not the congress refuse to participate in Kargil Vijay Divas  to commemorate the martyrs of the 1999 Kargil war? Enough said of these morons.

In a democracy we almost always end up, at least most of the time, with the lowest common denominator. It is just serendipitous that we sometimes find that the majority make the best available choice.

My theme in this article touches on two aspects, one about the choices offered to the Indian electorate and another on how choices are created according to the collective mental construct of the voters.

Let me outline briefly what NaMo offered to India on behalf of the BJP.

  • Development is the need of the hour
  • Through development we will create jobs and thereby grow your prosperity
  • The rest of India deserves the development model of Gujarat, with assured quality of life such as clean water, 24×7 electricity, good roads, proper infrastructure etc. We will ensure that these are created pan India
  • There will always be rewards for hard work but in the case of those who are unable to fulfil their basic needs of food, housing and so on due to adverse circumstances, we will help them through social intervention

The exit polls tell us that the message found resonance in the minds and hearts of a large number of the Indians who vote. One of the reasons why NaMo was so successful was that his polling agents were not just those in the polling booths but a number of men from UP and Bihar(including splinter states Uttaranchal and Jharkand) who were forced to migrate to Gujarat in search of employment and waxed eloquent on the quality of life there. Tall claims by political parties are one thing but word of mouth advertisement by impartial members of the public is any day more powerful.

The Indian public somehow found India Shining a little difficult to comprehend in 2004 and fell for Congress’s lure of easy money and subsidies. It is moot whether they are now ready for working hard and becoming rich through their own efforts. The expectations created by Modi and the BJP are very high and their delivery will be a challenge. Still one is sanguine that they will strain every sinew to ensure clean and competent governance to lift the economy and the country out of the morass of despondency and hopelessness. Writing this one day before the results are declared, I am waiting with bated breath. Intuition tells me that the vote is for Modi as PM and yet there is a feeling of unease about the dirty tricks department of the congress. Finally however, truth has to prevail and Modi has to become PM for people to have faith in the electoral process. Modi is an idea whose time has come and congress also knows that match fixing will rebound very badly on them.

Finally, the reasons for why there has been a vote for Modi is the corruption and scams that the Congress had done and the consequence thereof leading to no jobs and no hope. The BJP govt in the early part of the century had tried to inculcate a feeling of prosperity but the people veered to the idea of mooching and suckling themselves on the state. Fact is that there is a limit to such mooching as sooner or later, everyone has to pay for themselves. Hopefully, the people have learnt the lesson about free lunches and are now eager to work. Modi has managed to ignite a spark in the people and hopefully the fire of hope will drive the country forward to prosperity for all. 

Fiberals and False Fables of Modi

One Mr T.C.A.Srinivasa Raghavan wrote an article calling Narendra Modi, India’s Nixon. You can read the article here .

I am not surprised at the kind of article that comes out of the pens of such people who think that approval seeking of India’s so called ‘liberals’ is the be all and end all of life.  To sample the kind of stuff that he writes, here is just one para: –

“Mainly, I wanted to find out why he was shying away from cultivating the liberals of Delhi. It seemed to me that exactly like Nixon, Modi too seemed to have an inferiority complex and that this was preventing him from engaging with the liberals. “

It never occurred to TCASR that Modi may not be interested in cultivating the liberals who in his opinion and in that of several others are important only in the past tense. NaMo has never, but never, said anything about having Prime Ministerial ambitions, even when he had all but been named as the PM candidate for the NDA. For instance in his speech given after the elections, some of his supporters started chanting “Delhi Delhi” to which he said that he was going to Delhi on some day in the future for a day. Hardly an indication of a person aspiring to be PM! Since then, he has been elevated to campaign head of the BJP and PM candidate, leaving more of this liberal crowd in a tizzy. Imagine their frustration of not finding success at the end of 11 years of continuous and concerted calumny.

In my opinion and I am sure I speak for a lot of people who belong to the silent majority, NaMo is a concept whose time has come. The constant pillorying by the ‘liberals’ notwithstanding, here is a person who rose from very humble beginnings, stuck to his agenda of doing good for the people of Gujarat and triumphed over odds. For these idiots who call themselves liberals, the social media has screwed up the equations very badly. Resultantly, for Modi, the social media has acted as a vehicle for conveying the good work done in Gujarat to the public at large. And that work has been commented on far and wide in India and abroad only because, unlike the Blocka Dutts of the world, the scribes in other countries have embraced the social media such as Facebook and Twitter as a means of obtaining honest feedback and not hagiographic tweets from drooling hangers on. The power of Twitter was demonstrated to me, quite dramatically, a couple of years back. I tweeted about how the CRTs (Congress Rat Tweeples for the uninitiated) were hounding one of the forthright ladies on Twitter by threatening to find her address and make trouble for her. This lady happened to be in the USA. My tweet reached an American tweep who took full particulars from me and informed the FBI. The result was that the lady had no further trouble from the people who were trying to stalk her in the US.

And this is precisely what Modi has managed. He has let the social media speak for his campaigns with, unlike what is slyly being insinuated as a hired crowd by the #Paidmedia, a volunteer army that conveys in 140 characters what reams of paper and volumes of works by the completely compromised media try their best to hide and obfuscate.  This has left the ‘fiberals’, a coinage by Ravinar or @mediacrooks in a fix. This also has the ruling dispensation that is, in my view at least, pouring good money down the drain trying to ‘influence’ opinions of the excrescences posing as impartial journalists, by dispensing largesse such as Bharat Nirman and the like.

Another aspect of Modi is his complete disdain for anything churned out by the media whom he treats with a barely hidden, and well deserved, contempt. Once he even told Rajdeep and others that the media depends on Narendra Modi for their daily bread. This has a lot of truth in it. The moment the media covers  Narendra Modi  the TRP shoots up. The media is now in a fix. Should it be Bharat Nirman or Narendra Modi? Short term gain and Long Term Pain, if, horror of horrors, NM becomes the PM? Or desert the sinking Congress ship right now and praise Modi, which would result in short term pain (no Bharat Nirman) and no guarantee of long term gain.

That is fine, but what is the reason for Media’s hatred of Modi. The ostensible reason is the Gujarat Riots of 2002 and the killing of Muslims in the riots. But is that the real reason? After all there have been worse riots like the Meerut Riots where Muslims were the victims or the Nelli riots in Assam where again Muslims bore the brunt. Closer to the present, we have the Muzzaffarnagar riots that have not been particularly savoury. Riots are never a good thing and while the Gujarat riots deserve to be condemned, blaming Modi is hardly fair. The truth of the Gujarat riots is available in this site that deals with the facts and not the hyperbole that the media has created.

So what irks the media so much, as also the Press? The simple truth was provided to me by a journalist friend of mine. He told me that it was the practice in Gujarat for the Govt. to provide bus transport from Ahmedabad to Gandhinagar, as well as to provide lunch, snacks and tea to journalists, prior to Modi becoming CM. All this stopped once Modi came into power. He also slashed the rates for ad spend and applied DAVP rates as against commercial rates that were applied earlier. It may be a good idea to check whether Bharat Nirman ads are being aired at DAVP rates or at commercial rates.

For now it would appear that NaMo’s best friends are the members of the Congress party, led by a ‘literate’ Italian origin lady and her son with solid achievements to his name, all of which are listed here . If you were lead to a blank page, please remember that the page is being updated daily and we are yet to see any achievement on the Crown Prince’s part.

Let me now provide a taste of what India can expect under NaMo and it will be evident why there is a great fear of this unknown quantity in the illiberal circles that considers itself as ‘liberal’: –

  1. Revamping of the structures of Govt. funded institutions such as Sahitya Academy, faculties of History, various institutions that have become a sinecure and a pinjrapole for leftists of various denominations
  2. Possible prosecution of the perpetrators of various scams. NaMo does not have any Prithviraj Chauhan complex, like the ‘statesman’ Vajpayee did. There are rumours that Vajpayee used his clout as the Prime Minister through Brijesh Mishra to get a son of a certain powerful Congresswoman freed after the sire had apparently been caught with a large sum of money at Boston airport in 1998. Expect a no mercy approach from NaMo for such transgressions.
  3. Setting an example of corruption free and transparent governance, and ensuring that corruption is punished in an exemplary manner. This will automatically bring down the level of corruption and also allow people to receive services like any client of a company paying for services
  4. Transparency in governance through automation of essential Govt. services providing a new experience of being able to track progress of  and fix accountability for Govt. employees
  5. Stoppage of all these idiotic caste and religious equations. (As a matter of fact, with so many ‘claimants’ for the Muslim vote, the BJP actually will stand out by refusing to appease to minority pressure groups)
  6. Decisive governance
  7. More IT leading to easier and transparent processes
  8. Better prioritization of tasks

To be sure Modi will need a good bit of time to get going. Let me provide an example. In the 90s, I was put in charge of a branch that should have been a wonderful branch of SBI. However, at the time, despite being in the campus of a big public sector giant, with captive business, the branch was a mess. Successive BMs never stuck around long enough to make a difference and, when I was posted, I had arrears of housekeeping, customer service issues, staff and Union issues and what have you. It took me a good 18 months or so to set things right as my entire time and energy was spent in burying the ghosts of the branch’s chequered past. With God’s grace, I was able to work hard with the staff, both clerks and officers putting in exemplary efforts and bringing the branch out of the morass. My point here is that out of a 30 month period I spent there, 18 months is what it took to set things right.

I see a similarity in the circumstances surrounding the probable anointing of NaMo in the hotseat of PM. One readily admits that running a country is infinitely more complex than running a branch of SBI! Although NaMo is an extremely intelligent and capable administrator, the mess created by the UPA will take a while to unwind. In the first term NaMo will have to put together a good, nay a great team, and work in a highly focused manner to set right things. Thereafter, only can one hope to do some real work. Am sure that someone like NaMo is shrewd enough to realize that expectations can be inordinately high and the work of scrubbing out the dirt left by the UPA will take some doing. That is a challenge I expect him to take up with gusto. One of the points in Modi’s favor is his incorruptibility. Another is his ability to communicate very well. After a reticent MMS, he will be seen to be very different. Here’s hoping that the indicators, which appear to be favourable to him, are correct. Here’s hoping that his not inconsiderable administrative skills are more than adequate to slay the numerous problems that have been left by the congress lead UPA.

What many of us are hoping to see is an early death to ‘travesty secularism’ and instead see real Secularism, which as NaMo himself said is India First. We also hope to see a quick injection of confidence in the country, which would enable the Nation to get back on the road to economic progress after it has regressed in confidence and growth over the years of patented misrule by the UPeeA.

The Great Indian Rupee Trick

This piece is not about how the economy is tanking. That is a known phenomenon and I wrote about it in my previous piece here .  Well that was around 8 months back. There was no doubt in my mind that the economy was in serious danger and the US Marines were unfortunately not there to come to the rescue, unlike the themes of several movies seen by me in my formative years.

Here this is about how our currency, the Indian Rupee is just poised on quicksand  and all the inflation that we have been tolerating so far is very likely to come back to bite us right on our collective backsides.  In Jan 2000, the CPI was around the 90 mark and in Jan 2004 it rose to 104. . However, the rate rose sharply from 2008 onwards and went from around 125 straight to 220 in all of 5 years.


Here’s one more statistic showing how our external trade position has fared.


Just below zero in 2004 and then it started getting more and more adverse. We are now having a trade deficit of close to 1000 Billion rupees or in USD as on date, it is around USD 18.62 Billion. Please note the sources from where these stats have been taken, before you accuse this Jan Sanghi of fudging statistics to show the Govt. in bad light.

Let us see how exports have fared


Not bad one would say till you see this one: –


And this has got progressively worse in 2013. No matter what you are told about easing in percentage of CAD to GDP, there is merit in believing the worst.

Why oh why is the Rupee seeing its worst days against the US dollar? The answer lies in two factors that you need to see, one is the relative rates of inflation, which determines rates over a longer time horizon and the other is supply and demand in the market for dollars. As you will see in this piece written at the time of Budget 2013-14, we are dependent on foreign inflows in the form of FII and FDI to keep the rupee afloat. All very well, except that there seems to be no reason for the world to support the INR. So when the collective thought of investors is to seek alternative avenues for investment rather than India, as they did by exiting Govt. securities and the stock markets, to a lesser extent, the Rupee just tanked shocking everyone. Shocking, hardly I would say. We should have seen this coming. A house built on a sandy foundation with no support will collapse. One cannot ignore economics entirely and expect that there will be no consequences.

One of my Gurus, Mr A.V.Rajwade made this perspicacious observation here in May this year: –

“AV Rajwade: Again I am taking a longer view and yes I think that our belief that we are an exception to every rule is a wrong belief. We cannot keep on living on others’ money forever. Nobody can, nobody has. Nobody has ever grown fast based on capital inflows. These are facts and I do not believe that we are an exception to this basic rule what we have seen in the last 70 odd years in the global economy.

The question is what kind of time horizon money is looking up? As I said our current account deficit is horrendous, there are few signs that there is going to be a significant improvement. Trade number for April was bad and that is likely to persist, iron ore exports have gone down, coal imports will go up. I would believe that in the medium term the rupee’s fate is going to be decided far more by the competitiveness of our tradable sector, not on what happens to the dollar index or what happens to the dollar yen rate or whether there is risk on or risk off and so on so forth. Those are essentially for traders and I am not a trader in currencies.”

The markets react on a short term basis but eventually settle into sanity once the exuberance is over.  This will happen soon.

The Rupee’s fate is only a symptom and not the cause. It has tanked only because of the mismanagement of the economy by the UPA, mainly the congress. One of the factors that affects exchange rates is the differential of inflation. The differential of inflation between the USA and India is roughly 8% p.a. since around 2009. This would affect the Indian rupee directly, if the rupee were a freely traded currency on the capital account. However, since the Rupee is traded only within India for the greater part,  it is governed by supply and demand. At present demand is greater than supply because more USD is remitted out than coming in.  Our exports need to go up substantially and the imports need to be brought down so that we can see a strengthening of the rupee organically. The paradox is that thanks to the mismanagement of the economy, the Rupee should be around Rs 75 to the dollar, based on relative inflation of the USA and India. Our exporters are a resilient lot and will settle for sales proceeds at Rs 60+ to the USD and we can see some short term increase in exports with a slight lag. On the imports side, there is a need to identify what we don’t really need and stop these imports. Is there any reason for us to import apples and oranges? Or soft toys? We must ruthlessly stop nonsensical exports and see how to improve supplies from within. This will result in an internal surplus that will also affect the external deficit in a positive manner for the country.

It’s a pity that the UPA has, for short term electoral gains, reduced our people to a set of wimpy freebooters. Hopefully we will see a new dawn soon and find India on the path to greatness. But that seems to be at least a year away and the path thereafter will include tough and politically unpopular decisions. Well, I can dream!

Coming back to the Rupee, I am of the strong opinion that we will see a big depreciation once again because our economy, at least on the forex side, is floating on a sea of hot money that will just evaporate. How much of our reserves are real and durable reserves of a medium to long term nature, and how much is made up of volatile flows is not clear. Our people have lost faith in the Govt. and banks, and are moving away from deposits as their mainstay. While Gold has stayed down, it will not be long before it starts rising encore. Wait till Deepavali for that. Also when people lose faith in the economy they gravitate towards gold. There are some people like me who have only a limited happiness in seeing the dollar rise. I am well aware that purely in a selfish way, it is nice to get that much more for each Dollar I remit, since I work outside India. Overall, however, I would prefer to see a situation where the Rupee starts appreciating once again on the back of good export performance and the govt. is able to trim down imports.

Finally, here is why I believe that the Rupee will tank further and stay low for a long time: –

  1. No FDI is coming, regardless of the noise made by the #PaidMedia and the dishonest Govt.
  2. The trade deficit shows no sign of decreasing as the imports exceed exports by a good USD 20 billion or so every month
  3. Oil has just touched 100 and will only increase as winter sets in and demand increases. So unless, the oil companies have booked forward at a good price, we have to deal with the reality of higher oil prices
  4. Sooner rather than later, the India story will wither away, thanks to high fiscal and CAD and plain mismanagement and scams, and it will be very difficult to resurrect it. The consequence would be a flight of capital with a deleterious effect on the Rupee

Well, the people have voted for a ‘subsidised’ life with Bharat Nirman and FSB and NREGA. The results are there for all to see. Where are we headed? To a hellish life made more hellish by runaway inflation, a Rupee tanking and looming food shortages as farmers find no labour to help in sowing and harvesting their crops and a whole generation bred on freebies.

We have one hope and he will come in on the back of huge expectations. But I am sanguine that he will assemble a crack team that will take unpopular decisions in the short term to ensure a long term surplus for all of us. If we have UPA3, kiss the idea of India Good Bye!