Skill India for global economy

Thought for the day

"I never see what has been done; I only see what remains to be done."

—Budha (Indian, 563-483BC)

Word for the day

Luddite (n)

Someone who is opposed or resistant to new technologies or technological change.

Malice towards none

After three years, may we ask PM, what's the progress on his promise to establish special courts for cases involving politicians, so that all such cases are decided within a period of one year?

First random thought this morning

Integrating the solar energy equipment into normal building construction material could be a major innovation in the coming years. The work has already begun with roof tiles and window panes incorporating PV cells.

I have yet not heard someone taking a lead in India. Designer solar walls & roofing sheets, roof tiles, pillars & poles, car, bus & train roofs, doors and windows, pavement tiles - the opportunities are immense.

Government may want to spend some time and money on this also.

Skill India for global economy

Millions of reams have been used to write and publish about the demographic characteristics of India. Many stories, themes and strategies have been built around the young demographic profile of 1.25bn Indians.

Almost all these stories and strategies recognize the young Indian as a great opportunity - "Demographic dividend" for the Indian economy. A few of them have words of caution also. Failure to channelize this vast reservoir of energy into productive streams may not only dissipate the demographic dividend but also prove to be counterproductive in terms of widespread civil unrest and violent disruptions.

I have not come across any presentation that classifies this demographic profile as the solemn accountability and responsibility of India to the world.

The global community has always valued resource rich nations, expecting them to behave in a responsible manner to preserve the global order.

The capital rich western world has been expected to help the poor and starved of the world. The world looked forward to them to fund technological advancement, preservation of cultural heritage, assisting global growth and development. Even after taking full cognizance of the allegations of imperialism and suppression, I believe that financially rich communities have worked for the betterment of human life by funding technological innovation, life science research & development, productivity enhancement, and development assistance to the economically lagging world.

Similarly, nations rich in natural resources like minerals etc. have been expected to prospect and exploit these resources in optimum manner to assist the sustenance and growth of the global economy.

My point is that now since India possesses the largest pool of prospective workers for the world, should it not be responsibility of Indian government to prospect, grow, and develop this resource for the larger benefit of the global community.

This is even more pertinent in the context of the current global context. In places like Europe and Japan the root cause of the economic challenges could be traced to their aging demographic profile. China is also like to join the club soon. Under the circumstances it is the responsibility of India to provide educated, skilled and trained workforce to the global economy.

A number of research papers and surveys have shown that (a) Child and mother nutrition level in India is sub-standard consequently child mortality rates are poor; (b) higher and professional education standards are extremely poor consequently a large number of Indian graduates are unemployable even in routine jobs; (c) There is acute shortage of competent scientists to scale up research and development (R&T) activities to make Indian businesses competitive at global stage.

"Skill India" and "Make in India" are noble ideas for human resource development. But we need to make sure that these do not end up prospecting and developing only blue collar low skilled workers. In that case India will not only fail in its responsibility to global community but also slither back into the lower orbit of economic development...to continue

Believe what you know

Thought for the day

"Chaos is inherent in all compounded things. Strive on with diligence."

—Budha (Indian, 563-483BC)

Word for the day

Imprimatur (n)

Sanction or approval; support, e.g., our plan has the company president's imprimatur.

Malice towards none

Kapil Mishra (AAP) and Naseemuddin Siddiqui have added a new manifestation to the phrase Coming Out

First random thought this morning

I am not sure about how the pet project of PM Modi, viz., Make in India is doing in industrial sphere. But the hype created by it has certainly helped making a grand rally in Indian equity market.

Perhaps for the first time in more than two decades, domestic investors are more enthusiastic about Indian equities than foreign investors. Consequently, the market are moving higher despite intermittent selling by foreign investors.

Believe what you know

I have written on this many times earlier. Regardless, I find it important to reiterate my observations and thoughts on this once again.

I have been wandering through mesmerizing landscapes of India for past many years. The nomad hidden within me had coaxed me to many journeys. I would travel mostly aimlessly; enjoy various manifestations of the divine Mother Nature; acquaint myself with various people; appreciate their way of living; admire their culture; collect some souvenirs, recipes, anecdotes and come back into my cocoon- relaxed, happy and little wiser.

Nonetheless, in the process, I have developed a great appreciation for a variety of people - their varied customs & appearance - and usually felt comfortable even in a cross cultural environment. Subconsciously, I have invested significant efforts in identifying how other people are different from my own ways, rather than discovering the points of convergence. (If someone alleges that this is an act of racism – well I admit it certainly is.)

Most of these journeys have been fulfilling and contributed positively to my thoughts. However, one thing has always bothered me. Many times, I have been confronted with serious doubts about the “Indianness” of “India” and “Indians” as we understand these ideas in common discourse.

Deriving from my discussion on social, political and economic conditions with people of various regions, I doubt that the idea of “Indianness” perhaps only exists in films, army manuals, national holidays (26^th January and 15^th August), political speeches and patriotic songs. The compositions my children write describing “Unity in diversity” appear somewhat mythical to me.

I have discovered that after 70years of becoming a geopolitical union, India still remains merely the one. It is far from becoming a socio-economic union and even further from becoming a socio-political union.

I find a national approach to anything is conspicuous by its complete absence in general public discourse. People have strong dogmatic allegiance to their caste, religion, locality, region and state, generally in that order. I saw little evidence of any effort being invested by the system - local politicians, teachers, social workers, police or administrators - in developing an “Indian” identity of people.

The failure of national economic policy in recognizing this regional diversity is perhaps the primary reason for sub-optimal outcome of our efforts. No special efforts are needed to discover that most of the states, regions within states and communities within regions have diverse socio-economic behavior. Hence, their needs and requirements are also distinct. A blanket policy for all is therefore least likely to succeed in meeting its objectives.

The post 1947 political organization of the country on lingual basis appears to have outlived its utility. It is high time that our political and economic order should recognize this diversity and be re-designed.

In my view, an incremental approach (creating more states and districts) will not work. We need to begin from the beginning without any prejudice or reference....to continue

Let our children grow as Indian

Thought for the day

"It is so hard to believe because it is so hard to obey."

—Soren Kierkegaard (Danish, 1813-1855)

Word for the day

Milliner (n)

A person who designs, makes, or sells hats for women.

Malice towards none

Those filing hundreds of PILs on non-issues, may please consider filing a PIL requesting SC to order a judicial review of all orders passed by the controversial Kolkata HC judge! Please.

First random thought this morning

The entire pharma industry seems to be passing through its Galileo moment.

First, the scientists challenged the diabetes standards. Then came the big challenge to the entire theory of good & bad cholesterol and its impact on cardiac health. And now someone is challenging the impact of salt (sodium) intake on human health.

I am not sure who will go the gallows this time - the challenger Galileo or the defender pharma giants. But certainly we have interesting times ahead.

Let our children grow as Indian

A few months ago, the government of Maharashtra decided to erect a colossal statue of the great Maratha King Chatrapati Shivaji off Mumbai coast, broadly on lines of the Statute of Liberty off New York coast.

While I fully appreciate commemoration of one of the greatest sons of India, I feel, the proposed statute may not be a justice to his memory and stature. It may be seen as yet another poor attempt at Americanization of India.

This needs to be appreciated that the Statue of Liberty is deep rooted in the American consciousness. Freedom of people, thoughts and ideas is at the core of American State. The Statue came after the American State enshrined the idea of liberty in its consciousness. The flame carrying lady represents what USA stands for. It is widely considered both a reminder of core values, and inspiration to many.

In India, outside the erstwhile Maratha kingdom, the knowledge about the ideology and Vision of Chatrapati Shivaji is scant. The school history books outside Maharashtra contain few short stories about his valor, but nothing beyond that.

Unless, the students across the country are taught about the great vision, struggle and contribution of the great king, in a manner that it leaves an indelible imprint on their collective conscience, the proposed Statue may just remain a tourist attraction.

Not only this, the same is in fact true about most great kings, saints, religious leaders and literary genius. School students in Maharashtra read little or nothing about history and legends of South, East or North India. The same is true about most states. The students are taught only about the respective regional personalities.

Students in Mumbai & Delhi could not even name all North Eastern states. None of several 10th class Delhi students I spoke to were aware about a region named Rohilkhand in India (located just 160kms from Delhi). Students in UP, Punjab, Bihar, Rajasthan are mostly ignorant about Tukaram, Thiruvalluvar, Subramanya Bharti, Eknath, and Chandidas.

To a person sitting in Mumbai, Bangaluru, Chennai or Hyderabad, the state of Uttar Pradesh (UP) may not mean much more than – Taj Mahal, Varanasi, Lucknow, Kebab, taxi drivers and construction labor. Very few residents of the western and southern states appreciate that UP is as diverse as India itself. Various regions of the state, i.e., Awadh, Brij, Rohillkhand, Bundelkhand, Purvanchal, and Doab, have distinctly identifiable history, food, dialect, customs, deities, and problems.

The consequence is that student grow up with mostly misplaced sense of supremacy of their regional identities and culture vis-à-vis other regional identities and cultures.

Under these circumstances, how could one expect people in general to have a national approach to any issue! Politicians who emerge from these people only, naturally have parochial viewpoint of most issues concerning growth and development of the country.

...to continue next week.

Moving away from roots

Thought for the day

"Boredom is the root of all evil - the despairing refusal to be oneself."

—Soren Kierkegaard (Danish, 1813-1855)

Word for the day

Holus-Bolus (adv)

All at once; altogether.

Malice towards none

Why the home minister of modern India should engage himself in debate over supremacy of Maharana Pratap and Akbar?

Should these things be not better left to historians, poets and archaeologists?

First random thought this morning

The number of near misses in India civil aviation sector has seen material rise in past couple of years. This reflects the phenomenal rise in air traffic. At the same time it also reflects that the infrastructure needed to handle this kind of traffic growth is not in place. The new UDAAN scheme may add significantly to the air traffic. It is also possible that people with lesser experience and skill are hired to manage the sudden rise in number of flights. The maintenance standards may also become slightly lax.

Authorities, Supreme Court, passenger associations must look into the matter before we have a major disaster mid air or on the tarmac.

Moving away from roots

Have you seen the latest TV promotion of the largest travel portal in India. The advertisement not only stereotypes a typical resident of Delhi, but also tries to generalize the socio-economic behavior of a large group of people based on their regional identities.

Anyone who has lived in Mumbai for sometime will vouch for the deep prejudice of affluent and highly educated Marwari and Gujarati people towards north Indians.

A few weeks ago, a senior leader of the ruling party implied by his public comments that the Aryan race north Indians are tolerant enough to live with the dark skinned Dravidian south Indians.

The racial crimes against people from north eastern states are frequent and rising.

One thing that we as a society have steadfastly refused to accept is our regional and racial prejudices and preferences. Admittedly, the degree of prejudices may vary from 0-100 on individual level, but on a broader social level they do exist, and defiantly work to the detriment of country's overall growth and development.

The presence of regional and racial prejudices and preferences in the economically developed countries cannot be denied. In fact, there these could have even stronger influence on the social structures.

But this does not justify the racism and regionalism in our land. Our roots are built upon the Sanatan Dharma that seeks peace and prosperity for everyone (सर्वे भवन्तु सुखिनः सर्वे सन्तु निरामया), irrespective of race, region or creed; and strengthened by the belief like (a) the entire universe is a family (वसुधैव कुटुम्बकम्) (b) all women in this universe are incarnations of the Mother supreme (स्त्रियः समस्ताः सकला जगत्सु।) and (c) all castes are integrated into the one Mother Supreme (यादेवी सर्वभूतेषू जातिरूपेण संस्थिता).

The current state of social, cultural and religious affairs is definitely a distortion.

I have no inhibition in saying that the root cause of our socio-economic backwardness lies in our utter disregard for our religion, culture and traditions. More so by the vested political interest groups.

Religion has been a major force in core Indian ethos. Traditionally it has been the influence of religion that has brought the concepts of scientific inquisition, righteousness, moral rectitude, social responsibility, environmental sustainability, debt management, HR management, and just & fair taxation, etc. in the trade and commerce.

Post Independence the State has been over focusing on micromanaging businesses and ignoring key social issues. This has weakened the core fabric of Indian society, inasmuch as that taking pride in our rich heritage has become synonym with bigotry for all - the so called "nationalist" who takes pride, the so called "secularist" who is too scared to take pride, and the so called "rationalist" who find nothing to take pride in Indian heritage.

...to continue

This one also falling in place

Thought for the day

"During the first period of a man's life the greatest danger is not to take the risk."

—Soren Kierkegaard (Danish, 1813-1855)

Word for the day

Hypostatize (v)

To treat or regard (a concept, idea, etc.) as a distinct substance or reality.

Malice towards none

The people of Delhi, who empowered Arvind Kejriwal to take their fight against corruption forward, have indicated (through MCD elections) that they are not happy with him.

The question is why they are not coming out on streets, the way they did during IAC campaign, and asking him to step down?

Or Is there much more than what's meeting the eye?

First random thought this morning

Markets shrugged off Brexit and Trump in no time. Both were marketed aggressively as potential disaster. Traders are fully reconciled to two Fed hikes later this year. French elections gave no opportunity for a short trade either. OPEC unity has so far not yielded much in terms of inventory glut easing or price stabilization.

Back home the market rally is being attributed to Demonetization (accelerated financial inclusion, better fiscal, etc.), something that was marketed as monumental disaster by many reputed economists and analysts.

The disregard for experts' opinion by market was never so stark.

This one also falling in place

The most important contribution of the present day government to Indian economy, in my view, is its national approach to some critical economic issues.

After many decades many decades we have a political party in power with such overwhelming dominance and aspiring for complete dominance. The overriding influence of the central leadership over the vast area of dominance (BJP ruled states now encompass ~60% of Indian population) allows near seamless economic integration of many large states like UP, MP, Maharashtra, etc.). At the same time the strong aspiration of BJP leadership to rule over the rest of the country (especially Bihar, West Bengal, Odisha and Karnataka) motivates them to focus on economic development of these regions as well.

Implementation of GST is more popular indication of the economic integration efforts of the incumbent government. But in my view, the more relevant efforts include pan-Indian approach for railways and highways expansion, an apolitical approach for power sector reforms, efforts to establish a nationwide agriculture market, gradually phasing out tax incentives on area specific investments, amendment in mining laws that allows the mine holding states to draw a larger share in royalties and incentivizes putting manufacturing facilities closure to raw material, etc.

There are two things, impact of which will be evident only later, are -

(a)   Putting onus of executing central schemes on states through recommendations of 14th finance commission. Under the current circumstances where there is one dominant party with strong central leadership, this design may work well. The planning and policy making can be centralized and execution could be delegated to states. But it is to be seen if it will work in different circumstances.

(b)   Replacing the legacy Planning Commission, which was empowered to make development plans in consultation with states, with a more advisory body NITI Aayog. While both the bodies came into existence through executive orders and depend on the government's will, the planning commission had assumed an important role in the 5yr plan based development model adopted by India since independence.

The new design however appears to suggest that we no longer want to follow the central planning model that was loosely based on the Soviet command based economic development model. It however also does not suggest that we are ready and willing to adopt the laissez-faire model of USA, where markets are free and federal states are materially powerful.

The conflict between the development economists who have so far dominated the Indian policy making arena, and the market economists who have given more important roles probably for the first time, will take some time to resolve, in my view. We will be able to judge the pertinence of NITI Aaoyg only when that happens.

Overall, I feel we have taken many steps on the road to economic integration of the country, and this piece shall fall in place in next decade or so. 

Failure is not an option here

Thought for the day

"Face the facts of being what you are, for that is what changes what you are."

—Soren Kierkegaard (Danish, 1813-1855)

Word for the day

Oleaginous (adj)

Having the nature or qualities of oil.

Containing Having oil.

Malice towards none

It's rather  surprising to see that our market experts are bothered in equal measure about the French presidential elections and Delhi Municipal elections!

First random thought this morning

Arvind Kejriwal is behaving like the puerile young man who is cutting the branch of the tree he is sitting on.

By tagging anyone and everyone of his party members who chose to speak against him as "sold to BJP", he has implied that AAP members and MLAs are saleable if you pay the right price, thus seriously dissipating the credibility of all AAP members.

Failure is not an option here

In five decades of post Nehru period, there have been many national movements which have attempted to redefine the India's social, political and economic milieu.

Most notable of these movements are Naxalite movement of 1960's spearheaded by Charu Mazumdar and Kanu Sanyal et. al.; Jaiprakash Narayn's "Total Revolution" in 1970s, V. P. Singh's "Jan Morcha" in late 1980's, and L. K. Advani's "Ram temple" movement in early 1990's.

Besides, many regional movements have also had notable impact on the Socio-political order. Kanshiram's movement for social justice to the bottom of the pyramid, viz., "Bahujan Samaj" is amongst the most prominent ones.

Though most of these movements have had material influence on our socio-political order, none of these movements could sustain to achieve a potent revolution that could catalyze a complete break away from the politically feudal, economically colonial and socially divisive legacy of British Raj.

After five decades, the society continues to be deeply divided on the lines of religion, caste, and community. Socio-economic inequalities obdurately persist. Social and gender prejudices run deep into citizens' mindset.

The political consequence is that the populace as a whole still prefers to closely identify with religion, caste, community, region rather than the Nation. Reflecting the divide, the elected representatives are often seen pursuing parochial agenda; sometime at the expense of broader national interests.

The economic consequence is that we have failed to devise a "National" approach in economic planning and programming. A fragmented approach in defining economic agenda, has often led to clash of regional aspirations and misallocation of scarce national resources. Indian Railways, various river water disputes, conspicuous regional growth imbalances and wasteful "tax exempt industrial zones" are some classic examples.

In this backdrop emergence of a strong Nationalist leader in PM Narendra Modi is a critical developments. Though it's still some distance away to qualify as a redefining national movements, it appears well on course.

The single most important contribution of PM Modi's efforts to the social order could be identified as rise of hope in the society in general. It is particularly significant because this rise in hope has occurred at the expense of general skepticism over political establishment.

The question is whether this rise in hope will get channelize into the economic sphere in terms of larger and deeper investment commitments, improvement in risk profile of entrepreneurs, and better compliance standards.

A failure on part of the government in general and PM Modi in particular could lead the country into a renewed bout of skepticism, risk averseness and non-compliance.......to continue

Shed the colonial past

Thought for the day

"It is the knowledge that all men have weaknesses and that many have vices that makes government necessary."

—James Monroe (American President, 1758-1831)

Word for the day

Minatory (adj)

Menacing; threatening.

Malice towards none

As per the latest Cleanliness rankings, MP emerges as the cleanest state in the country and the neighboring UP as the dirtiest.

First random thought this morning

Sometime I wonder whether we live in a democratic country or feudal village.

National media prominently shows, as a novelty, how the president of ruling party and vice president of principle opposition party eat food with poor people. Prime Minister visits temple, of course as a VVIP, but takes off his shoes himself. CM of a large state himself performs Kanya Pujan during Navratri. All events are reported as hallmark of the benevolence and humility of leaders.

A different view is to see how a minister gets out of his office. The driver brings the car 20minutes early, runs the AC to cool it. One person carries the briefcase and files. One person runs and holds the gate of lift so that minister does not have to wait. Some ministers like someone to hold their mobile phone too. This is true even for most of the Hawai Chappal wearing Delhi ministers.

Shed the colonial past

India became an independent political union 70years ago. However, it continues to remain far from becoming an economic and social union till date.

In past two decades, some notable efforts have been initiated to make India a strong economic union. The most pertinent being development of golden quadrilateral of national highways, development of dedicated freight corridors, a uniform goods and services tax, and more recently proposal to develop a national market for agriculture produce.

Many efforts have been made to promote cross state investments through tax concessions, e.g., tax holidays for setting up new industry in industrially backward areas, subsidies for new units in SEZ, Agro processing zones, Software Technology Parks, to reduce regional inequalities.

So far, these initiatives have brought some incremental changes in the direction and trajectory of economic growth. These measures are usually found inadequate in bringing any structural change in the economy, something we need desperately at this point in time of history. It remains to be seen whether GST will bridge the inequalities of widen these.

The economic model adopted post independence era, which was mostly an extension of the exploitive colonial model used by British Empire, has promoted inequalities, injustice and unsustainability. This is the economic paradigm we need to change by instituting fundamental reforms. Improving efficiency of the extant system is just not sufficient.

It is pertinent to take note some basic data points, before I extend my argument any further.

(a)   The four largest populated states, viz., UP, Bihar, MP and West Bengal are amongst the poorest ones. These four states account for almost 40% of total population of India. Whereas their contribution to India's total GDP is just ~20%. The annual revenue gap (the difference between the revenue earned and revenue expenditure) for these states is much higher than the national averages. Bihar earns just 31% of its revenue expenditure requirement; UP 51%; MP 46% and West Bengal 45%.

(b)   The four richest states in India, viz., Maharashtra, Tamil Nadu, Gujarat and Karnataka account for less than 25% the total population; whereas their contribution to national GDP is over 40%. Maharashtra (72%), Tamil Nadu (79%), and Gujarat (75%) are able to cover their revenue expenditure much better.

(c)    Five top states Maharashtra, Tamil Nadu, Gujarat, Karnataka and Andhra Pradesh account for close to 70% of total exports from India. Whereas the resource rich states like Jharkhand, Chhattisgarh, West Bengal, Odisha, Punjab etc. lagged much behind.

(d)   The economic inequalities are fully reflected in the social parameters like child mortality, literacy, women health, availability of drinking water and sanitation also.

The point is if we keep more than 50% of the population just at the sustenance level, how do we create enough demand to grow faster and higher! ....to continue next week

Improving farm income

Thought for the day

"Preparation for war is a constant stimulus to suspicion and ill will."

—James Monroe (American President, 1758-1831)

Word for the day

Dox (v)

To publish the private personal information of (another person) or reveal the identity of (an online poster) without the consent of that individual

Malice towards none

Why Shri Narendra Modi visiting a temple should be a national news?

 First random thought this morning

I almost killed myself and two school children yesterday in order to avoid hitting a dog who suddenly decided to take a stroll on a busy road and came in front of my car from nowhere. Police refused to file an FIR and take any action against the errant canine.

Why can't animals be treated just like human being and punished for endangering others life, littering and encroaching public land.

Cases of killing and mutilation of bodies of infants and young children by stray dogs are reported frequently in India. There are many cases of attacks on adults, old and infirm also.

Why is it so that media, liberals, nationalists, politicians and civil society has never made hue and cry over these deaths.

Improving farm income

As I suggested yesterday (see here), to improve the health of farm sector, and liberate 40% of Indian population from perennial distress, we need a combination of administrative, legal, social, economic and financial sector reforms. In particular the following three things need to happen, viz., (a) Substantial rise in productivity; (b) Substantial rise in price of agriculture produce; and/or (c) fall in price of agriculture land.

Rise in productivity

My discussion with many farmers, agriculture scientists and rural activists suggests that a substantial rise in productivity is possible without cumbersome land, marketing and labor reforms or building expensive infrastructure.

Aggressive promotion of collective farming, institutionalization of farm equipment rental business, creating more awareness about intensive farming and moving the farmers away from traditional cereal crops towards cash crops could enhance yields by 50-100% in most cases.

In this context, implementation of the food security law is critical. If implemented in right earnest this could transform Indian agriculture from a mere self sustenance activity into a truly commercial activity.

This measure combined with the financial inclusion efforts, could have meaningful impact on the livelihood and productivity of small and marginal farmers.

Substantial rise in prices of agriculture produce

A substantial rise (2 to 3x) in most agriculture produce price could potentially bring back interest in agriculture sector and incentivize substantial investment leading to higher productivity and eventually lower food inflation.

This one time measure could help making taxation of this sector politically and finically feasible thus improving the fiscal balance of the country.

The negative could be substantial rise in food inflation in the short term leading to higher rates.

Substantial fall in land prices

Substantial fall in prices of agriculture land could also help in improving yields and therefore attract fresh investments in the sector.

Such a fall, however could have serious impact on the consumer discretionary spend, as a large part of the growth in discretionary spending has been contributed by the wealth effect created through higher land prices.

The best solution therefore would come only from a mix of the above three. Any solution on these lines might take ~5years to implement and another ~5years to have a meaningful impact on structure of agriculture sector in the country.

Taxing farmers may yield nothing

Thought for the day

"Sheep, like people, are ungovernable when hungry."

—John Muir (American, 1838-1914)

Word for the day

Green-Collar (adj)

Noting or pertaining to workers, jobs, or businesses that are involved in protecting the environment or solving environmental problems.

Malice towards none

You speak one lie 100times, and people start believing it to be true.

This adage does not seem to be applying to AAP.

The more they lie, the more  people disbelieve them. So much so that many have started discounting their truths also.

First random thought this morning

Our government seems to be pushing the Make in India policy hard. Reportedly, it now wants all government procurements to be sourced locally. It also wants metro trains to have at least 75% local content. It sounds like a great idea.

The small problem is that many of our large trade partners like USA also seem to be copying our idea of localization, and many of us are not liking it.

An American investor who recently visited Patanjali facilities in Haridwar, got the impression that this desi enterprise certainly has tacit support of thegovernmen (States and Central). If global corporations like Coke, Pepsi, HUL, Nestle, P&G etc. get hit due to this, this pain will certainly reflect on likes of TCS, Infosys.

Taxing farmers may yield nothing

Tax on agriculture income is one of the favorite topic of market economists and strategists. Most of them believe that by taxing agriculture income, the government could materially improve its fiscal position.

In my view, taxing agriculture income would add only an insignificant amount to the government's kitty. Anyone betting big on taxation of agriculture income may perhaps need to spend 6months in any village of the country to understand what I am trying to suggest.

About 40% India's total population is directly dependent on farming. As per the latest available NSSO survey (70th Round, June 2013), the country has about 90.2 million agricultural households.

Among the major States, Rajasthan has highest percentage of agricultural households (78.4 percent) among its rural households followed by Uttar Pradesh (74.8 percent) and Madhya Pradesh (70.8 percent). Kerala has the least percentage share of agricultural households (27.3 percent) in its rural households preceded by other southern States like Tamil Nadu (34.7 percent) and Andhra Pradesh (41.5 percent).

Close to three fourth of these farmers belong to OBC, SC and ST category. Two third of these farmer household have crop cultivation as their primary source of income. 22% of these household survive on wages. While the others have livestock and agri related activities as their primary source of income. About 44percent of estimated agricultural households have MGNREG job card.

Average monthly income of the agricultural households, including net receipts from cultivation, farming of animals, nonfarm business and income from wages/salaries, during the agricultural year July 2012- June 2013 was estimated as Rs.6426/per household (Average 5people).

About 52 percent of the agricultural households in the country are estimated to be indebted. The average amount of outstanding loan per agricultural household was Rs.47000/- (approx.).

Among the major States, Andhra Pradesh had the highest share of indebted agricultural households in the country (92.9 percent) followed by Telangana (89.1 percent) and Tamil Nadu (82.5 percent). Assam (17.5 percent), Jharkhand (28.9 percent), and Chhattisgarh (37.2 percent) were the major States with lowest share of indebted agricultural households.

The average amount of outstanding loan was highest for Kerala (Rs.213600/-) followed by Andhra Pradesh (Rs.123400) and Punjab (Rs.119500). Assam (Rs.3400), Jharkhand (Rs.5700) and Chhattisgarh (Rs.10200) were the States with lowest amount of average outstanding loan.

About 83% (80% in 2003) of the total farming households in India are either landless or marginal (holding less than 1 hectare or 2.47 acres cultivable land). The average gross cropped area per agricultural household is period 0.937hectare (2.31 acre). The average value of production (which included value of harvested crop, pre-harvest sale and value of by-products) per agricultural household during the period was Rs.40580/-.

However, if we adjust this average income for the loss due to crop damage due to natural causes (at least once in three years), the average income per farmer household will be much lower.

It is most pertinent to note that this income does not account for the cost of self-labor and own seeds used.

As the following table shows, only 0.24% or appx 2,15,000 agriculture household are large farmers (owning more than 6hectare cultivable land). They collectively own approximately 5.8% of the total cultivable area.

Assuming that they earn more than average farmer household income of Rs41000/hectare per crop, and are able to take three crops every year, the average income for the large farmer household may not be more than Rs41000 X 3crops X 6hectare=Rs7,38,000. Dividing this income between two adult members of the house and adjusting for expenses like depreciation on equipments, interest on loans, and one bad year in five years, the government may not get virtually any tax.

 

 

 

I understand that there are numerous cases of false reporting of agriculture income to convert black money without any tax.

There are some large farmers, who hold large chunks of Benami Land, and may be earning much more than the averages mentioned above.

But these are anomalies. These need to be handled as such. Making a rule based on these exceptions may not yield much results.

As such, agriculture is a totally unviable business in India. With over 40% population engaged in an unviable and least productive business, an economy cannot be expected to grow faster on sustainable basis.

If we want Indian economy to grow faster on sustainable basis, supporting restructuring and reorganizing India's farm sector is a pre-requisite.

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