The Giving Index

A chapter on "Charity in India" by Rajendra S. Kulkarni and Ravindra S. Kulkarni in The Handbook of Hindu Economics  and Business , edited by Hrishikesh D. Vinod and published by createspace.com (ISBN 9781483980881), 12 April 2013 and discussions with them prompted me to suggest a possible index of measuring giving by any entity. My first attempt is posted below.

The Giving Index

The Giving Index (TGI) is designed to know and rank giving to other than your own progeny, and immediate blood relatives, their children and grandchildren. All or most humans do this to some extent as extension of themselves serving the self-interest as the central driving force of why humans behave the way they do as defined by the globally known and recognized moral philosopher and father of modern economics Adam Smith.

TGI measures ten attributes of giving entities. Entities can be individuals, families, business, financial, social, cultural, religious groups, nations or international bodies.

Each entity can be given a maximum of 100 points which would signify being on the top of the TGI. The other extreme at or near zero points would mean a non-giver best.  TGI can allow comparisons within and across entities to know who thinks more or less of the well-being of others and does something to improve it with its own financial resources as if the beneficiaries are one’s own extended relatives. The more distant and different a group one gives to reflects expanding embrace of the notion of a global family. This view of globalization of one’s life and living comes close to the thinking expressed in Vedanta literature of ancient India which says “The Whole World is One Family”.

Thus, the self-interest of Adam Smith not only leads to maximization of the welfare of a society or the world through trade and investment, giving to others out of one’s economic and financial success also brings the whole world together as a human family, so giving is as much of self-interest (or should be) as maximization of one’s income and wealth.

The ten measurable attributes are:

1.       Percentage of Wealth as measured by Net Worth given.

2.       Percentage of Income measured as Gross Annual Income.

3.       Percentage of Total Income tax paid to local, national and international government bodies.

4.       Percentage of Total wealth tax paid to national and international bodies.

5.       Percentage sales tax paid to local, national and international bodies.

6.       Percentage excise and other taxes paid to local, national and international bodies.

7.       Percentage savings including contributions to public and private retirement plans as well as after tax personal savings.

8.        Percentage Tax-deductibility of charitable contributions in the country of residence of the entity.

9.       Percentage of people in any entity giving in the country of residence of the entity.

10.   Percentage tax rate prevalent in a society, taxing entity such as local, state, national, and international..

Each of the ten attributes can be given 10, 9, 8,7,6,5,4,3,2 and 1, now we define the numerical value to be given to each attribute. Wealth and income numbers are in US dollars.

Wealth: 10 percent given =10 points, 9 percent given =9 points, 8 percent given = 8 points, 7 percent given = 7 points, 6 percent given =6 points, 5 percent given =5 points, 4 percent given= 4 points, 3 percent given=3 points, 2 percent given= 2 points and I percent given =1 point. Less than 1 percent gets zero point.

Income: the same percentage giving and points earned rules.

Income tax paid: the same rules as applied to wealth and income.

Wealth tax paid: the same rules as in income.

Sales tax paid: the same rules as applied to income and wealth.

Excise and other taxes paid: the same rules as applied to income and wealth.

Savings: the same rules as applied to income and wealth.

Tax-deductibility: 100 Percent deductibility= 10 points, 90 percent=9 ….10 percent deductibility =1 meaning tax authorities are not encouraging giving through the tax code.

Giving culture: If everyone in the entity gives something then the entity gets 10 points, if 90 percent give then 9 points, if only 10 percent give then 1 point.  

Tax rate: Lower the tax rate higher the points for the taxing environment i.e. a country, state, etc.

An example:

Warren Buffet and Bill and Melinda Gates would get the following number of points in the ten attributes:

Percentage of wealth given = more than 10 percent so they get 10 points.

Percentage of income given is more than 10 percent so they get 10 points.

Percentage of income tax paid is more than 10 percent so they get 10 points.

Percentage of wealth (capital gains) is more than 10 percent so they get 10 points.

Percentage of sales tax is less say 8 percent so they het 8 points.

Percentage of excise tax say is less than 7 percent so they get 7 points.

Percentage tax deductibility in the US is 100 percent or public charities so they get 10 points.

They all give in their own group as a family so they get 10 points.

Income tax rates (especially average effective rates) in the US are lowest so people can give more so they get 10 points.

Thus, Warren Buffet gets 95 points on the charity index of 100 and so do Bill and Melinda Gates.

How about you the reader?  Calculate your own number and see where you are on TGI!

SEMINAR ON EMPOWERING SOUTH ASIAN WOMEN

India Stock Market And ETFs: Why Value Investors Should Beware

Economic and Financial Leaders of India and the Rupee in 2013

Economic and Financial Leaders of India and the Rupee  

Economic and financial leaders of India in the UPA coalition government in 2013 have been trained in their graduate studies in the UK and USA. They are well educated in the neoclassical economics and the western approach to macroeconomic management based on microeconomic behavior response of business and individuals to policy actions of governments. Macro economy is managed through fiscal and monetary policies and micro response of market participants through policies affecting prices, demand, supply returns, liquidity, risk management, information availability, and rapid transactions to load and unload asset holdings, etc. Institutional structures and underlying value systems play a critical role in both macro and micro responses of consumers, investors, managers, etc.

Does the Indian economic/financial management team have proper policies in place at the present time? What does the condition of the Indian economy and the rupee say about their expertise and use of the same? Are they being too much into being “British economists", "American economists” and not being good and wise "Indian economists" for the Indian economy? Are they applying the wrong models? Are they more into western mind and culture in their economic theory and its application? Is there a mismatch of theory and reality of Indian economic life? Are the Indian consumers, social classes and businesses taking them for a joy ride?

Answers to these questions may be critical to fixing India's economic problems and bringing the Indian economy back on to its long-term sustainable growth trajectory with a stable currency. Who are the leaders we are talking about and their economic education at the top educational and intellectual centers of the world? Here is the list:

Dr. Manmohan Singh, Prime Minister and Minister for Planning,..., Cambridge University and Oxford University, UK.

Mr. P. Chidambaram, Finance Minister, Harvard University, USA.

Dr. Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, Oxford University, UK.

Mr. Kapil Sibal, Minister of Information Technology and Communications and Minister of Law, Harvard University, USA.

 Dr. C. Rangarajan, Chairman, Prime Minister's Advisory Committee, University of Pennsylvania, USA.

Dr. Raghuram Rajan, Chairman-designate, Reserve Bank of India, University of Chicago, USA.

Mr. Jyotiraditya Madavrao Scindia, Minister of Power, Harvard University and Stanford University, USA.

Mr. Sachin Pilot, Minister of Corporate Affairs, University of Pennsylvania, USA.

Mr. Milind Murli Deora, Minister of State for Information Technology and Communications and Shipping, Boston University, USA.

The markets seem to be losing confidence in the team. What do they have to do to regain the confidence to stabilize India's finances and the rupee?

Indis's Economy Needs Confidence of Investors - Domestic and Foreign

The Indian economy needs confidence, confidence, confidence to attract domestic and foreign investment. Indian government leaders in economic areas need to make policies and implement them to earn the confidence of investors for a higher short-term, medium-term and long-term growth rates. More domestic investment capital will stay at home and foreign liquid, financial and direct investment capital will move in with the increase in the degree of confidence investors perceive for each of the three time horizons.

Deputy Chairman of the Planning Commission Dr. Montek Singh Ahluwalia,  Finance Minister  P. Chidambaram, Commerce and Industry Minister Anand Sharma, Corporate Affairs Minisster Sachin Pilot, Power Minister  Jyotiraditya Madavrao Scindia and others are making rounds of New York and Washington, D.C. in the summer of 2013 jawboning the positives of India to American government, industry and investors.

Apparently the US government, industry and investors want more from India to risk their capital in India in the expectation of a higher return  and bigger markets than elsewhere.  So how could India do that?

In a paper titled " India's Democratic Economic Transformation" in Challenge magazine of September/October 1996 I had identified the following to attract capital and to build confidence. To attract capital I had suggested to get foreign portfolio investment, foreign direct investment, reforms and integration of capital markets, accessing external bond and equity markets,  and sourcing external capital markets generally. India has done much of it, perhaps excessive bond market borrowing as the trade and budget deficit have been financed with external capital by government and industry.

Servicing credit of curse requires a stream of income from exports and open capital markets. This where India has a lot of work to do in making the economy competitive in terms of quality of goods, variety of goods and services, cost, and a friendly business environment.

Jawboning ad good public relations can help but open trade and real competitive advantage are the fundamental long-term factors that will build sustained confidence of global investors, including significant American industrial and portfolio investment, in India.  

India Open for Business Welcome Team With American Education

Having been under colonial rule from 1958 to 1947 and the British influence and control through the East India Company from 1600 to 1857, India justifiably was suspicious of the West following Independence in 1947. East India Company officers who became advisers to the Mogul Emperors in India  of course took over the administration which eventually led o the annexation of India to Britain  and installing Queen Victoria as the Empress of India. 
Prime Minister 'Chacha'  Jawaharla Nehru made India non-aligned  and at the same time made defense pact with the Soviet Union  which became the key supplier of military hardware  to India until its fall in 1989. Chacha Nehru's government also asked the British corporations  and personnel to leave India in 1956. Following his death, Coca Cola and IBM also left in the 1970s instead of sharing their formulas and software with India.
Fast forward to 2000 and President Bill Clinton's visit to India which has brought India and the United states close at an accelerated  speed. There are strategic partnerships and initiatives between the two countries under President George W. Bush and President Obama on the American side and Prime Minister Atal Bihari Vajpayee and Prime Minister Dr. Manmohan Singh in the areas of energy, environment, defense, education, technology, trade, etc.
Another indicator of American and Indian closeness is the degree of American intellectual influence on Indian policy under UPA II in the government headed by Prime Minister Dr. Manmohan Singh. There are thirteen ministers and Deputy Chairman of the Planning Commission in the Union government in July 2013 of which 5 are British educated and 9 American educated: Economic, budget and tax policy (Dr. Manmohan Singh (UK), Dr. Montek Singh Ahluwalia (UK) and Shri P. Chidambaram (USA)), foreign policy (Shri Salman Khurshid (UK)), education Dr. M.M. Pallam Raju (USA)assisted by Dr. Shashi Tharoor (USA)), law ( Shri Kapil Sibal (USA), civil aviation (Shri Ajit Singh (USA), urban housing and poverty alleviation (Dr. Girija Vyas (USA), rural development (Shri Jairam Ramesh (USA), development of north eastern region (Shri Paban Singh Ghatowar (UK)), power (Shri Jyotiraditya Madhavrao Scindia (USA)), corporate affairs (Shri Sachin Pilot (USA), shipping, communications & information technology (Shri Milind Murli Deora (USA)), and health and family welfare (Shri Abu Hasem Khan Choudhary UK and Canada).
This is perhaps the first time since 1947 when so much American thinking is guiding India. Of course Mahatma Gandhi, Prime Minister Jawaharlal Nehru, Deputy Prime Minister Sardar Vallabhbhai Patel and many other Indian independence movement leaders were educated in the U.K.
Future blogs will look into the implications of close and strategic relationship that has grown between the United States and India since 2000 and disproportionate American intellectual influence on India compared with any other country in 2013.

The Fall of the Indian Rupee in 2012- 2013

Hare are ten possible reasons behind the fall of the Indian Rupee by almost 20 percent from July 2012 to  July 2013 against major global currencies::

1.  Slowing GDP growth from near 10  to 5 percent.
2.  Increasing trade and current account  deficit.
3.  Underlying inflation.
4.  Indian human capital going to greener pastures. Confidence in the economy is less than before.
5.  Indian financial capital going abroad. Foreign capital going back home or elsewhere.
6.  Political complexity and indeterminate state of indistinguishable leadership across political parties.
7.  India becoming dependent on handouts and distributive justice towards more equality.
8.  Group identities based on caste, social status, region, and religion are driving the political economy.
9.  Corruption, indifference, disrespect, disregard for honest day's work,  and low quality and creativity.
10. India's globalization creates opportunities and competition which at present favor other economies.

India in Search of Its Future Path: Parliamentary Elections 2014

L.K. Advani, a creative strategist, has helped clear the field for a direct, vigorous and a most competitive campaign fight between Congress represented and led by its Vice President Rahul Gandhi and BJP campaign committee led by Narendra Modi. 
Both parties will try to win a clear majority of the Indian electorate. In case neither one does, coalitions will be attempted to form the next government. It will be a clean fight in a long while. 
Whichever party wins majority or leads a coalition government, if needed, economic, political, military, and foreign policy making will be easier and clearer for the following decade. Clarity of authority, direction  and views by the electorate to their representatives in Parliament will be good for India.
Congress Party leadership reorganization on June 16 and expansion of Congress-led UPA governing Cabinet  on June 17 confirms the above analysis. 
It will be interesting to observe developments in policy and electioneering from now on to the state elections in November 2013 and national Parliamentary elections expected in May 2014. There is a possibility that the Parliamentary elections could be moved forward to November 2013 if the UPA government considers it beneficial to its re-election. In any case, it will be a very interesting period in Indian politics in the next few months.

Culture and Values of India: Balance between the Physical, Mental and Spiritual Lives

(x)       Balance between the Physical, Mental and Spiritual Lives

           

             India has the image and a good bit of substance in being a representation of balance between the physical, mental and spiritual. The continuous search for balance will act as breakers in the pursuit of higher economic growth rates. 

             The dominant Hindu, Buddhist, Jain and Sikh traditions in India will continue to seek material progress within their spiritual traditions instead of somehow abandoning them to become material-centric humans. 

            

            The Islamic tradition in India today is so unlike the aggressive invaders from the Mediterranean to Afghanistan from the tenth to the eighteenth centuries that the spiritual and life-style values of Muslims are no different than the other spiritual traditions. 

             It is difficult to visualize ‘animal spirits’ to propel Indians of any persuasion to be economically, and parenthetically militarily, aggressive. After all even Western societies are trying to be less aggressive than in the past.