Do it yourself: Income Tax

Showing posts with label Income Tax. Show all posts

Thursday, February 6, 2025

Devil’s advocate

In the sixteen century the Catholic Church in Rome established an office of the advocatus diaboli (Devil's advocate). The job of the Davil’s advocate was to argue against the canonization of a candidate proposed by the Church. The officer would use all his might to find faults in the canonization process and evidence of miracles attributed to the candidate. It was not necessary that the officer did actually believe in his arguments against the proposed canonization. The idea, apparently, was to avoid inadvertent mistakes and make sure that no underserving candidate gets canonized. Unfortunately, in the late 20^th century, the office of advocatus diaboli has been diluted materially.

I like to often play Devil’s advocate to the popular investment narratives and consensus assumptions. The idea usually is to get more clarity and minimize mistakes in the investment decision making. Continuing with the practice, I would like to question the popular market assumptions about the (a) impact of Rs one trillion tax bonanza announced in the recent union budget and (b) economic impact of the ongoing Mahakumbh.

Tax Bonanza: The finance minister, in her recently presented Union Budget for FY26, has recently announced enhancement of rebate under section 87A from Rs25,000 earlier to Rs60,000. Besides, she also announced restructuring of tax-slabs, lifting the applicability of maximum marginal rate of 30% to the taxable income above Rs24,00,000 from the present Rs15,00,000. These changes would be applicable only for the assessees opting for the “new tax scheme” (where no deductions u/s 80 are allowed). The budget proposals assume that the government would forgo Rs one trillion of tax revenue from these proposals.

The popular market narrative after this announcement has been that the additional cash of rupees one trillion in the hands of middle-class households will boost (i) discretionary consumption and (ii) banking sector liquidity.

In my view, these assumptions may be somewhat misplaced. For, the benefit of slab change is available equally to all assesses opting for the new scheme. The benefit of additional rebate of UPTO Rs35,000 u/s 87A is available to the assesses reporting taxable income between Rs4 lacs and Rs12 lacs and opting for new scheme. A person reporting taxable income of Rs5,00,000 for example will get a rebate of only Rs 5000 u/s 87A. Appx 28% assessees are still filing returns under the old scheme. These assesses are not eligible for any fresh tax concession.

It is common knowledge that the propensity to consume varies with the level of income. People with lower base income usually have a higher propensity to consume and are more likely to spend higher on non-discretionary items. People with higher base income have a higher propensity to save and spend more on discretionary items.

Pertinent to note that tax saving would happen at the expense of lower revenue for the government. Since the deficit is not rising in the same proportion, it is safe to assume that the tax concessions are being given by curtailing government consumption. (For record, the revenue deficit for FY26BE is just Rs966.54 billion against Rs3102.07billion in FY25RE) So net consumption impact of these tax concessions on the economy might be neutral or even negative.

Moreover, in the past three years, the household financial liabilities have seen material rise. It is very much possible that this tax saving is used to pare debt. This could potentially be negative for both credit growth and system liquidity.

I would therefore argue that at this juncture it is almost impossible to correctly estimate the impact of this rupee one trillion tax concession on the economy and markets. It is more likely that it just adds to the consumer confidence, without actually boosting consumption.

Maha Kumbh: Reportedly, more than 450 million devotees are expected to visit the city of Prayagraj to take a dip in the holy rivers. The Uttar Pradesh state and the central governments are reportedly spending over Rs 100 billion in organization of this mega event.

Many analysts have extrapolated these numbers to a massive economic stimulus, assuming a multiplier impact on the economy. One brokerage report for example, mentions creation of over 8,00,000 additional jobs and generation of over Rs two trillion in additional revenue. It estimates Rs340 billion in additional revenue for the hospitality sector, Rs360bn in additional revenue for the transportation sector, Rs30 billion additional spending towards branding and marketing; and Rs50 billion in creation of durable infrastructure.

Having been to the city of Prayagraj multiple times, I find it very hard to believe the projected number of pilgrims attending this Maha Kumbh. Nonetheless, even if I accept the number of 450 million attendees, I know from my experience of attending several such events, 95% of the attendees are from very poor, poor and lower middle class. They either borrow or deplete their meager savings to pay for the travel expenses to make this once in lifetime pilgrimage. They mostly carry their own food, or avail free food. They sleep on streets or mela ground. The 0.01% rich and VIP, who fly in and out of the city on the same day spend the most on transportation; not much on food and hospitality. It is the 4.99% middle class visitors who spend on buying local food, stay in hotels and tents, pay to local transporters (taxi, auto, boat, rickshaw etc.), and take prasad and souvenirs back home.

Such events do provide a material income boost to the local economy, but it increases stress on much higher number of households who spend beyond their affordability; and/or carry disease and injuries back home. Factoring these events to the bottom lines of companies (hospitality, travel, consumption, financial etc.) could at best be a futile exercise. For example, I could not find any significant correlation between the previous mega religious events and companies’ profitability or overall economic growth of the country. Much smaller sporting or entertainment events, in fact, show much better correlation with the economy.

Wednesday, November 6, 2024

Anticipating a bouncer

The central government presently derives 63% of its resources from taxes (Direct Taxes 36% and Indirect Taxes 27%). 27% comes from borrowing and 10% from other sources.

The present socio-political milieu is such that (i) the central government is becoming increasingly dependent on the regional parties, hence it is imperative that it would need to allocate more resources to the states ruled by the supporting regional parties; (ii) a larger proportion of the population is becoming increasingly dependent on the government for the basic necessities like food, shelter, education and healthcare, requiring the basic social sector spending to rise without any major improvement in the quality of life; (iii) supply side pressures are not abetting, keeping the inflation (including imported inflation) elevated, pressurizing USDINR and yields; and (iv) economic growth continues to be disproportionately dependent on government spending (both revenue and capex).

Under these circumstances, the government shall continuously be under pressure to augment its revenue. The challenges it faces are — (i) personal tax rates are already stretched; (ii) actual number of income tax payers is consistently declining despite decent rise in the IT return filers; (iii) corporate tax hikes at this stage will send wrong signals to the global investors; (iv) GST rates are widely anticipated to be moderated; (v) disinvestment process has totally derailed and not expected to come on track anytime soon due to the political rhetoric; (vi) dividend from CPSEs is close to peaking; and (vii) FRBM targets require deficit cuts putting a cap on additional resource mobilization through borrowings.

The investors need to contemplate from where the government will attempt to raise the additional resources in the coming years to sustain public spending. The answers may have material implications for the investment strategy and market direction post Budget in February 2025.

Wednesday, March 6, 2024

Myth of tax-free agriculture income

The tax-free status of agricultural income has been a contentious issue amongst the urban middle class of India for a long time. The issue is raked up every year close to the budget presentation. It is also commonly used as an argument against farm subsidies, MSP, and other farm sector reforms.

In my view, the whole debate and discussions around the taxation of agriculture income in India amongst the urban middle class is driven by misunderstanding and ignorance about agriculture economics in India.

Constitutional status of the Agriculture Income

It is important to understand the constitutional and legal status of the agriculture income in India, before discussing the taxation aspect.

· Agriculture is a state subject as per the Constitution of India (Entry 46 in the State List of Schedule VII). The power to tax agriculture income vests in the respective state government. The central government cannot tax agricultural income. A few state governments, like, Assam, Odisha, Tamil Nadu, and West Bengal, have enacted legislation to tax the agriculture income in their respective states. Most of these legislations tax only orchards and plantations and exempt staple food crops like wheat, rice, and vegetables, etc.

· Agriculture income is exempt from Income-tax under section 10(1) of the Income Tax Act, 1961. As per section 2(1A) of the Act, agriculture income that is exempt from tax is defined as:

i. Rent (cash or in kind) earned from any land in India which is used for agricultural purposes, or

ii. Any income from the production of agricultural goods; from activities necessary to make agriculture produce fit for selling (e.g., removal of husk from paddy), and from sale of such agriculture goods by the cultivator or receiver of rent in kind.

iii. Income from building owned and occupied by the cultivator or receiver of rent, provided the building is on or near the land and is required as a dwelling house, or as a store-house, or other out-building.

· Income from livestock, fisheries, forestry, etc. (commonly referred to as allied activities) is not considered part of the agricultural income.

· Income from Coffee and Tea plantations is subject to presumptive taxation. 40% of such income is considered taxable income.

· Agriculture income is considered for determining the marginal rate of tax for assessees, and all non-agriculture income is taxed at such marginal rate of taxation.

Quantum of agriculture income

As per the second advance estimate of national income for FY24, total GVA from Agriculture and Allied activities is estimated to be Rs46.92 trillion (About 18% of total GVA). The share of crops (agriculture activity as per the Income Tax Act) in this GVA is approximately 55% (Economic Survey FY23). Hence, the GVA from Agriculture is roughly Rs25.81 trillion.

As per the last agriculture census (2015-2016), the total number of operation holdings in the country was 146 million. It is most likely that the number of holdings now is higher than this. However, if we take this number only, the average income per farm is approximately Rs1,76,700.

It is pertinent to note here that during AY2022-23, a total of 74 million income tax returns were filed. Out of this, 51.6 million (appx 70%) income tax returns declared zero or negative (refund) tax liability. In the case of farmers, over 99% of farmers would have total income less than the threshold of Rs7 lacs.

Agriculture economics

The last agriculture census divided the operational holdings as per their sizes in the following categories.

· The average size of an operational holding was 1.08 hectares (approximately 2.67 acres).

· Small and Marginal holdings (0 to 2 hectares or less than 5.3 acres) accounted for 86.2% of total operational holdings. This accounted for appx 47.3% of the total operational area.

· Semi Medium and Medium holdings (2 to 10 hectares) were 13.2% of total holdings accounting for 43.6% of the total operational area.

· The large holdings (10 hectares or above) were only 0.57% accounting for 9% of the total operational area.

Now consider farming economics.

The largest part of the operational holdings is used for growing staples like wheat, rice maize etc. The maximum a large farmer can earn from these crops is Rs200000 to Rs2,50,000/hectare per year, assuming he takes two full crops. For small and marginal farmers these earnings are limited to Rs125000 to Rs175000/hectare per year. (Assuming average productivity of 3.5 tons per hectare)

For Sugarcane average earnings is Rs140000 to Rs165000/hectare per year. (Assuming average productivity of 85 tons per hectare).

For Pulses, and oilseeds the average earnings per year could range between Rs2,50,000 to Rs3,00,000. (assuming average productivity of one ton for pulses and 1.2 tons for oil seeds)

For vegetables and fruits, average earnings could range between Rs4,00,000 to Rs5,00,000 in good years.

Tax revenue potential

As per the above optimistic earnings estimates and assuming only one bad crop in three years, the total tax collection potential from farmers could be projected as follows:

· Small and marginal farmers (46% of operational holdings) assuming an average holding of one hectare per family of two adults – NIL

· Medium farmers (43.6% operational holdings), assuming an average holding of 5 hectares per family of 2 adults growing one staple crop and one cash crop- NIL

· Large farmers (9% of operational holdings), assuming an average holding of 15 hectares divided equally between staples & cash crops and 50% given on rent or crop share, accounting for 15% of crop GVA, four adults per family, and effective tax rate 20% - Rs40000cr.

Of course, these are back-of-the-envelope calculations with very optimistic estimates of crop productivity and prices. If we consider one bad crop in three years (which is the normal case) the potential tax collection will diminish materially. Also, if we adjust it for the taxes already been collected by the states, the potential will be even less.

For context, during FY23, the government collected Rs19,72,248 crore in gross direct taxes. The top potential for tax on agriculture is just 2% of this amount.

Trivia

Many people might be using agriculture income for laundering money. They may be showing exaggerated income from their farmlands just to convert their black money (cash) into white money. If we start taxing agricultural income, they will just stop this practice. Nothing will get added to the revenue kitty. Rather, the cash will stay in the parallel economy, and the interest income (which would have been otherwise fully taxable if the principal amount was declared as legal money), will also escape the taxation.

In conclusion, this whole discussion about taxing agriculture income is much ado about nothing.

Thursday, February 1, 2024

Direct tax and budget populism

It is an annual ritual to seek tax relief, exemptions and incentives from the finance minister before presentation of the annual budget. The expectations of tax favors are particularly stronger in election years, as taxpayers and market participants are led by the belief that the government may be gratuitous to allure voters. There is however no empirical evidence of any correlation between the direct tax regime and government populism. The fact is that the population that is materially affected by direct tax laws is not significant to the election outcome.

The recently released Direct Tax Statistics by the Central Board of Direct Taxes (CBDT) shows that income taxpayers in India may not be a group of interest from a general election view point. For example, consider the following points evident from the said statistics:

No. of taxpayers: In AY23 only 8.91crore individuals paid some income tax (including TDS) in India. This is less than 10% of the total eligible voters in India. Though this year details have not been provided, from past year’s statistics it is clear that more than two thirds of these individuals have income less than Rs5.50 lacs, which is almost tax exempt. The population seeking income tax relief/incentive is about 2-3% of the voter base. This segment of the voters is also not particularly known for their commitment to voting.

Tax payer regional dispersion: During AY23, the government collected Rs8.26 trillion as corporate tax and Rs8.33 trillion as personal income tax. Four states (UP, Bihar, MP and West Bengal) which account for almost 40% of population accounted for only 7% of tax payment. Excluding NOIDA and Kolkata which may account for significant corporate tax, the personal income tax collections in these states would be of little relevance for elections.

Maharashtra with 9.5% population accounted for over 36.4% of tax collection. However, it would be interesting to see the picture excluding Greater Mumbai and Pune jurisdictions. Delhi accounted for 1.4% of population and 13.3% of tax collection.

The broader picture thus is that 50% tax collection happens from states having less than 10% population (that too mostly from 3 cities Delhi, Greater Mumbai and Pune) and 10% tax collection happens from states with over 40% population (including likely major contributions from NOIDA and Kolkata).

Direct Tax to GDP ratio highest: FY23 recorded a direct tax to GDP ratio of 6.11%, highest on record. Tax growth rate is consistently higher than the nominal GDP growth rate since FY17 (financial year 2015-16). FY22 witnessed the best tax buoyancy factor (tax growth to GDP growth) of 2.52 since FY03 (2.59).

Taxes growing faster than GDP: Between FY14 and FY23, direct tax collection has registered a growth of 11.2% CAGR, total tax collection has grown at 11.6% CAGR; whereas nominal GDP has grown at 10.2% CAGR only. Some part of higher tax collection could be attributed to enlargement of tax base; but the incidence of tax has also increased.

Trend to continue: The tax collection trends witnessed in the recent years are likely to persist in future also. There are about 66.3 crore PAN numbers allotted in India. Out of this presently only 8.91cr pay tax (including TDS) and 7.4cr people file income tax return. The administrative effort is to bring more PAN allottees to the tax net. The share of TDS in total tax collection has increased from 34.4% in FY14 to 41.5% in FY23. This shall also increase in future.

In short, if you are a taxpayer and hoping for any favor from the finance minister today, you might be disappointed.

Saturday, November 13, 2021

Billionaire tax vs taxing the billions

Recently, the President of US, Joe Biden, laid out a framework for nearly US$1.75trn in social sector funding. The plan, inter alia, proposes a spending of $400 billion to help provide subsidized childcare for more than 6 million children and tuition-free preschool for 3- and 4-year-olds, along with $555 billion for clean energy initiatives, including $320 billion in tax credits, to help Americans pay for environment friendly home improvements and corporation’s transition to clean-energy manufacturing, over the next 10 years.

The President has proposed to fund this spending through a 15% corporate minimum tax on large corporations, tax on stock buybacks and a surcharge on the top 0.02% of high earners.

However, the proposal to tax the superrich (700 odd billionaires) on their unrealized gains on assets could not be pushed for lack of necessary support. Nonetheless, the proposal has reignited an intense debate, as the opinions are vertically divided on the legality and morality of the proposal.

Those opposing it are arguing that taxing the unrealized gains on stocks etc. would not stand the legal scrutiny as such gains are mostly notional and do not meet the criteria of “taxable income”. Even Democrats like Senator Joe Manchin opposed the proposal on the ground of disparity. He reportedly said, “I don’t like it. I don’t like the connotation that we’re targeting different people.”

Elon Musk, one of the Billionaires who would be most affected by the proposed tax, argued that the proposal could open the door to future tax hikes that would cover a wider range of middle-class Americans with investments. “Exactly. Eventually, they run out of other people’s money and then they come for you”, he reportedly commented on the proposal.

The supporters of the proposal however appear convinced that it is morally and ethically appropriate, that the superrich pay taxes on their entire income and not just the meagre salaries and dividend they draw from their corporations.

Chuck Marr, Director of Federal Tax Policy at the Center for Budget and Policy Priorities thinktank, cited the example of Jeff Bezos, Founder of Amazon.com Inc. Jeff Bezos, reportedly draws a salary of about $80,000 a year from his company, though his Amazon stock holdings increase in value more than $10bn a year. “If Mr Bezos does not sell any of his Amazon shares in a given year, the income tax ignores the $10bn gain, and effectively he is taxed like a middle-class person making $80,000 a year”, Marr tweeted.

In view of the supporters of the proposal, it is not correct to argue that the rise in value of shares is totally notional. The superrich are able to leverage their shareholding to borrow substantial money to grow their wealth even more, giving rise to the already wide and deep inequalities. In that sense, the rise in value of the shareholding is tangible and could be taxed.

As per some estimates of the White House economics team (see here), the top 400 wealthiest families in the US paid federal taxes at an average rate of 8.2 percent; whereas an average American citizen pays federal taxes at an average rate of 14.6 percent. Therefore, apparently, the present tax code is regressive and needs to be reformed.

Though the plan did not find favour with a of majority law makers, there appears to be a strong popular support for such a measure. As per a Vox and Data for Progress poll, ‘71 percent of voters support raising taxes on the wealthiest 2 percent of Americans to pay for the bill. Eighty-six percent of Democrats and 50 percent of Republicans backed the idea. Other tax provisions focused on the wealthy that could be included in the bill — such as tax increases on corporations and capital gains — found 65 percent or more support overall.”

It may be relevant to note in this context that the concept of taxing the unrealized gains on investments is not new to the US tax code. US taxpayers are taxed on their unrealized gains on the investments in Passive Foreign Investment Company (PFIC), e.g., mutual funds, every year. The unrealized gains on employees stock options are also taxed.

Context for India

Like the US administration, the government in India has also embarked on a massive social sector and infrastructure building plan. In the latest Independence Day speech, prime minister Modi had outlined a Rs100trn Pradhan Mantri Gatishakti Bharat Master Plan for integrated infrastructure growth. As part of the comprehensive Covid-19 relief plan, a Rs20trn Self Reliance (AatmNirbhar India) program was also announced last year.

To muster financing for these plans and mitigate their fiscal impact a number of measures have been proposed - aggressive sale of public assets and hike in duty on fuel being the two prominent ones. A committee has also reportedly proposed hike in duty on cigarettes from the next fiscal year.

It was widely anticipated that the government will impose some kind of surcharge on rich in the union budget for the current fiscal FY22 to raise additional resources. However, the government refrained from doing that.

The current status is that the sale of public assets has started to gain some momentum with privatization of Air India and scheduling of LIC public offer. This shall help in keeping the fiscal math balanced. We may not see the interest rates rising materially from the current level. The interest on savings shall also remain low, which essentially means stress for pensioners and small savers.The persistent hike in duties on fuel and cooking gas (except one major cut on Diwali) has also significantly impacted over a billion common people directly, or through a second round inflation impact.

The question now is what would be a better course of action for the Government of India—

Should it consider taxing the superrich Indian billionaires on their wealth and/or unrealized gains? Or

Should it continue taxing over a billion commoners who are already struggling with Stagflationary conditions for the past few years now?

Prima facie, the tax structure in India appears to be progressive as the effective rate of tax on tax payers with taxable income of over Rs10million being substantially higher than the tax payers in lower income groups. Also a large majority of households have been kept out of tax net by keeping the threshold higher. Less than 15million people in India are liable to pay tax on their income. Even out of these 150million, about 100million report an annual income of less than Rs one million, and have an effective tax rate of less than 20%.

However, if we consider that tax rate on corporates has been reduced materially in recent years and significant fiscal concessions are allowed to the tech startups and new manufacturing units, the tax structure may not appear that progressive.

Obviously, this debate does not suit the stock markets and equity investors. Nonetheless, the issues are important and need to be discussed objectively and intensively.

Tuesday, August 6, 2019

Face the bitter truth

Some food for thought

"Government is an evil; it is only the thoughtlessness and vices of men that make it a necessary evil. When all men are good and wise, government will of itself decay.

—Percy Bysshe Shelley (English Poet, 1792-1822)

Word for the day

Stolid (adj)

Not easily stirred or moved mentally; unemotional; impassive.

First thought this morning

Abrogation of Article 370, a temporary and transient provision of the constitution to grant special status to the state of J&K; implementation of a uniform civil code (UCC) as mandated under directive principles of state policy outlined under Article 44 of the Constitution; and construction of a Ram Temple at Ayodhya have been three long standing promises of BJP (earlier Jan Sangh). These three promises have in fact been the major agenda items that distinguished it from other non-communist political parties in India.

Freshly strengthened BJP led NDA government has made significant progress in delivering on these promises;

A decisive action on the state of Jammu and Kashmir has been taken by abrogating operative clauses of Article 370 and introducing bill for reorganize the state of J&K.

By enacting a law to make instant triple talaq illegal, a significant step has been taken towards implementation of UCC.

The Supreme Court has agreed to hear all litigation in respect of Ram Mandir in Ayodhya on day to day basis. Hopefully a decision that is acceptable to all shall come within next few months.

After the BJP complete the performance on its core agenda, we should accept some performance on the ancillary promise of faster and sustainable economic development. Amen!

Chart of the day

Face the bitter truth

It is a common practice for most schools and teachers to assign tasks to small children, which they could not be reasonably expected to perform on their own. In most cases teachers are fully conscious that the parents will be completing such assignments. The parents are usually bothered, but somehow choose not to register their protest to teachers; rather they choose to complete the assignments themselves. The children get their first lesson in non-compliance and jugaad in their preschool tenure itself.

For three decades, so called mainstream Kashmiri political leadership never raised a voice for the rights of persecuted and exiled Kashmiri Pandits. To the contrary they have been supporting the people indulging in anti national and violent activities.

They certainly have lost their credential to be constitutional representatives of the people and land of J&K. Outside the valley they evoke no popular support even amongst the Muslims. Although a tiny section of media and liberal thinkers does talk about the plight of the residents of Kashmir in general, no one specifically shows sympathy towards the mostly dynastic Kashmiri political leadership or groups challenging the status of J&K as integral part of the Indian Union.

Now applying these analogies to the Indian businesses and financial markets, we get the following:

(a) It is undisputed and inarguable that a section of Indian businesses have been violating the law of land and rules of compliance with impunity since long.

Have we witnessed industry associations like CII, Assochem, PHDCCI etc strongly reprimanding its constituents or issuing a mandatory advisory to all its constituents and members not to indulge in such practices and ensure full compliance of law & rules, especially tax laws?

(b) There have been numerous instances of professionals like CA, CS, Advocates, Doctors etc violating the code of conduct prescribed for them and indulging in unethical and unlawful practices.

Have we seen self regulatory bodies of these professions taking adequate punitive actions against their delinquent members?

(c) Entire nation knows how the staff members and officers of banks conducted themselves during the Demonetization period.

How many these bank employees have been punished even with a reprimand? How many of the citizens who bribed these bank employees to get their currency notes converted out of turn are ashamed of their act of non-compliance.

(d) How many local communities and assemblies (popularly known as Samaj, Biradari, Khap, Panchayat etc) have issued advisory to their members to fully comply with laws of the land, especially taxation laws?

(e) How many investors and traders are aware of the malpractices of their respective brokers?

I am not aware of any one complaining about this unless and until he or she becomes victim of such malpractices. Are you?

(f) How many of us are aware of misuse (or non compliance) of CSR allocation? Dis any self regulatory industry body thought of issuing a advisory to companies to fully comply with the CSR rules and not indulge in money laundering misusing these rules?

What is the credential and bona fide of the people (industrialist, bankers, professionals, experts, traders, community leaders, politicians etc) who chose to criticize the enforcement agencies, taxation authorities etc for strictly dealing with suspected violators.

I do not want to go into appropriateness or otherwise of the conduct of enforcement agencies and tax authorities. But I am sure total failure of "self regulation" on part of citizens is worrisome and needs to be managed at the primary education level.

Also worrisome is the tendency of businesses and professionals to indulge in finding loopholes in a legal provision even before such provisions becomes enforceable, rather than reasoning with the government about the appropriateness or otherwise of such provisions.

The argument that government is unresponsive and arrogant is more of a platitude, since most of the people and organizations wanting to engage with the government would fail in proving their credential for such engagement.

Thursday, June 20, 2019

Tax vanity

Some food for thought

"Our duty is to encourage every one in his struggle to live up to his own highest idea, and strive at the same time to make the ideal as near as possible to the Truth."

—Swami Vivekanand (Indian Philosopher, 1863-1902)

Word for the day

Epiphonema (n)

A sentence that is an exclamation, a general or striking comment, or a succinct summary of what has previously been said.

First thought this morning

Many people have taken strong exception to the chanting of religious and other slogans associated with our independence struggle on the floor of the Parliament. They have usually been critical of BJP, enjoying a dominant majority in the lower house, for its inability to protect the secular credentials.

I believe these people are living in denial. They are choosing to ignore the fact that just one month ago, these members of the Parliament have been elected by majority support using these very slogans only. Expecting them to stop shouting these slogans would actually be naive. Honoring the democratic traditions, the will of the majority must be accepted as the law of the land.

We, the people of India, have unambiguously expressed our priorities. If the Parliament and State assemblies are functioning as per the priorities set by us, there should not be any complaints.

On a more fundamental note, I would reiterate that the government must work to remove the terms "secular" and "socialist" from the preamble of our constitution. Let there be clearly marked "Right" and "Left" politics in the country so that the people can chose between Bread and Moon (Roti aur Chaand). These degenerated socialists and pseudo secularists have already done tremendous harm to the elementary fabric of our society.

Chart of the day

Tax vanity

Many people reportedly bought tickets for over hyped India-Pakistan ICC World Cup 2019 encounter in black market paying as high as £1000 per ticket. Add to this another £1500 for VISA fee, economy class return airfare, 2night stay in London. This comes to staggering £2500 (INR 2,20,000) per person for watching a match with a 6th ranked ODI team in world - which has not been playing good cricket for two years; comprises mostly inexperienced & inconsistent cricketers; and belongs to a country widely perceived to be an enemy. Moreover, as per the available weather forecast there was only a 50% chance of a full match being played.

Thankfully match happened and India won decisively as expected. However, if we ignore the fun on the sidelines (drums, bhangra and nationalistic fervor) the cricket was lacking from both sides. Virat Kohli gave himself out despite umpire saying not out. Rohit Sharma gave two run out chances. Dhoni played a poor shot to get out in a hurry. Bhumrah bowled below par. Bhuvneshwar again raised doubt about his fitness. Entire Pakistan team performed poorly save for some random glimpses of brilliance by Amir and couple of batsman.

This reminds me of the Justin Bieber's Mumbai concert in summer of 2017. People virtually scrambled to pay INR70,000 for each concert ticket; travelled to New Mumbai stadium, and waited for many hours in hot and humid weather for a pop singer to come and lip sing a few of his popular songs, easily available for free download on internet.

I see three bothersome trends in these events:

(a) Income inequalities in India have risen to a level where a section of people is able to splurge obscene amount of money just for vanity purposes. I acknowledge that this has been happening ever since ancient times. But earlier the underprivileged did not have smart phones in their hand beaming such acts of self indulgence live to their anguish, elevating their sense of deprivation.

(b) The people at bottom of the pyramid are inspired to give priority to aspirational spending (expensive smart phone, expensive vacations, extravagant marriages & birthday parties, etc.) over necessities like good education, healthy food, better living conditions etc. This is persistently increasing pressure on the government to provide for the education, health, housing, fuel, electricity, water etc.

It is common knowledge that a large portion of farmers' debt is non farming debt. This debt is mostly taken for unaffordable marriages, religious rituals on birth & death and medical treatment. This debt cannot be repaid from meager farm income that is barely sufficient for survival. This leads to frequent calls for debt waiver. The governments are obliged to honor these loan waiver calls due to their political compulsions. The vicious cycle is thus perpetuating. The primary consequence of this is perennial shortage of growth capital.

(c) Media has become too potent to influence economic behavior of consumers. This is true for most of the democracies where media enjoys reasonable degree of freedom. But in our case since it threatens to damage the socio-economic structure of the country, a certain degree of control, may be higher standards of self regulation and stringent check on motivated campaigns, may be warranted. Alternatively, the State may consider running a counter campaign whenever a need is felt.

If the Finance Minister is searching for new avenues of raising tax avenue and wealth redistribution, this kind of vanity spending that impacts less than 2% of the population may be a good target. Let the GST on Justin Bieber concert ticket be 40% and the foreign exchange purchase for non-business and non-medical purposes may also be subject to 12% GST. Those who can spend Rs2,20,000 on Indo-Pak match, they can spend Rs2,50,000 as well.