Retail FDI- Creating political storms

The announcement by the gov ernment about cabinet decision on 51% FDI in Multi Brand Retail and 100% in single brand has created significant debate among political parties even to the extent of affecting the stability of this Government.

Trade constitutes the largest segment of the economy with a nearly 16.7 % share in NDP in 2010- 11, that is, in the aggregate NDP of Rs 43.2 lakh crore that year trade accounted for Rs 7.2 lakh crore [ at 2004- 05 constant prices] higher than the share of manufacturing [at 13.4%] and Agriculture [ at 15.0%]. ( National Accounts Statistics of the CSO, New Delhi 2011).

Trade is conducted mostly [ more than 80%] by partnership / proprietorship firms with active involvement from members of family and community. More than 125 lakh kirana stores provide a source of livelihood to nearly 16 crore people. Retail trade has grown faster than the economy: it registered a compounded annual growth rate ( CAGR) of 9.2% between 2004- 05 and 2010- 11 when the Indian economy grew at 8.6%. The retail trade comprises all kinds of people and formats – from street vendors to departmental stores of various types, shapes and characteristics.

More than 80% of trade is accounted for by partnership and proprietorship forms – often called the ” unorganized” sector. The kirana shop adjacent to my home opens at 7am and closes at 10pm every day, 365 days of the year. It is very efficient, and one can order through a mobile. The owner knows the tastes and price preferences of our family, but his business is classified as ” unorganized” by our experts and economists.

The retail trade suffers from two major handicaps. One is the non- availability of credit at reasonable rates from institutions; the other is the bribe one has to pay to the government babus to leave him in peace.

Two main arguments are given for this decision. One it will improve logistics/ supply chain and enhance agricultural efficiency and the other is it will bring down prices to help consumers

THE retail trade suffers from two major handicaps. One is the non- availability of credit at reasonable rates from institutions; the other is the bribe one has to pay to the government babus to leave him in peace since middlemen are eliminated.

My vegetable vendor carries half a truck- load of vegetables on his TVS 50 at morning 5am. In India small businesses use capital more efficiently than big ones- So supply chain if at all will be more expensive. As far as consumer prices – they may come down initially but global experience suggest after ” predatory pricing for some time” global companies will hike it to much higher levels since they need to increase returns.

The other argument is that the MNCs bring ” funds” and ” efficiency” . An MNC does not normally bring funds from outside sources as it can access them in our market by showing ” comfort letters” from their parent companies.

Many financial institutions, both government and private, are ready to lend to them below the prime rate as they are ” Global”. That the MNC will bring funds from abroad is largely a myth.

Remember, Enron which was supposedly bringing Rs 10, 000 crore from outside. The final result is that Indian FIs are holding more than Rs 6,000 crore of worthless paper.

Has anyone studied the ” aggregate cost” of these global retail chains? Most American homes have a retail store in their basement.

In the US, it is an issue of labor shortage but in India there is surplus that is part of the large self- employed group. For the economic expert goods held by household is consumption but held by mom- and- pop store is inventory.

Hence, inventory reduction has been achieved in the economy. Not much space is available in Indian houses to convert them as ” retail stores”. Another aspect is the fuel cost of driving long distances to the super- market and spending thousands of man- hours between aisles. Plus mobile phones are useful in placing orders from our Mata- Pita stores [also known as mom and pop stores in USA]. All petroleum services and products, rice, tobacco, salt, alcoholic beverages and fresh food traded at public markets are excluded in Japan from any ” distributional aspect” by companies of other countries. Australia, Japan, South Korea do not allow trade services in petroleum, its products, rice, tobacco, salt, milk, fertilizers etc by foreign companies.

French using their Loi Royer simply restrict any development of hypermarkets to protect what they call the ” centres of French towns and villages and the living of small shopkeepers”. Germany has legislative constraints on outlets above 1200 sq. m.

Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail.

We are signatory with more than 70 countries on to Bilateral Investment Promotion and Protection Agreements ( BIPAs), India has to provide national treatment to the investors. State governments therefore, may have to open up for big retail. Industries will use the legal option to force the States to comply.

The paan- chewing, dhoti- clad, English- ignorant retail trader should not be seen as an inefficient entrepreneur who needs to be bleached by globally- accepted detergents. What he needs is a level playing field, in the full sense of the term, with access to affordable credit and the abolition of inspector raj in the form of harassment by various arms of the government. Let us remember that we are still a savingsbased, family- oriented economy.

Swiss court may unveil black money names on 3CDs

Julius Baer had until 31 May to object to a Zurich High Court decision to unseal three CDs containing names of several account-holders, but the Swiss bank failed to do so – which could mean that these names could soon be in the public domain.

Over the next couple of weeks, a Zurich court could unveil the names of several account holders of Swiss.

Three CDs are at the core of a case involving Rudolf Elmer, a former Julius Baer Chief Operating Officer, who leaked 2,000 names to WikiLeaks. Elmer was then arrested and went on trial for allegedly breaking Swiss banking secrecy laws. However, the case against him would not hold if the CDs are found to contain names of account-holders of the bank in Cayman Islands, where Elmer worked for two years.

AFP

The CDs could soon become public information since Elmer has chosen to have his trial in public. They could have a big impact in India if the CDs are found to contain any Indian names, given the huge political impact of this disclosure.

Elmer claims that he has only published 5 percent of the data on WikiLeaks and so there may be much worse to come.

The prosecution case in the lower court was that Elmer had a Swiss contract with the bank (under which he had to respect banking secrecy laws) even though for two of the eight years he worked for the bank in Cayman Islands.

A lower court upheld the prosecution case and found him guilty but on appeal the high court judge decided in November last year that because the data on the CDs had not been revealed, it was not known whether it was Cayman or Swiss data.

“If it’s Cayman data, then it’s not under Swiss banking secrecy laws and they cannot find me guilty on a contract,” Elmer has said.

After that, the fight has been about what is on the CDs, one of which had been given to the newspaper Cash. The prosecution had asked the paper to hand over the CDs, but Cash instead sent them to Julius Baer on the grounds of protecting their sources. The bank argued that they should remain sealed to protect client privacy.

The high court dismissed this argument and opted to unseal the CDs. JB had until 31 May to appeal against the decision, but the deadline has now passed with no appeal, which means the contents of the CDs are set to be revealed against the bank’s wishes.

The important point to note is that the consequences could be disastrous for the bank and for tax evaders around the world. The Prosecution Office of Zurich will get all client names and in an open trial the names could be made public. Even if the names aren’t divulged, the tax authorities in other countries will have the option to request information from Zurich’s Prosecution Office. Whether India is going to ask for the names is another matter.

“The can of worms will be opened even more,” Elmer has been quoted as saying in the media. “I believe it is very important for international clients to know that the CDs are now with the prosecution and an enormous risk arises that their names might be published, or even that information requests will be filed with Zurich’s Prosecution Office.”

Now let us look at what kind of black money from elsewhere is lodged in secret Swiss bank accounts. Nearly one trillion Swiss francs out of 2.8 trillion of Swiss money is black money, says Konrad Hummler, former chairman of the Swiss Private Bankers Association. (See August 2009, Swiss Review, “Atlantic hurricane hits Switzerland in full force.”)

Hummler is quoted as saying: “Switzerland has become a paradise for foreign capital on which tax is not paid. The uproar from foreign governments is understandable.”

As to what this means, in August 2009 one Swiss franc was nearly equal to the US dollar. It means that US$ 1 trillion in black money has been kept in Swiss banks. Julian Assange of WikiLeaks has mentioned that Indians are a large class of investors in Swiss banks and much of the recent revelations pertaining to Commonwealth Games, Koda and other scams lead us to the Cayman Islands through Swiss banks.

Sources in the Swiss banking industry feel that since the Elmer data belongs to 2002, it may be less damaging than if it were recent. However, any Indian names found on the list will have huge political impact.

Elmer asserts that he has published only 5 percent the data on WikiLeaks, and says he did not release the other 95 percent because it was not his job to publish client names. It was up to the tax authorities to chase cases of evasion. He also claimed that when the CDs were unsealed it would do a lot more damage than the original WikiLeaks publication

Only time will tell whether or not the bank or its clients have anything to fear when the full contents of the CDs are revealed. But the fact that the bank fought so hard to keep them private suggests otherwise. The CDs are a ticking time bomb both for whose names may be on them, and for the political establishment.

Obama’s gay vision lights fire under US’s Bible Belt

Barack Obama has electrified his liberal constituency by announcing his support to same sex marriage.  In an interview to ABC television, which he has emailed to all his supporters, he says:

“I’ve always believed that gay and lesbian Americans should be treated fairly and equally. I was reluctant to use the term marriage because of the very powerful traditions it evokes. And I thought civil union laws that conferred legal rights upon gay and lesbian couples were a solution. But over the course of several years I’ve talked to friends and family about this. I’ve thought about members of my staff in long-term, committed, same-sex relationships who are raising kids together. Through our efforts to end the “Don’t Ask, Don’t Tell” policy, I’ve gotten to know some of the gay and lesbian troops who are serving our country with honor and distinction.

“What I’ve come to realize is that for loving, same-sex couples, the denial of marriage equality means that, in their eyes and the eyes of their children, they are still considered less than full citizens. Even at my own dinner table, when I look at Sasha and Malia, who have friends whose parents are same-sex couples, I know it wouldn’t dawn on them that their friends’ parents should be treated differently. So I decided it was time to affirm my personal belief that same-sex couples should be allowed to marry. I respect the beliefs of others, and the right of religious institutions to act in accordance with their own doctrines. But I believe that in the eyes of the law, all Americans should be treated equally. And where states enact same-sex marriage, no federal act should invalidate them.”

In making his views public, Obama has lit a time-bomb in American society which is deeply divided on the issue of same sex relationships, including same sex marriage.

In one sense he has brought the end to what is called the “American Project” which was excellently elucidated by Alexis de Tocqueville –  the French traveller – in the 1830s. He stresses that the American institution of marriage was fundamental to the civil society of a free nation. Of course, he also praises the ability of Americans to form associations at the drop of a hat and its then minimal levels of crime due to the deterrent nature of punishment.

What has happened to the “American Project”?

The President’s support for same-sex marriages has evoked mixed responses. AP

The pendulum has swung from one extreme to the other. A relationship-based, local community-based system of self-governance (and hence law-abiding society) has been turned into a rule-based/contract and small print-based society. There are now pre-nuptial contracts/marriage contracts/friendship contracts and child rights contracts. When a society becomes obsessed with rules, it loses its spontaneity and, in the process, the sovereignty of families gets destroyed. When families are not in control, children spend more time with game consoles than their grandmother.

This trend has been visible from the 1980s, when everyone was for enforcing rights and nobody argued about duties. Old people are the responsibility of the government so also unwed mothers and young children. The joint family got liquidated into nuclear families which, in turn, became single parent or co-habiting families. Single parent children are low performers compared to the children of married and living together parents. Unfortunately, lots of studies have shown that children of co-habiting mothers are no better than those of single parents (usually a mother). (See Charles Murray: The Coming Apart: The State of White America 1960/2010).

More than 50 percent of children born in 2009 to under-30 women were out of wedlock. What was once considered illegitimate has now become the new normal. Among blacks it is nearly 75 percent and for Latinos it is 55 percent (See Marriage is a Luxury Good).

At a time when marriage and family as institutions are under severe stress and may not exist in the coming decade, in this cauldron President Obama has poured shudh ghee to accentuate the issue by arguing that same sex marriages be recognized and supported.

This will be extraordinarily divisive since only a few days before North Carolina has rejected any attempt to recognise gay marriages. The USA is now broadly divided into two camps. The West Coast (San Francisco is known as the capital of same sex America) and the liberal North East, on one side, and the Bible belt of South and Midwest, on the other. The Economist newspaper says “it is safe to say that over one-third of Americans, more than 100m, can be considered evangelical, with the greatest concentration in the South.  Not only that, the vast majority of evangelicals oppose gay marriage”.

It seems the entire religious and family edifice of America, as understood by Tocqueville, is under threat.

“American exceptionalism” has come exceptionally under threat. To the best of my current information, same-sex marriages or unions cannot consummate and so they have to adopt or go for sperm and egg donations. From all accounts, born-again Christians or evangelicals are not going to accept it under any circumstances and many more states will fight it tooth and nail. It is worth recalling that the American civil war was not only about African-American issues, but about federalism and the rights of states.

What about the church? The Catholic Church has to oppose it tooth and nail, but given the recent scandals regarding child abuse, etc, and their diminishing hold on followers, it may not matter much. But the opposition of New Age Churches like the Pentecostals, which have strong evangelical followers, will be severe. One possibility is for the Church to lose but Christianity to win by slowly projecting Christ as gay-friendly just as the historical West Asian Christ has, over time, been converted into a White Christ (as depicted in the History Museum of New York).

The reactions of Islamic theologians will be very critical since all sections of Islam consider homosexuality to be unnatural and in some Middle Eastern countries it is punished with death.

As far as India is concerned, even Marxist historians have not provided instances of any gay person being killed in our history for being gay. At worst he may be looked upon with amusement in our villages, not contempt.

But Americans are passionate and very religious people, unlike Europeans. The Bible belt is not going to accept Obama’s election-eve announcement of support. Obama has enthused his flock but the undone “American Project”.

It is going to be long-drawn-out civil war fought on religious and federal principles which will split America into two: those who are for and those who are against. The present has become tense, and the future uncertain.

Will social media break the next scam,trumping TV and print

 

A Lok Sabha member of Parliament, Meenakshi Natarajan, was to introduce the Print and Electronic Media Standards and Regulations Bill 2012.The bill provides, among others things, for a regulatory authority with sweeping powers, including powers to ban or suspend coverage of an event or incident that may pose a threat to national security from foreign or internal sources. It even provides for a fine of up to Rs 50 lakh, suspension of a media organisation’s licence for up to 11 months and cancellation in some cases.

 

Natarajan, a first-time MP representing Mandsaur in Madhya Pradesh, is an All-India Congress Committee secretary and a member of Rahul Gandhi‘s core team of youth leaders. The bill, incidentally, was not introduced since she was absent on the day it was taken up. “The bill was based on her (Natarajan’s) views.  These are not the views of Rahul Gandhi. Neither are these his views or nor has she got his consent to this bill,” Congress General Secretary Janardhan Dwivedi said.

 

 

Courtesy: Getty Images

 

Earlier, Press Council of India Chairperson, former Supreme Court Justice Markandey Katju, called for regulating social media, saying it would prevent unpleasant material from making it into the public domain. “Social media like Facebook and Google need to be regulated as a lot of dirty and filthy material is available on these sites and these affect the minds of the younger generation,” Katju said during an interaction with women journalists at the Indian Women Press Corps. Katju also supported some kind of regulation for media, and especially electronic media.

 

“Everybody should have self-regulation. I was scared when I was the high court judge that if I took a bribe I would be impeached by Parliament. A lawyer’s licence can be cancelled by the Bar Council of India and similarly a doctor’s licence can be cancelled by the Medical Council of India for any medical negligence. So everybody is accountable except the media, especially the electronic media. They say we will have self-regulation. Then everybody should have self-regulation, why should there be laws? The very fact that you have laws is that society realises that self-regulation is not all that sufficient. There should be some fear among media,” he said (Read here).

 

According to Katju, Indian media has been playing a very irresponsible role. “I am not against the media and fight for their rights as nobody else would have. I am not calling for controlling media but regulating them. Maybe a separate committee should be constituted and the media fraternity should be a part of framing its guidelines,” he said.

 

In the eighties, it was the print media which was in the forefront of exposing corruption and other misdeeds of government and political leaders. But by the beginning of this century TV has overtaken print media in terms of “Breaking News” – whether it is the Adarsh scam or Commonwealth Games or the 2G spectrum scandal. TV as a medium has become the main stream. The print media is struggling to function as a pure news media since TV pre-empts it the previous night. Printed newspapers are thus trying to focus on analysis and backgrounders to stories. TV is focusing on combining views and news bundled into one.

 

But a significant change has come about with the advent of social media such as Twitter and Facebook. They have captured the imagination of youth, especially since they are fully democratic – with no owner or editorial control. In print and mainstream media, owners appoint editors who vet the news and views to be published. So is the case with TV media.

 

But in the social media everybody has an equal chance and all are kings and the speed of dissemination is unbelievable. It is not constrained by a sense of controlled partisanship or private agenda because for every viewpoint there are 100 counterviews.

 

There is a general perception that the print and electronic media are run by Left liberals in our country who do not provide opportunities for other views to surface. This could be due the fact that most of the journalists have been brought up in the Nehruvian tradition of Left liberalism and the Columbia School of Journalism. Even the local journalism schools encourage such points of view. Many an editor has come out of these schools of journalism. So, to that extent, Right-wingers, both of the economic and religious varieties, have found the social media to be an effective tool to counter the perceived Left liberal  print and TV medium bias.

 

Since they are not bothered about being “insiders” or “consensus builders” and they are unpaid part-timers, they focus sharply on the rightist point of view. They also are in the forefront to expose wrongdoing by the ruling establishment.

 

Two recent examples highlight their success and provide clues to the shape of things to come.

 

For instance, when the Abhishek Manu Singhvi (AMS) CD hit the social media they circulated it far and wide. In Twitter jargon, AMS was “trending” for many days. This made the case not only popular but also difficult to be ignored. The issue was his alleged sexual dalliance with a middle-aged lawyer in his chambers during day-time and the insinuation is that he promised to help make her a judge. His driver, who was allegedly unhappy with him, was supposed to have made the recording.

 

The video was removed from some locations on Youtube, but enterprising persons managed to put it in several different locations, some which can be censored and some which were not easily amenable to censorship for technological reasons. The Delhi High Court had given an injunction based on AMS’s petition. But neither the court nor government had the wherewithal to prevent the videos from being distributed globally.

 

The TV channels, by and large, were silent, and, by doing that, they actually worsened the situation for Singhvi. It was perceived that the mainstream media protects the high and mighty, particularly if they belong to the “narrow elite” of Delhi compared to, say, small town leaders.  Both TV and print media were suddenly talking about privacy and consenting adults.

 

But social media quoted the Swami Nithyananda case and argued that you cannot have different yardsticks for different individuals. It was reasoned that Nityananda was a private individual while AMS was not. Actually AMS was chairman of the standing committee of Parliament and spokesperson for the ruling party. When the mainstream media published his denials and his version of the story, it increased the curiosity of the average reader/viewer. The advantage of social media is that it has millions of writers who are also editors unlike mainstream media, where a bunch of senior editors try to decide what is good for their readers/viewers.

 

Another important case is the supposed “land grab” by the present president in constructing a palatial residence in Pune for constructing a post-retirement home. As the supreme commander of the armed forces, Pratibha Patil was perceived as misusing her position since the said land was meant to be used by army personnel. The issue was first exposed by Vinita Deshmukh, a staff of MoneyLife (a financial journal from Mumbai) and soon Twitter carried it far and wide.

 

It appears that the president tried to influence army officers in Pune through some influential people, but even that was highlighted by the social media. In this entire episode, mainstream media was circumspect, as in the case of the AMS videos. The mainstream carried largely denials from the office of the president. The denizens of social media saw this as yet another example of mainstream media not taking up substantive issues involving the powerful elite. When the president finally announced that she would be giving up the Pune residential plans, it was, in a sense, a victory for social media.

 

So it seems that we are moving from the print era to TV and social media. Social media may not be powerful enough to move voters, but it is already able to take on the powerful. It is interesting to observe that social media participants always ask about sources and verification before jumping to conclusions, With the Right to Information (RTI) Act available in India, social media may begin to get their own feeds using RTI.

 

In other words they need not get news only from print or electronic media. They are not controlled by business houses or by political parties. In other words, we are entering an interesting era of millions of editors in cyberspace, unpaid and driven by agendas that also include the social good. These social media participants are slowly turning out to be unpaid guardians of our Republic.

 

Of course, there is talk of regulating or controlling the social media – like Justice Katju wants. It is also interesting to note that he was on Twitter for a short period, but has since wound up his account. Those who talk of controlling the social media know not what they are talking about both from a technological point of view and from the intellectual evolution point of view. It is actually real power in the hands of the middle class captured from the narrow ownership-driven agendas of the elite.

 

So don’t be surprised if the next major scam is exposed by the social media rather than the mainstream media.

 

 

Increasing impact of social media in India

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In the eighties when the Bofors scam hit the headlines everyone was eager to read ” The Hindu” newspaper, where it was exposed by Chitra Subramanian and N Ram – of The Hindu. It was print media which was the torch bearers. But by the beginning of this century TV has overtaken print media in terms of ” Breaking News” whether it is of Adarsh scam or that of CWG and 2G. TV as medium has become The MSM or Main Stream Media. Actually print media world over is struggling to function as a pure news media since TV has pre- empted it the previous night.

Hence slowly printed news papers are focussing on analysis and back ground to stories. TV is more focussing on combining views and news bundled into one.

But the advent of Twitter and Face- Book is changing all these. Broadly classified as Social Media ( SM) – it has captured the imagination of, particularly youngsters since it is fully democratic without the control of owners of media or editors. To publish in a print MSM one needs to be vetted by the editor and the editor is vetted by the owner of the media house. So is the case in TV. But in the social media everybody has equal chance and all are kings and the speed is unbelievable. It is not constrained by sense of partisanship or agenda driven since for every one view point there are hundred counter view points.

In India generally it is perceived that the print media is by and large liberal and supporter of ruling group and TV media is left and liberal and so agenda driven. So to that extent the rightist elements both the religious type and other right elements have found the social media to be an effective tool to counter the perceived left liberal TV MSM. To an interesting extent they seems to have succeeded since they are not governed by traditional norms of being an ” insider” or ” consensus” builders.

For instance when the Abhishek Manu Singhvi- AMS- tapes hit the social media they circulated it far and wide and in the jargon of Twitter he was trending for many days. This made his case very difficult. The issue was his alleged sexual dalliance with a middle aged lawyer in his chambers during day time and the insinuation is that he promised to make her a judge. The said video was supposed to be done by his driver who was unhappy of the treatment/ salary meted out to him by his boss. It was removed from some locations in U tube but enterprising persons managed to put it in several different locations, some which can be censored and some which cannot be easily amenable for technological reasons. Even though the Delhi High Court has given an injunction based on his petition, neither the court nor Government had full wherewithal to prevent the tapes being distributed globally.

At the same time the TV MSM was conspicuous by its silence and by doing that they actually worsened the situation for him. It was perceived that the MSM protects the high and mighty particularly if they belong to the ” narrow elite” of Delhi compared to say small town leaders. The print media was more circumspect and both TV and print media were suddenly talking about privacy and consenting adults. Social media then questioned MSM about Nithyananda case and argued that you cannot have different yard sticks to different individuals.

It also forcefully reasoned that Nityananda was a private individual while AMS is not. Actually AMS is – he has resigned since then as Chairman of the standing committee of Parliament and a top legal counsel. The MSM had egg in its face when it published his denials and part of the story and increased the curiosity of average reader/ viewer. The advantage of SM is it has million editors and million writers unlike MSM where there are bunch of editors trying to decide what is good for their reader/ viewers.

Another major case is that of the ” land grab” done in Pune by the present President in constructing a palatial palace for her to be occupied post- retirement.

The said land was meant to be used by army personnel and she being the Supreme Commander of Armed Forces was perceived to misuse her position.

This was first exposed by Money Life ( a financial journal from Mumbai) staff Vinita Deshmukh and soon it spread in the twitter far and wide. It appears that the President tried to influence the army person at Pune through some Governor etc but even that was highlighted by the SM. In this entire episode MSM was a passive observer rather one can say circumspect as in the case of AMS tapes except for publishing the denials from her office. In the process MSM has become just an outpost of Governments Press Information Bureau and publishes / presents what is handed out.

For instance majority of newspapers or TV channels did not vigorously debate the appropriateness and legality etc of the actions of the incumbent President either due to deference to the post or due to lack of investigation into the issue. Then we heard the news that the President has given up her idea of a new home in Pune and in a sense bowed to the pressure of SM. It seems that from print era to TV era we are moving into SM era. SM may not be powerful in influencing voters as of now but it is becoming powerful to take on the high and mighty. It is the most democratic medium to a large extent self regulated. Actually it is interesting to observe that the participants in SM always ask about sources and verification before jumping to conclusions.

They are not controlled by business houses or by political parties. In other words we are entering an interesting era of millions of editors in the cyber sphere, unpaid and not driven by any agenda other than social good. These SM participants are actually unpaid guardians of our republic.

It is fun to hear old media types talking of regulating it or controlling it.

They know not what they are talking both from technological point of view and from intellectual evolution point of view. It is actually real power in the hands of middle class captured from the narrow ownership driven/ agenda driven elite. SM may begin to get their own feeds using RTE instead of depending on the MSM. Have a keyboard will go places. This is the real citizen journalism unpaid/ without agenda and motives. We eagerly await the next scam to be exposed by the Social Media with bated breath.

Should finmin be run by FM or FIIs and foreign dalals?

It all started when a government proposal on multi-brand retail (aka Wal-Mart entry) was put on hold due to severe opposition from many political parties, including a major UPA coalition partner Trinamool Congress. There was a chorus of protest from the pink papers and metropolitan rootless wonders (MROWs), also called experts, regarding the government’s inability to carry forward reforms.

For most of these semi-literate economic experts, reform means allowing Wal-Mart into India. Wal-Mart and other global majors would have allocated huge sums of money to “educate” Indians about the benefits of such “reforms”. Even Enron allocated nearly Rs 60 crore to educate us.

The finance minister and the PM seem to give audiences to FII agents and FDI dalals at the drop of a hat. PTI

Then there was the simple issue of tax payments by companies using tax havens as a shield in asset transfers – also known as the famous Vodafone case. The finance ministry correctly felt that any asset transfer taking place in India requires to be taxed even though it may be done under the corporate veil of tax havens. The Indian business of Hutchison Whampoa was purchased using offshore tax havens by Vodafone registered at Cayman Islands. Now the government correctly felt that tax havens cannot be used to deny legitimate dues to the government since “India itself is not a tax haven” and levied tax on such transactions.

The matter went to the Supreme Court which, in its wisdom, held that Vodafone does not have to pay taxes on this transaction. Of course, the Supreme Court’s opinion that our tax laws will affect foreign direct investment (FDI) is something that surprised many a financial expert since government policies cannot be, and should not be, created to suit any particular class of investors.

There are many more such arrangements in queue and the sum involved in taxes can run in to several thousand crores. So the government amended its tax laws with retrospective effect – exactly what UK did earlier. The finance  ministry also brought in the General Anti-Avoidance Rules (GAAR) in the recent budget to prevent tax cheating by big business using tax havens as tax shelter. That created a huge furore with Indian business lobbies jumping into the fray.

Let us reiterate that tax havens are the red-light districts of global financial architecture. The big global accounting firms – which are also ultimately listed in tax havens – have been having a running battle with the finance ministry on this issue. A subtle form of blackmail has always been used to enable the use of tax havens to dodge Indian taxes – it is always claimed that global business will not be attracted to India, if we change our laws to make them pay tax.

The threat has been used ad nauseam in spite of the fact that FDI and foreign institutional investment (FII) constitute less than 10 percent of our investment rate.  Only in 2009-10 does the provisional number show FII and FDI inflows put together at nearly 15 percent of our domestic savings. The biggest chunk of our investment is financed by our own domestic savings and in that household savings is the dominant component. In other words, the average Indian housewife is responsible for financing our growth and not the FII or FDI or even our corporates. See table below:

Last week, a group of US business interests gave a memorandum to President Obama stating that there is a “vacuum” in decision-making in Delhi since the regional parties are having a larger say about policy matters. This is atrocious and a direct interference in our polity. Do they mean that it is easier to bribe and do business with a central authority but not with several states? What do they mean by “vacuum”? Our docile media did not question this. Then the new chief of the Confederation of Indian Industry (CII) criticised the government on the same issue. It is important to know if the CII represents the interests of US/Europe business groups or that of India?

The finance minister, a reported by BusinessLine, has to come up with an explanation that goes as follows: “Mr Pranab Mukherjee has reaffirmed that tax changes related with the General Anti-Avoidance Rules (GAAR) proposed in the budget are not substantive but clarificatory in nature. These changes reiterated only the intent of the legislation….Mr Mukherjee (also) informed (a meeting of business leaders) that tax cases which have already been assessed and finalised up to 1 April 2012 cannot be reopened….Further the Indian tax laws are very clear that companies making capital gains from the assets located in India will have to pay taxes either in the country of their origin or in India. It is not a case of double taxation but ensuring that companies that are liable to pay tax must pay some tax.”

Now, why should a finance minister do this? In addition to that, the most damaging news item to be published suggests that US Treasury Secretary Tim Geithner is looking in to our tax provisions. Never before in history have specific proposals of the finance ministry been examined by the US treasury and perhaps vetted.

The most important point is that the $11 billion Vodafone deal was signed in the Cayman Islands. Similar retrospective amendments were made in the UK last month and the same Vodafone was made to pay tax there. So if it comes to UK or US laws global business keeps its tail between its legs and sits mum, but when it comes to India bullying and blackmailing is the norm. It is a great shame on us that we are treated like a Cactus Republic (Banana is a favourite fruit of Lord Ganesha and so I do not want to use that name).

In the case of FIIs, as excellently explained by Jaithirth Rao, the Indo-Mauritius treaty was started to encourage Indian businesses to invest in Mauritius. But clever lawyers and accountants understood the fine print that companies from Mauritius investing in India needed to pay no taxes on income generated in India and from then on our fiscal regime, the domestic economy and, possibly, even our politics, has been distorted. The so-called “post-box” companies made many wealthy and powerful desi investors “round trip” their overseas funds in to India.

In the case of FDI, an interesting study by KS Chalapathi Rao and Biswajith Dhar of ISID,  New Delhi, in 2011 suggests that “it is quite relevant to note that round‐tripping related investments increased gradually during the period from just a little less than 2 percent in 2004 to 21 percent in 2009. In the case of India, while it is typical of the FDI inflows to enter via tax havens, this route is exploited the most by private equity/venture capital/hedge funds and round‐tripping variety of inflows. This is more so by PE/VC/HFs promoted by Indians.”

Not only that, Somasekar Sundaresan argues  that FDI, too, can bring NGO-type activism, as seen in the activism surrounding Coal India.

Given the small role that foreign money plays in our domestic investment, one finds that the role of the FII is more seen in share market fluctuations that are unrelated to our domestic economy. FIIs may have around 20 percent of the turnover but have a larger impact on prices due to herd behaviour. If Japanese interest rates become attractive, they will relocate funds there and it has got nothing to do with our economy.

It is interesting that the larger, and more important, flows in the form of remittances are not much discussed. It was as high as $60 billion last year. This is the unsung and unheard activities of Indian fitters/plumbers/carpenters and masons (among others) working in West Asia. Their remittances are as big as, or even bigger than, our software exports.

But the finance minister and the PM seem to give audiences to FII agents and FDI dalals at the drop of a hat. They seem to have met relevant ministers/bureaucrats at least a dozen times in the last one month. But who listens even for a moment to the average Indian housewife whose savings is the primary cause of our economic growth, or to the plumber from Kerala, struggling in shanty camps in West Asia, whose remittances sustain us.

It is time the finance ministry and the Republic of India are run by the finance minister and not by FIIs and FDI agents.

Should finmin be run by FM or FIIs and foreign dalals?

It all started when a government proposal on multi-brand retail (aka Wal-Mart entry) was put on hold due to severe opposition from many political parties, including a major UPA coalition partner Trinamool Congress. There was a chorus of protest from the pink papers and metropolitan rootless wonders (MROWs), also called experts, regarding the government’s inability to carry forward reforms.

For most of these semi-literate economic experts, reform means allowing Wal-Mart into India. Wal-Mart and other global majors would have allocated huge sums of money to “educate” Indians about the benefits of such “reforms”. Even Enron allocated nearly Rs 60 crore to educate us.

The finance minister and the PM seem to give audiences to FII agents and FDI dalals at the drop of a hat. PTI

Then there was the simple issue of tax payments by companies using tax havens as a shield in asset transfers – also known as the famous Vodafone case. The finance ministry correctly felt that any asset transfer taking place in India requires to be taxed even though it may be done under the corporate veil of tax havens. The Indian business of Hutchison Whampoa was purchased using offshore tax havens by Vodafone registered at Cayman Islands. Now the government correctly felt that tax havens cannot be used to deny legitimate dues to the government since “India itself is not a tax haven” and levied tax on such transactions.

The matter went to the Supreme Court which, in its wisdom, held that Vodafone does not have to pay taxes on this transaction. Of course, the Supreme Court’s opinion that our tax laws will affect foreign direct investment (FDI) is something that surprised many a financial expert since government policies cannot be, and should not be, created to suit any particular class of investors.

There are many more such arrangements in queue and the sum involved in taxes can run in to several thousand crores. So the government amended its tax laws with retrospective effect – exactly what UK did earlier. The finance  ministry also brought in the General Anti-Avoidance Rules (GAAR) in the recent budget to prevent tax cheating by big business using tax havens as tax shelter. That created a huge furore with Indian business lobbies jumping into the fray.

Let us reiterate that tax havens are the red-light districts of global financial architecture. The big global accounting firms – which are also ultimately listed in tax havens – have been having a running battle with the finance ministry on this issue. A subtle form of blackmail has always been used to enable the use of tax havens to dodge Indian taxes – it is always claimed that global business will not be attracted to India, if we change our laws to make them pay tax.

The threat has been used ad nauseam in spite of the fact that FDI and foreign institutional investment (FII) constitute less than 10 percent of our investment rate.  Only in 2009-10 does the provisional number show FII and FDI inflows put together at nearly 15 percent of our domestic savings. The biggest chunk of our investment is financed by our own domestic savings and in that household savings is the dominant component. In other words, the average Indian housewife is responsible for financing our growth and not the FII or FDI or even our corporates. See table below:

Last week, a group of US business interests gave a memorandum to President Obama stating that there is a “vacuum” in decision-making in Delhi since the regional parties are having a larger say about policy matters. This is atrocious and a direct interference in our polity. Do they mean that it is easier to bribe and do business with a central authority but not with several states? What do they mean by “vacuum”? Our docile media did not question this. Then the new chief of the Confederation of Indian Industry (CII) criticised the government on the same issue. It is important to know if the CII represents the interests of US/Europe business groups or that of India?

The finance minister, a reported by BusinessLine, has to come up with an explanation that goes as follows: “Mr Pranab Mukherjee has reaffirmed that tax changes related with the General Anti-Avoidance Rules (GAAR) proposed in the budget are not substantive but clarificatory in nature. These changes reiterated only the intent of the legislation….Mr Mukherjee (also) informed (a meeting of business leaders) that tax cases which have already been assessed and finalised up to 1 April 2012 cannot be reopened….Further the Indian tax laws are very clear that companies making capital gains from the assets located in India will have to pay taxes either in the country of their origin or in India. It is not a case of double taxation but ensuring that companies that are liable to pay tax must pay some tax.”

Now, why should a finance minister do this? In addition to that, the most damaging news item to be published suggests that US Treasury Secretary Tim Geithner is looking in to our tax provisions. Never before in history have specific proposals of the finance ministry been examined by the US treasury and perhaps vetted.

The most important point is that the $11 billion Vodafone deal was signed in the Cayman Islands. Similar retrospective amendments were made in the UK last month and the same Vodafone was made to pay tax there. So if it comes to UK or US laws global business keeps its tail between its legs and sits mum, but when it comes to India bullying and blackmailing is the norm. It is a great shame on us that we are treated like a Cactus Republic (Banana is a favourite fruit of Lord Ganesha and so I do not want to use that name).

In the case of FIIs, as excellently explained by Jaithirth Rao, the Indo-Mauritius treaty was started to encourage Indian businesses to invest in Mauritius. But clever lawyers and accountants understood the fine print that companies from Mauritius investing in India needed to pay no taxes on income generated in India and from then on our fiscal regime, the domestic economy and, possibly, even our politics, has been distorted. The so-called “post-box” companies made many wealthy and powerful desi investors “round trip” their overseas funds in to India.

In the case of FDI, an interesting study by KS Chalapathi Rao and Biswajith Dhar of ISID,  New Delhi, in 2011 suggests that “it is quite relevant to note that round‐tripping related investments increased gradually during the period from just a little less than 2 percent in 2004 to 21 percent in 2009. In the case of India, while it is typical of the FDI inflows to enter via tax havens, this route is exploited the most by private equity/venture capital/hedge funds and round‐tripping variety of inflows. This is more so by PE/VC/HFs promoted by Indians.”

Not only that, Somasekar Sundaresan argues  that FDI, too, can bring NGO-type activism, as seen in the activism surrounding Coal India.

Given the small role that foreign money plays in our domestic investment, one finds that the role of the FII is more seen in share market fluctuations that are unrelated to our domestic economy. FIIs may have around 20 percent of the turnover but have a larger impact on prices due to herd behaviour. If Japanese interest rates become attractive, they will relocate funds there and it has got nothing to do with our economy.

It is interesting that the larger, and more important, flows in the form of remittances are not much discussed. It was as high as $60 billion last year. This is the unsung and unheard activities of Indian fitters/plumbers/carpenters and masons (among others) working in West Asia. Their remittances are as big as, or even bigger than, our software exports.

But the finance minister and the PM seem to give audiences to FII agents and FDI dalals at the drop of a hat. They seem to have met relevant ministers/bureaucrats at least a dozen times in the last one month. But who listens even for a moment to the average Indian housewife whose savings is the primary cause of our economic growth, or to the plumber from Kerala, struggling in shanty camps in West Asia, whose remittances sustain us.

It is time the finance ministry and the Republic of India are run by the finance minister and not by FIIs and FDI agents.

Unlisted family businesses rule India

Patrick French (‘India: A Portrait’) reveals that more than two- thirds of the under- 40 members of the Lok Sabha are hereditary and many of them are hyper hereditary, based on their dynasty.

Actually many of us forget that since 1885, members of the Motilal Nehru family have presided over the Congress party for 39 of its 125 years. Motilal Nehru was president for two years, Jawaharlal Nehru for nine, Indira Gandhi for eight and Rajiv Gandhi for seven. Sonia Gandhi holds the record both within the dynasty and the party by having the longest, unbroken tenure of 14 years and is still going strong. The party has become a family enterprise and a non- family man like Narasimha Rao is not even recognised as a former prime minster.

We also have the DMK, NCP, Akali Dal, Shiv Sena, JDS, NC etc. in the same footsteps.

The three major parties run by Jaya, Mamta and Maya also in a sense falls in this category since they control everything in the organisation.

It is important to mention that Tamil Nadu is a pioneer of this wherein the interests of the state, party, government, and people are subsumed for the welfare of the family enterprise. In general, business enterprises maximizing shareholder wealth or earning per share ( EPS) is the norm. Here also it is same in terms of family wealth. There is some allocation for loyalists in the form of ministry positions or chairman of corporations.

The investment is reasonably higher but most promises like free rice to free television sets to free mixture- grinders are given from the government account. To that extent future cash outflows are that of government and inflows are to the family.

This works as long as the family is perceived to represent caste or sectional interests and they bring in votes. Also the huge amount of money generated helps the family to hold on to its party even out of power by judiciously using ill- gotten wealth. What about internal democracy or transparency in functioning? That is the major issue. Most of the critical posts as in family business are held by sons, daughters, in laws etc. Also critical money making activities like land allotment or mining lease or permission to start colleges are kept within the family. Some low margin high volume activity like transfer of teachers may be given to outsiders.

The unlisted entity has to regularly prove its brand/ market value in elections.

If it continues to fail then the constituents become uninterested. Another important issue is that one can be a subunlisted enterprise of a larger one like congress. But then the sharing of revenue with head quarters should be as per understanding. Otherwise there could be problems like that faced by Gundu Rao or YSR Reddys son.

But if you or your children opt out of politics, then you cannot be a ‘dacoit capitalist’anymore since your ability to formulate policies is gone and there could even be vendetta by the current rulers.

So make sure your son, daughter, wives and sambandhis are in some business unit or the other. Will this business meet its nemesis? Not for some years yet. One reason it will flourish is the increasing importance of land as a factor of production. In the 60s, capital was scarce and land was easily allotted. Now, capital is available, even from global sources, but land is scarce and that is the strength of these families. Control of land and its allotment is the primary industry.

To that extent, the family business will flourish.

From one angle, it is frightening that some 50 or so families have a firm grip on our politics. Except communists and BJP all others have this . So as is predicted, if all regional parties have majority in the coming Lok Sabha elections and a third front government supported by Congress is a possibility then we can be rest assured that whole country will be under the control of unlisted family businesses and it may not augur well in the long term and also for the development of our polity. But at the current stage of our political process it seems inevitable that, 50 or so families, which are unfortunately rapacious and greedy, rule us. They may have an understanding amongst themselves- as in the case of dacoits about regional loot and coalition Dharma to look aside. The has to run its steam till a functioning and appropriate political structure is evolved. We have a long way to go.

MOTILAL Nehru family have presided over the Congress party since 1885.

Sonia Gandhi holds the record both within the dynasty and the party by having the longest, unbroken tenure of 14 years and is still going strong.

Foreign funding of NGOs should stop

Two important criteria for NGOs are that they should be independent from government and they are organizations not meant for making profit. But many get money from the government or from foreign governments.

The type of activities they are involved is mind- boggling which can extent from ” aging issues” to ” corruption” to ” human rights” to ” waste management”. Many of them call themselves ” Civil Society” and involve in socio- political activities even though they do not directly participate in the electoral process. Many of Church- related organizations involve themselves in human rights issues as a civil society organization.

They are also active in conversion or what is called harvesting of souls.

The funding for many of these civil society groups is substantially international.

The international flow of funds is regulated by the Foreign Contributions Regulation Act ( FCRA Act) of the Central Government on which the ministry of home affairs has formulated rules in April 2011 onwards.

In the nine years from 2001 to 2010 such organizations received more than Rs 70,000 crore and in 2009- 10 ( for which latest data is available) it was Rs 10,400 crore. The total number of such organizations was 38,500 in 2009- 10 and of them only 21,500 ( 55%) reported their accounts.

The list of donor countries is headed by the US ( Rs 3,105 crore) followed by Germany ( Rs 1, 046 crore) and the UK ( Rs 1, 039crore).

The highest amount of foreign contribution was received and utilized for establishment expenses ( Rs 1,483 crore), followed by rural development ( Rs 944 crore) etc. Establishment expenses consist of buying land, buildings, jeeps, setting up offices, mobiles, laptops, cameras, salaries, consultancy fees, honorarium, and foreign travel etc, constituting nearly 50% of the expenses and in some cases as high as 70%. This goes against the grain of service motto where the ultimate recipient is supposed to get the maximum. Now, such organizations even recruit ” executives” from management institutions.

However, they are not covered by Right to Information Act as they are not part of government. Many do not have any information on their web sites. Some of the web sites contain nothing on finances.

They demand transparency from others.

World Vision of Tamil Nadu is one organization which has got maximum foreign funds Rs 209 crore in the last year alone. If you consider last five years it has got nearly Rs 1,000 crore. In the US, this organization employs only Christians and the US Supreme Court has upheld this. Its parent says that ” More than 80 percent of staff members worldwide are Christians. In each of the 100 countries where World Vision works our leadership is Christian”. World Vision is a sectarian Christian organization which says ” maintaining Christian identity is critical for the staff. ” It is supposed to clarify in every communication about their Christian identity but hardly done in India. Why such sectarian organizations allowed to flourish using foreign funds? The primary purpose of most of these sectarian organizations is conversion or harvesting the soul. This has given rise to social tensions in several parts of India.

That there are other issues pertaining to illegal flows. The International Narcotics Control Strategy Report – Money Laundering and Financial Crimes ( March 2009) – by the US State Department suggests that 30- 40 per cent of the inflows may be through hawala channels which are not accounted. During 2007- 2008, according to this report, formal inflows into India were $ 42.6 billion.

So 40 per cent of this amount, $ 16- 18 billion, could be considered illegal flows not captured by law. Recently the Government included NGOs and other trusts also within the ambit of Prevention of Money Laundering Act ( PMLA) 2002, by a notification. But we do not find any known action so far against NGOs under the PMLA. Not only that due to the foreign funding the issues taken up are as per masters choice. Suddenly Gates Foundation finds HIV as the issue in our country while we are still battling TB and leprosy and malaria. Agenda- driven funding undermines our priorities and perspectives.

Recently Russia has approved a bill that introduces stringent control over the activities of foreign funded non- government and non- commercial organizations in a move designed to pre- empt any ” coloured revolution” in the country.

It says, and to quote ” The Kremlin has learnt its lessons from a string of ” coloured revolutions” in the former Soviet Republics – the ” rose revolution in Georgia, the ” orange revolution” in Ukraine and the ” tulip revolution” in Kyrgyzstan – all inspired and orchestrated by western- funded civil society groups”. Incidentally, there is an act in the US called Foreign Agents Registration Act ( FARA) and it provides for penalties up to ten years in jail for acting as a foreign agent or getting foreign funds without notification to the Attorney General.

FARA was originally passed in 1938 to prevent the spread of Nazi ideas and propaganda.

It is important that the Government of India bans foreign funding of civil society groups and NGOs who want to reform India. For this, the Government should scrap the FCRA act and also the rules.

Let NGOs and other missionary activities take place using local charity. We are no more the ” white mans burden”.

India should leverage the Gold with the households

India is one of the largest buyers of gold in the world. More than 90 per cent of this is for jewellery purposes and not for Industrial purposes. Table 1 gives the purchase of gold for jewellery by different countries in the last few years. In the past, Indian demand was nearly 30 per cent of global consumption. Recently, the attraction of smuggling has come down due to liberalized import policy. Incidentally, domestic production of gold is very negligible, running into a few tonnes.

The purchases made in Middle East is also mostly by people of Indian origin and to that extent the demand by “Indians” is much larger. What is bought in Gulf States this year by the NRIs (non-resident Indians) will reach here may be in a year or so. At an average price of, say, Rs20, 000 for ten grams, we can estimate that for 1000 tonnes nearly Rs.2 Lakh crore has been spent in buying gold last year by Indian households, which is much larger than the aggregate capital raised from the stock market.

The purchase of Gold by households is not treated as savings in our statistics. It is treated, as consumption by households which are curious as households treat purchase of gold as “investments” whatever the economists in government may think. That the Gold is in private hands is important to note and since it is not with government it is productive. It is interesting to note that the demand has been around 1000 tonnes in the last two years and of this 25 percent is for Bar/coin investment.

But why do households invest in gold?

It is not for the return but for security. Gold is the major social security for large number of Indian households which do not have anysocial security at all. Kindly observe that nearly 90 percent of India is self-employed. The problem is more acute for the wives of these self-employed, as they do not have any independent access to income or savings. Even if they work, it is used for currentconsumption. In the poorer segments, a good portion of the income of the man couldbe used for drinking, gambling, etc., and hence not much left at old age.

The jointfamily system is breaking down and so the traditional support models are gettingweakened. Under the circumstances, it is but natural that the Indian woman would liketo own some assets which are useful in old age, or in case of any other eventuality.Real-estate is relatively costly, not divisible and not portable. Gold ornaments areportable and divisible. A chain can be converted into two bangles and also one can havesmallest nose ring or ear stud unlike land.

 Transfer of ownership is also very easy. In the case of gold ornaments one can say that possession is ownership. In other words, if a mother removes her chain and gives it to her daughter then it belongs to the latter by tradition. One can get loan against gold by pledging it with a moneylender any time of the day or night, seven days of the week. The millions of moneylenders are actually the ATM (All Time Money) of our country, as they act as money vendors with a personal touch too. In other words gold represents the most liquid form of asset in India. One can also say that gold is the most politically correct metal, which can be owned. In traditional Indian families, sometimes, shares or fixed deposits are disposed without the knowledge of the housewife. But gold is always sold with the concurrence of the housewife. Of course, if it is on her body then it cannot be disposed off without her knowledge.

The so-called superstition pertaining to not removing the Mangal Sutra till the death of the husband is an insurance protection to the woman against rapacious relatives and children. It is assumed that the gold ornaments will work as social security for her in case of major emergency or after the death of the head of the household. The Bollywood blockbusters of yesteryear would invariably have a scene where the heroine removes her bangles or chain to be pledged for the benefit of her ailing husband and it did reflect the ground reality better than the views of experts. Hence, gold is the most liquid, portable, easy to transfer, act as social security and insurance for the middle- and low-income group women.

The Total Stock of Gold is estimated at 18,000-40,000 tonnes by different experts which may be an underestimate particularly after the Trivandrum temple vaults got opened up. That temple alone supposed to hold more than half a billion worth of Gold/Emeralds /Rubies etc

As the largest buyer of this metal in the world, India should play an active role in the international market and leverage our position to shape policies pertaining to gold. Any large buyer of a commodity, say, oil or coffee or zinc or maize wants to, and does, have a say in the accelerated disposal of that commodity in the world market. What does India do? Nothing. Is our government, then, not concerned about the welfare of the people but only about some ideological shibboleth? Why is it so? It is because there is a considerable dis-connect between the government and the middle-class.

The planners and policy-makers are either the socialist type or globalizing metropolitan elites. The Nehruvian socialist experts feel that the middle-class or petite bourgeois is naive to invest in unproductive assets instead of joining the working class in the struggle to get social security for all. This did not happen and even the proletariat opted to buy gold having little faith in the government (of any variety) providing any security at old age.

The globalizing metropolitan elites feel that the middle-class is foolish in investing in gold since the “experts like them” have defined it to be un-productive. They would rather have the middle class invest in share markets and burn their hands and legs. They are concerned about reforming the government pension system which is under severe strain as both the Central and State governments are broke. In such a situation, the most entrepreneurial and hard working, self-employed groups are facing a huge challenge to protect their future. Their position is that of a nut caught in the nutcracker with the socialists and globalisers acting as the two arms.

It is not the Indian woman who is naive or foolish, but the government which is insensitive and ignorant to the issue of leveraging on our strength.

 

In the context of `Digital Cash’ becoming more active, the number of transactions may rise to trillions and the number of trans-border entities issuing them will also increase. This would be more so with increased outsourcing activities. Since “Digi-Cash” does not have any sovereign guarantee, the role of gold as a medium of exchange and as an underlying standard will increase. As the monetary transactions in the net-based world expand, the concern for the underlying lack of “Sovereign Guarantee” should be highlighted. In the context of a possible death of euro and the decline of the US Dollar, this may not be very difficult to visualize. Along with this, a campaign should be launched by India to bring gold as standard of security (if not as a medium of exchange) and this may enormously help the millions of self-employed in India who own this asset and who have to take care of themselves in the coming decades.

India should also create mechanisms to leverage on the investment category [namely Bars/Coins] of the Gold purchases by middle class in the last few years. Innovative mechanisms can be created by government of India to facilitate this gold to be invested with banks and earn some nominal interest rates so that Government can show large stock of gold in banks to facilitate the stabilization of rupee value. Actually much of these coins and bars are already kept in bank lockers and locker fee is paid by the middle-class.

But in order to initiate any such steps Government of India should come out of its Nehruvian mindset and stop taking advice from Globalizers who will sell all these Gold along with our housewives to Global corporations. India should co-opt China in this global campaign to make Gold a unit of security when sovereign guarantees are not taken seriously.

One thing should be clear. Gold is brought by the women of the country. They are smart and shrewd- they will not do anything which do not make economic sense even though most economists do not have any sense pertaining to Indian realities.