Commission for Business and Industry Growth and Development (CBIGD)

 Commission for Business and Industry Growth and Development (CBIGD)

There are thoughts to change the terms of reference of the Planning Commission as the institution has outlived its useful and productive function in an economy which is less controlled, less socialistic and less homogeneous across states in terms plans and activities  designed  and approved by it for development of the states and industrial development of the country.

Whatever the faults with the Nehruvian vision for the Planning Commission as a copy of the Soviet plan system its achievements have been dismal and its negative impact as a controlling all knowing authoritarian agency of the central government directly reporting to the Prime Minister. Prime Minister Nehru was of course in love or or I say say infatuated with the Soviet Socialism like lovers sometimes do.

India has achieved a lot since its Independence in 1947 but it has been held back significantly by giving excessively larger role to the public sector and only a very minor role to the private sector. Even now many politicians and civil servants mistrust and suppress the private sector generally and big business particularly. The entire focus and importance must be reversed if India wants to grow and develop.

Then there is the Finance Commission which actually allocates central funds to states to implement their plans or Planning Commission approved plans.  Finally actual allocation of the budget is under the control of the Finance Minister which levies taxes and funds everything.
There is inconsistent and overlapping efforts without any synchronizing among the three major bodies controlling allocation of finance within the government at the center and states.

It is good idea to let the new CBIGD retain its data collection,  research and analysis function  and create a new bigger division to focus on business and industry growth and development across the country working closely with the  Industry, IT, Technology, Agriculture, Health, Education and other ministries which themselves could be reorganized to give much more importance and role to the private sector to develop businesses and industries in each state and district.

CBIGD could also be an implementing agency to make huge investment in infrastructure to move the economy and create jobs and incomes instead of handouts, invest in roads, transportation systems-land, water, air;  electricity, gas and oil, cleaning up and connecting  rivers, public trash collection, public toilets, sewer systems, recycling and purifying water, etc. Each of these could be managed by divisions to oversee their construction simultaneously as these are all mutually exclusive projects.

A subway system in Chennai, an airport in Jhunjhunu, cleaning up of the Ganga, Setting up public toilets, sewer systems in different cities, ... can happen at the same time under competent technicians and managers who will make the ministers and MPs very smart and productive  to their constituents.

Looking back five years from mow we could appreciate wonderful achievements under such a system. If the Planning Commission remains as is then nothing much will have happened. So it is imperative that the Narendra Modi government creates something like CBIGD as a true growth and development agency of India.

Ten Things for PM Narendra Modi to Do to Empower India as India has Empowered NAMO

Ten Things PM Narendra Modi should do to achieve his dream for India

1. Make huge investment in infrastructure to move the economy and create jobs and incomes instead of handouts. Invest in roads, transportation systems-land, water, air, electricity, gas and oil, cleanup and connect rivers, public trash collection, public toilets, sewer systems, recycling and purifying water, etc.

2. Education expansion and reform based on merit  and efficiency of curriculum, students and teachers, use of technology, and focused teaching and learning. Create training centers and polytechnic institutions  in every activity at colleges and schools in all communities across the country. Use public as well as private education systems to build up to date human capital in all individuals as their capacity and interest. Give equal opportunity and resources to all regardless of income, caste, religion, region, etc. Create training  and jobs where people are in rural and urban areas to minimize migration and use available resources everywhere.

3. Give incentives to small and medium manufacturing and creative and innovative centers in each district  and Panchayat Samiti of India. Provide guaranteed working capital through banks and capital markets to profitable enterprises. Give incentives to hire local talent from area colleges, schools and training centers strictly on merit, capacity and performance of the employee.

5. Set the tax rates at 15 percent for income, dividend and capital gains and corporate profit to make them equally important in the eye of the state. Set capital gains at 15 percent for capital appreciation returns on investment up to  20 percent and at 20 percent on appreciation above 20 percent. Apply a universal 5 percent national GST (VAT) on consumers  and 10 percent excise tax on corporations.
Apply a 5 percent of net profit as voluntary giving back to the society  as decided by corporate or non-corporate owners of large businesses. If they do not meet this requirement annually then it becomes a required tax. Corporations would naturally prefer choice of whom to support for education health, training centers, pure donations to the poor and needy, young and old, etc. instead of handing over 5 percent more to the government.

6. Minimize, reduce or eliminate subsidies to create a level playing field in the market place.

7. Crate and build capacity of the individual to create opportunities for each individual.

8. Liberalize competitive money, banking and capital markets to make the needed financing available to all at a reasonable cost, i.e. at interest rates below the expected return rate on the use of funds. Strengthen financial regulation and supervision to stop a financial bubble before it builds up while making finance available to all who need it in agriculture, industry and service sectors as well as consumers who can qualify for prudent credit.

9. Remove religion and caste based quota, reservation, special or extra treatment and subsidies so that every Indian is treated equally on merit basis  and equal opportunity. Eventually make a constitutional change to eliminate the current reservation system altogether. The state should be strictly secular without any preference to any religion. People can practice their religion as they wish. No discrimination and o preference to any religion.

10. Immediately pass a law that any civil servant/government employee caught taking more than a free cup of tea from any one in providing the government service for which he/she is already paid very handsomely should be immediately suspended and prosecuted for taking a bribe in the performance of official duty. His or her pension should also be frozen. This law will apply to all central, state, district, panchayat samiti,  and panchayat legislators. officers and office assistants across the country without exception.

Good luck and best wishes to you and your government for a better, cleaner and more prosperous and equal India.

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.