Ecognizance

PRICE INDIA PAYS FOR GENDER INEQUALITY

2018-04-08T06:46:00.001-07:00

India is a vast country both in terms of natural resources and human resources. To make it a world power, the first step should be to strengthen the citizens in terms of knowledge and their ability to earn.

As a country, we pay a huge price for the inequalities that are still consistent in our society based on gender, religion, caste, and creed.

I would like to address the issue of the costs, India as a country pays for the gender inequality present. According to the World Economic Forum, India ranks 108 in Global Gender Gap index slipping down by 21 positions in 2017. Its rating is 10 notches down than in 2006 when the WEF first started calculating this index. Women are generally considered the weaker sex. There are both evident and hidden indicators of this inequality against women. Their low social status in quite evident in the rural parts of the country but it persists even in the urban area.

The equality is just not our birthright but it also has some economic and political cost attached to it. According to an article in “The Atlantic”, India is losing around 4% of annual growth over the past decade just because of the presence of this inequality. “It's not possible for India to become a global economic power if half of its population is ignored, and not given more economic opportunities,” says Shipra Dawar, founder of ePsyclinic, an online clinic for mental health. “Government and businesses have to join hands to make women a key in India’s growth story.”

According to World Bank data, Ratio of female to male labor force participation rate (%) has gone down to 35 in 2017 from 42 in 1990.

This low participation is due to many reasons starting from the birth of a female child. Foremost is the issue of female foeticide, where the girl child is killed in the womb. Although it is illegal in India to even check the gender of the fetus, due to improper implementation of the law and the patriarchal nature of our society, it still happens at a horrifying rate. Inappropriate parenthood persists even after birth, from inproper healthcare resulting in malnourishment, stunting and a number of health issues to lack of education opportunities. Not only does it affect their childhood but also their adulthood making them prone to numerous chronic diseases as they grow old, with an adverse impact on their working abilities.

This picture is even worse in the rural area where the literacy rate is lower than the countries average of 75%. It was found in the rural areas; nearly 4.5 percent of males and 2.2 percent of females completed education level of graduation and above, while in urban areas 17 percent of males and 13 percent of females completed this level of education. The discrimination doesn’t end here. Even if women enter the labor market, there’s a huge gap in the pay of men and women for the same work profile.

In 2011, the average age of marriage of women in India was 19 years. Most of the women are underweight at the time of childbirth resulting in high infant mortality rates and maternal mortality rates.

The crimes against women are on the rise. In a society like India where women are worshipped as goddesses, it shows the hypocritical side. There’s not a single day when the newspapers or other media platforms aren’t showing at least one incident of heinous crimes like rape, honor killing, dowry-related deaths and acid attacks. It leads to the even lower preference of the female child.

If India as an economy wants to achieve the potential GDP target it needs to address this issue as a priority. A large number of researchers have pointed out a positive relationship between the gender equality and economic development. As per the Mckinsey global institute, India can increase its GDP between 16%-60% if the women of the country are enabled to work at par with men. India can achieve 90% of its potential GDP growth by bridging the gap.

It’s true that our constitution provides women equal rights and opportunities and there are several laws to ensure so, but reality shows a completely different picture.

We need to start from the root cause of this issue that is the mentality of considering women as subordinate and it’s just not the men who need to change. Women also need to stop accepting it as their fate and that it’s the law of nature. Gender is a social construct and to grow as a society we need to rise above it. Secondly, we need to improve the quality of education to inculcate a sense of equality in the mind of young children; both men and women. We need to provide better healthcare facilities and make the laws stricter for combating the issues like female foeticide and other heinous crimes against women. It’s high time to make the environment safer for women whether it’s the streets or the workplaces so that more women are able to enter the workforce and the restraints by the families for working are curtailed. The labor market also needs to improve in India, in order to be friendlier to its women participants. An attitudinal shift toward women is required to uplift their stature in the society as with their growth the country will grow.

–Chhavi Mittal, Year III

Financial Literacy in India

2018-04-01T06:57:00.001-07:00

Financial literacy, in lay man language refers to the ability to understand largely how money works. But specifically, it requires the competence to properly make decisions relating to matters of personal finance, particularly, areas like investing, real estate, insurance, taxation, saving and retirement. This doesn’t mean one is required to comprehend the various instruments and modes of the investments.

Financial literacy is very critical for developing countries like India where the majority find financial literacy beyond comprehension. A survey conducted by Standard & Poor’s Financial Services LLC (S&P) found out that 3/4th of the Indian adult population was incapable of properly understanding the basic financial concepts. This becomes more problematic when governmental policies are focusing on financial inclusion among the masses. As per this survey, India’s position in financial literacy is poor as compared to rest of the world and further, this can be a hindrance in India’s desire of becoming an economic superpower.

Financial literacy puts a burden on the nation in the form of higher cost of financial security and lesser prosperity. Most of the people in our country invest in physical assets (real estate, gold etc) or short term instruments (securities with maturity value of less than a year) rather than long term investment avenues, which are very critical for any country’s growth as they help in fulfilling capital requirements, for instance, infrastructure and others.

One of the most common myths regarding financial literacy is that one who is literate or rich is considered to be financially literate as well. But this is definitely not the case. The need of the hour is for a drastic overhaul of approach to savings and investments by Indian households.

In my opinion, financial literacy can be improved by following a few simple steps, like:-

Imparting financial education from childhood itself is a first step. Financial literacy should become a fully inclusive part of curriculum in schools, and should be both taught and assessed, just the way other academic subjects are. This will help the coming generation in becoming more aware since the beginning.

With the advancement of the digital world, interactive measures like short films, attractive advertisements, etc on financial education will have a stronger impact than the traditional methods. Digital fluency is expected to increase with the government’s initiatives such as Digital India.

Internet is like a plethora of information. You can get assistance from various internet avenues regarding where and how to invest.

Consulting experts in the beginning to understand financial experts also comes as an option and helps in building financial proficiency in the long run.

With the government’s recent decision of demonetization, many people have come under the organized sector and this has led to more opportunities rather increase importance for financial inclusion and literacy. Government has launched digital wallets, Universal Payments Interface (UPI) and also commercial and payment banks have flagged new ways for stepping towards a cashless economy. India has the world’s 2nd largest smartphone market and so the push to increase usage of mobiles for payments is in itself a step towards increasing financial literacy. Mobile internet users in India are around 350 million and are expected to grow to 50 million every year till 2020.This will create various possibilities of going digital in many areas and will create new opportunities to engage and share financial knowledge with consumers.

The way forward

Financial literacy is a pillar of efficient economy. In India, majority of the population falls in the middle income group which needs, along with low income group, financial education so that they take effective saving decisions. It is also important to reach out to the millennials who are very active in financial markets and require customized financial products but have limited awareness of the possible financial solutions. Financial literacy has to come first, to improve financial inclusion. Government’s policy on financial inclusion will not be successful unless the citizens are financially literate. Government can open as many banks as they want and launch schemes which focus on opening bank accounts but unless the public knows what all financial options are available they will not use these services. Policy needs to focus on spreading awareness through print as well as digital media.

If we see the example of U.S.A, they observe a financial literacy month in which they educate the people about the importance of financial literacy. Theoretical knowledge is not sufficient, there is a need of experimental learning for people to learn to use financial products, and in this respect banks have an important role. Appropriate training and guidance must be provided to people from rural areas as their access to technology is limited. Accessibility and quality of these training methods is very essential.

With increasing digitalization of banking process and other financial processes, financial literacy is the need of the hour.

Written By: PRANJALI, Year III

References:
https://goo.gl/9Fdx19
https://goo.gl/aqzjTX
https://goo.gl/vcY4kG
https://goo.gl/5S7DpA
https://goo.gl/DJbEjW

Cryptocurrency And The Changing World

2018-03-26T00:33:00.000-07:00

Cryptocurrency aims to revolutionise the way we transact in a world no longer only physical, but also virtual. It has aimed to remove middlemen such as our central banks and to give much power back to the people in the money market. And as expected, our governments are fighting back. There is a lack of clarity and homogeneity in how the states treat and think about cryptocurrency. A legitimate form of virtual money? A commodity? or a financial security? All these terms and labels have different ramifications because of which the values of cryptocurrencies have fluctuated so massively. While both sides on the debate of crryptocurrency fight, the world deals with the consequences. But what are these impacts on the global financial sector and world economy? Let's have a look.

The use of cryptocurrencies does not require authorization by any middlemen which means there is no surveillance for what it is used. Transaction fees are minimal, as low as a couple cents for some cryptocurrencies adding to the allure of privacy and anonymity associated. By cutting out the middlemen, cryptocurrencies are causing disruption in the global payment system as it becomes hard to trace and ascertain the identity of the participants, it means that it is difficult to prevent money laundering, terrorist activities, illicit trade of commodities like drugs and ammunition. This is because documentation of the person in the eyes of the government is only done when the cryptocurrency is converted into legal tender. Silk Road, dark web marketplace infamous for such trade, was closed down in 2013, but more such websites have sprung up. Dark web is a part of the internet that does not show up on search engines like google or bing, and is not easily accessible, but it is a menace. It is scary to think about what would entail if the dark web can use cryptocurrencies.

Cryptocurrencies have no intrinsic value, most of them are not backed by the state nor are they based on assets like oil or gold. What this means is that there is no institution that has a vested interest in maintaining their value, which makes cryptocurrencies sort of immune to government induced fluctuations. Its value depends on the willingness of people to believe it legitimate and secure, and to use it for transactions.

This has a lot of effect on the money market. With no control on a currencies, governments lose control on the amount of money in circulation which in turn threaten their use monetary policy to keep inflation in check. This is why central banks are issuing regulations to impose control. Russia's central bank said it would criminalise the use of bitcoin as a money substitute and would block websites selling it and its rivals. Europe Central Bank has warned EU of the same risk of lost control of money supply, thinking of cryptocurrencies along the same lines as the tulip, i.e a bubble. At present there is a limited market cap of cryptocurrencies, take for example bitcoin. The supply of bitcoin is limited like gold. Which is problematic because it means that the price of bitcoin will continue to fluctuate which bolsters the view that bitcoin and the likes are a bubble, that it will burst and the hit will be ugly. Furthermore, new cryptocurrencies are being 'born' every day, which means we really do not and can not know about the supply of cryptocurrencies.

Meanwhile, Japan has recognised bitcoin as legal tender and approved several companies as operators of cryptocurrency exchanges given they register with the government. United States has taken a positive approach towards cryptocurrency, while setting up several agencies to prevent illicit crimes transactions through it. Bitcoin and other cryptocurrencies are treated like property and are taxed alike.

But cryptocurrencies can and could de-dollarize the world. The global economy is interconnected in a very complex manner, but we can say that it is the US dollar that is the lynchpin. If the financial world is the internet, the US dollar is Google Chrome which makes the United States Treasury a de facto central bank of the world. This is an oversimplified statement but also shapes the dynamics of international trade, foreign relations, diplomacy and economic sanctions. It is also one of the reasons why the US has such a huge dominance in the world. Cryptocurrencies challenge all that by decentralising transactions without any recourse back to the US dollar. Many countries are considering the adoption of state owned cryptocurrencies to move the country out of difficult economic situations brought on due to sanctions by the US. For example, Venezuela has launched its own oil backed cryptocurrency which helped them reduce inflation caused due to these sanctions. North Korea is another such country which has tried the same. This provision is a massive attack on the Dollar. These attacks are serving the countries that are under fire with sanctions. But if the dollar really takes a hit, more than the US and other advanced countries, it is the smaller and emerging economies that will suffer.

In the business world, cryptocurrencies have caused two kinds of effects. first one is of Initial Coin Offerings (ICOs) in crowdfunding process for startups. Another is the sudden boom in valuation of businesses. ICOs are a way to crowdfund new cryptocurrency in which the creators offer 'tokens' of that cryptocurrency in exchange for capital in the form of legal tender. It has provided an escape route for the rigorous rounds of funding startups go through, hence reducing costs. Although ICOs can provide fair and lawful investment, a word of caution for investors to beware of scammers and the high risk and lack of security. The second, more serious effect, is that of the boom in share market prices of companies that are associating themselves with cryptocurrencies or blockchain technology. One such example is of LongFin, a New York based fintech, which experienced a 1000% stock rise after they took over a cryptocurrency company. These market caps are not justified, as they are show volatile investor behaviour and could harm the security market once cryptocurrencies start losing confidence if deemed illegal or restrained.

As cryptocurrencies continue experience growth in price, market capitalization, and mainstream adoption, they are providing features and functions that are revolutionising the way we operate in the global economy. We may longer face the question if cryptocurrencies are disrupting the global economy, but we do need to question ourselves on how much and ask what the future holds. Only time will tell.

References:
1. https://medium.com/the-mission/how-cryptocurrency-is-disrupting-the-global-economy-89347581aa93

2. https://www.bloomberg.com/view/articles/2017-12-18/cryptocurrencies-are-starting-to-affect-the-real-economy

3. https://news.nationalgeographic.com/news/2013/10/131014-bitcoins-silk-road-virtual-currencies-internet-money/

4. https://en.wikipedia.org/wiki/Economics_of_bitcoin

Written by: Anoushka Chawla, Year II

Rich God, Poor Man

2018-03-11T07:27:00.000-07:00

As inhabitants of the subcontinent of India, we certainly cannot dismiss the fact that we live in a highly religion-oriented country. There is religion in politics, government, jobs and even in the days of the week!

The 21st century is a very confusing and complicated era. While some people realize the importance of not wasting resources on stone structures, some still endeavor to organize the biggest (and the loudest) pandal in their neighborhood. With a population of over a billion religious people, the resources spent on religious practices inadvertently have a mammoth impact on the economy of the country. Now the question arises, are the resources being put to good use like helping contribute to the economy or are they just being wasted. The answer though is not that simple. There are two faces to the same coin.

How religious practices benefit the economy:

ASSOCHAM estimates that Ganesh Utsav generates business worth about Rs 20,000 crore annually across the country, particularly in Maharashtra and Telangana. Hyderabad alone generates business worth about Rs 5,000 crore in a nine-day Ganesh Chaturthi festival and provides employment to more than 20,000 families throughout the year, especially during the peak season of Ganesh festival (July-September). Durga Puja also generates business worth about 40,000 crore for the country. The size of the Durga Puja economy equals almost a third of West Bengal’s annual budget. During the nine day Puja, the food and beverages alone generate 50-60 crore rupees worth of business.

These large scale festivals are the sole livelihood of many workers of the unorganized sector and they depend on this annual income to feed their families for the rest of the year.

How religious practices are a sheer waste of resources:

While large scale organized celebration of festivals like Ganesh Chaturthi and Durga Puja produce a healthy dose of employment in this country, there is a steady outflow of resources like food, clothes, candles etc. that are daily offered in temples, churches and mosques in the name of religion.

In a country that has been ranked the most malnourished country by the World Bank, it is hard to imagine how crores and crores worth of useful resources are wasted on mere stone idols. Malnourishment, apart from being a social evil,also leads to major underutilization of the country’s manpower, human resource and economic potential. While 30% of India’s poor live on Rs 32 per day in villages and Rs 47 in cities, with no water, nutritious food or clothes worth the name to cover their bodies, the gods in over 16 religious shrines in India have an income which runs well into the crores. They live and travel in silver and gold bedecked sanctums and chariots, are dressed in the finest clothes and jewelry. During Mahashivratri, tonnes and tonnes of milk is just poured over the Shiva idol and down the drain when beggars outside the temple have seemingly not tasted milk in years. A print release by the government in February, 2016 suggests, “India ranks first in milk production, accounting for 18.5 percent of world production, achieving an annual output of 146.3 million tonnes during 2014-15.” But what is the point of producing so much milk if it doesn’t end up in somebody’s stomach? Milk is a vital source of carbohydrates, proteins, vitamin B12, calcium and fats. A single metric tonne is sufficient to feed 4,000 people. Though there isn’t a confirmed statistic on the number of tonnes of milk wasted annually in the name of Mahashivratri, the fact that there are thousands of temples indicates that the wastage is beyond a single metric tonne. Now you estimate how many malnourished children can be fed with this amount.

Resolving malnutrition is not just about feeding the poor. It’s about giving them hope to live. Only when there is food in his stomach to sustain him will he get the incentive to work and earn a livelihood for himself, thus contributing to the economy of the country. Where 92% of deaths are a result of hunger prevailing under normal and even ‘celebratory’ circumstances of the land of festivals and only eight percent die of hunger as a result of natural calamities, there is only one way the economy will progress in, and something tells me it won’t be up.

What should be done?

The only solution to this issue is to find a middle path. The large scale festivals like Durga Puja need to be encouraged as they generate unmatchable income in a relatively short period of time and inspite of being annual events are adequate to feed many families for an entire year.

Howevee regular wastage of useful resources needs to be immediately curbed. Your milkman wouldn’t care if you use the milk to wet the drain or to feed a malnourished body as long as their transactions are taking place and the income isn’t threatened. But it will have a profound effect on determining which way the economy of this great developing nation will develop.

The gurudwaras of the country have shown that religious sentiment and practical help can not only go hand in hand, but work very extremely well together. By serving millions of free meals with the help of volunteers and previously helpless employees, the gurudwaras have created a system that fuels the economy by providing employment and does charity in its most pure form, while uplifting the religious sentiment that we as a country are so proud of. And that, is the way to go.

Written by: Urvi Bhatia, Year I

Rhino Horn Trade: A Very Pointed Bubble

2018-02-25T03:18:00.001-08:00

Can you imagine a horn having more value than gold in the international black market? Well, I was as shook as you are when I found out!
The Rhino horn trade is far more complex than it seems to be. Rhinoceros poaching was banned in India in 1910. Yet Rhino poaching trends have been high and not so surprisingly the horn is the most sought after body part of Rhinos. Despite it being a punishable offence, these poachers who are generally skillful sharpshooters take the risk as the yields are beyond believable!

A kilo of Rhino horn is pegged at around $100,000 in the international market with an average horn being around 1-3 kg. The price is perhaps more than that of Gold or Cocaine. Why? Let’s look at the demand.
The ever increasing demand of Rhino horns has seen upto 30% rise in the past 13 years. This insane demand comes from Vietnam, and China, as it’s believed that Rhino horns have Cancer curing properties. This belief was strengthened by a rumour that swept Vietnam in mid 2000’s that imbibing Rhino horn powder had cured a Vietnamese politician’s cancer. Some blame the rising number of wealthy people in Vietnam to be another reason for this newly found in interest. The tally of multimillionaires has risen by 150% in the last 5 years. Rhino horn powder is used as a Cocaine like party drug. Wealthy Vietnamese and Asian expatriate business elites in Vietnam also apparently use rhino horn as an aphrodisiac and as a cure for impotence. The convention on International Trade On Endangered Species notes that this rising wealth is “inflating a bubble of demand of Rhino horn”.

According to report submitted by conservative to Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) rhino horns were illegally transported to Vietnam through Nepal, but with stricter laws against poaching and Rhino horn smuggling in Nepal the transit route has now shifted to Myanmar. India which is a home to 3000 one horned Rhinos has not been able to successfully control illegal smuggling of Rhino horn. “The Rhino horn trade could potentially invite threats to national security as some armed militant groups in North East India have reportedly been found to be involved in the rhino horn trade in exchange of arms.” Said Bibhab Talukdar, Chair of the IUCN SSC Asian Rhino Specialist Group. The IUCN Asian Rhino Specialist Group (AsRSG) is currently negotiating the preparation of a national rhino conservation strategy, involving India’s ministry of environment, forests and climate change, as well as Assam, Bengal and UP governments.

With alarmingly high trends of rhino poaching in India there is an urgent need of stringent laws to prevent poaching as well as Rhino horn smuggling. The routes of this illegal trade network need to be blocked or checked. These steps can be effective only if the countries involved join hands and work collectively towards wiping out the illegal horn trade for it leads to serious environmental imbalance with reducing number of Rhinos and leads to negative economic implications in the way of drain of foreign exchange.

Written by:
Deeksha Sharma
Year I

References:
https://goo.gl/w2oeQz
https://goo.gl/AjVxEYv
https://goo.gl/jQ7Vfw

THE BIG FAT INDIAN WEDDING IS PERHAPS TOO FAT FOR OUR ECONOMY

2018-02-24T11:14:00.003-08:00

Weddings are a feast anywhere in the world. But in India, weddings are a full blown festival with vibrant colors, jolly faces and beautiful memories. The Big Fat Indian weddings are as magnanimous as the ones shown in bollywood.

Technically similar to any other (usually) small ceremony, a key difference is the money spent on everything. People usually spend all of their savings just to make that one day, a big day for them. So when it comes to weddings, Indian parents don’t even do any kind of cost-benefit analysis and it’s more like a reflex where the moment their children decide to get married, they open this treasure trove of money and jewellery that they have been collecting/saving since the day their children were born. Indian cinema has been the protagonist in this community wide change of preferences for weddings that people have recently had.

But now the question that arises is- Is it worth it for people to spend all their savings in one day? Why have people changed their preferences from having a simple ceremony to one that is gigantically expensive and lavish? And are these big fat weddings doing any good to us?

So, first let’s try and find out a reason for this change in preferences!

Basic reason for this perhaps lies in the fact that the incomes of the people have increased over time which have led to an increase in consumption expenditure because of the income effect and hence people are spending more on weddings than their forefathers ever did. It has all started with the richest people in the income hierarchy. The opulence in their weddings has influenced the upper middle class and the lower middle class to follow their steps. It is this trickle-down effect or to be modest ‘follow the herd’ ideology of people that has made the wedding business so successful. The average cost of an Indian wedding in the U.S. is $65,000, while hard data on the size of the Indian wedding industry is not easy to come by, but it is estimated that this industry is growing at about 25% to 30% per year. I am sure many of the economists would agree to how important it is to have this kind of growth in other sectors of the economy such as agriculture which has a major part of the population involved in it and manufacturing which is crucial to our economic growth. It is therefore surprising how despite the sectors that are in need of money are unable to channelize funds whereas the wedding industry has been bestowed with this huge inflow of funds simply because of a shift in preferences.

Now let’s try and answer whether these lavish, Bollywood style weddings help the economy or not?

In my opinion, an individual should spend according to his needs and requirements and not under any kind of societal or peer pressure. In India people continue to spend on weddings in huge amounts. No recession or sluggish periods have had a deep impact on the wedding business. Even after immensely significant economic decisions made by the government i.e. demonetization and GST which has had an impact on nearly every sector and business, the Indian wedding industry stands upright as a $38 billion business. Moreover there are a lot of people engaged in this business. For instance, caterers, decorators, music artists, wedding planners, tailors etc. And due to credit multiplier, there's stimulation not just for the desired sector but for the entire economy.

An economy where people save creates wealth. Creating wealth is not any good for an economy as money does not come into circulation and there is a decrease in investment prospects as well. If people don’t spend, especially the top one-percenters, then money will not exchange hands and the multiplier effect won’t come into play. It is very important for an economy to be a spending economy in order to grow.

Although these weddings give Indian economy a boost, with total worth of 100,000 to 110,000 crores a year, giving birth to various sort of employment opportunities but I would like to suggest that spending the money in the activities which are a part of consumption expenditure helps the economy grow but not as efficiently as investment expenditure does. I agree that both of them are a part of aggregate expenditure and stimulate the economy but as we know that India is a developing country and there is widespread poverty, so investing in banks or equity shares or bonds will obviously give people more yield than spending money in weddings which is just a one day business. Investment spending will not only help people on an individual level by providing them secured returns for the future in long run but it is also good for the economy as a whole.

I would like to conclude by saying that a country where education, health, sanitation, poverty, governance, crime, inequality, financial literacy and so many other areas of importance are in a dismal state, is spending money on weddings really ethical? It is important for us to channelize excessive funds in sectors of national and economic importance before anything else.

A strategic change of preferences is always desirable for a country when the income of it’s population starts increasing!

—Eshita Goel, Year II

Budget Series: Taxation

2018-02-18T06:27:00.000-08:00

Presenting the Budget 2018 the Finance minister said as government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years. Therefore, govt do not propose to make any further change in the structure of the income tax rates for individuals. It has only increased 1% cess on personal income tax.

Budget 2018 proposed a standard deduction of Rs40,000 in lieu of transport allowance and medical reimbursement, giving relief to the salaried people(a revenue sacrifice of Rs8,000 crore for govt).Some of the experts say that it is a very nominal for the salaried people as earlier medical expense reimbursement of 15,000 per annum and transport allowance exemption of Rs1,600 per month was anyway leading to a total tax-free salary of Rs34,200.

Also, Budget 2018 has reduced the corporate tax rate for companies with an annual turnover of up to Rs250 crore to 25%.This will benefit the the micro, small and medium enterprises (MSMEs) but not big corporates. Corporate tax cut will help the entire MSME sector and account for 99% of the companies filing tax returns. Because the of this tax cut government will have to forego revenue of Rs7,000 crore.

Earlier there was no restriction on trust and institutions for incurring expenditure in cash but In order to have audit trail of the expenses incurred by these entities, govt has proposed that payments exceeding Rs. 10,000 in cash made by such entities shall be disallowed and the same shall be subject to tax.

In the past fews years Stock market has witnessed unprecedented rise. Seeing this the Government has proposed a 10% tax on long term capital gains tax on equities.

The cess on moblie phones has been increased by 5% and 7.5 % on televisions. This step has been taken by the govt to encourage production in India. Industry experts say, the customs duty hike will push foreign players towards manufacturing and sourcing components more within the country. This would also increase job opportunities in the sector.

Source:

http://www.livemint.com/Politics/bfRo3KQlrXNqNGl7QjlqnL/Budget-2018-Standard-deduction-of-Rs40000-on-transport-me.html

http://www.firstpost.com/tech/news-analysis/budget-2018-customs-duty-hike-of-5-on-mobile-phones-to-force-major-brands-to-pass-on-burden-to-consumers-4330797.html

Budget Series : Finance and Banking

2018-02-17T06:37:00.003-08:00

With no big bang announcements on the Budget day, the banking sector had to be satisfied with what they already have. In fact, were given a bigger task to provide incremental loans worth Rs 5 lakh crore in Fy19.

The proposal to allow RRBs to raise market capital would enable these institutions to support credit flow to the rural sector. The proposals to review the refinancing norms for NBFCs(Non-Banking Financial Company) under MUDRA and receivable discounting by PSBs would improve credit supply to MSMEs and support the credit growth of banks and NBFCs. The increase in exempted interest income is unlikely to significantly improve deposit base, as the tax exemption is restricted to senior citizens who anyways prefer bank deposits. However, the proposal to provide insurance and pension benefits to the poor through Jan Dhan accounts can improve the deposit base of banks to some extent.

The big expected announcement which didn’t come was the increase in foreign holding limit in private sector lenders from the present 74%. Stocks of private sector banks had run up sharply. The budget reiterated its commitment to bank recapitalization but was numb on any more reforms.Bank recapitalisation program has been launched with bonds of Rs 80,000 crore being issued this year. The programme has been integrated with an ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme. This recapitalisation will pave the way for the public sector banks to lend additional credit of Rs 5 lakh crore.

There were also no new big announcements with regards to the resolution of non-performing assets (NPAs) which the banking sector is currently struggling to deal with.

In the absence of any big announcements, bank shares lagged with the BSE Bankex closing in the red.

So, overall the banking sector will have no prominent effect from the announcements made regarding the finance sector but there will be repercussions arising from the reforms and strategies of the other sectors. Affordable housing in rural areas would also add to retail loan growth of both banks and non-banking financial companies. The 10% hike in agriculture credit to Rs 11 lakh crore and the proposal to hike the minimum support prices of all crops at 1.5X of production costs augur well for rural incomes and spending. This should benefit banks through improved credit offtake as well as an improvement in asset quality in the agriculture segment.

Despite dismissing the consideration of crypto-currencies as legal tender or coin and warning of all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system, the Government will explore use of blockchain technology proactively for ushering in digital economy.

The government has, for the first time in India’s history, beaten its own disinvestment target, raising about Rs 92,000 crore by selling its stake in state run companies as against the budgeted Rs 72,500 crore.
Though buoyed by the success of its disinvestment policy, the government raised the target for 2018-19 by a modest 10.3% year-on-year to Rs 80,000 crore.

CREDITS : POOJA

ISHIKA

Budget Series: Fiscal Management

2018-02-16T21:02:00.002-08:00

The Finance minister has set the fiscal deficit target for 2018-19 at 3.3% of the gross domestic product (GDP) against the earlier target of 3%.Most analysts say they had expected it to be 3.2%.The government also revised the deficit target for the year ending in March 2018 to 3.5% of GDP from the targeted 3.2%.

Key recommendations of N.k singh Committee are accepted by finance minister to reduce debt-to- GDP ratio to 40% by 2024 to 2025. The debt-to-GDP ratio was 50.1 % in last year. Now government aims to reduce the ratio by 3.3% in 2018-19 , by 3.1% in 2019-2020 and 3% by 2020-21.
In this budget Government has also introduced amendments to the present fiscal Responsibility and Budget Management Act.

The government has increased its borrowing programme from Rs6.05 trillion to Rs6.06 trillion for the next fiscal year.The fiscal deficit target of 3.5% of GDP was achieved after cutting down capital expenditure by Rs36,000 crore in 2017-18. A shortfall of Rs50,000 crore on account of the goods and services tax (GST) forced the government to revise its fiscal deficit target.
The government’s revenue deficit went up to 2.6% of GDP in 2017-18 from the budget estimate of 1.9% of GDP, because of Rs1.1 trillion increase in revenue expenditure during the year.
Finance minister said this due to the government receiving GST revenue for 11 months in 2017-18 (a shortfall of Rs50,000 crore) and facing a shortfall in non-tax revenue due to lower receipts from spectrum auction.

Part of the shortfall was met through higher direct tax collections and disinvestment, Jaitley said. The government hopes to breach the disinvestment target in 2017-18 by collecting Rs1 trillion against the budget estimate of Rs72,500 crore. For 2018-19, the government has set a disinvestment target of Rs80,000 crore, including gains from privatization of Air India Ltd.

The government hopes GST collections will grow by 67% to Rs7.4 trillion in 2018-19, where as it has targeted a 4% growth in non-tax revenues to Rs2.4 trillion after it failed to achieve the target in the previous year.

Source :http://www.livemint.com/…/Fiscal-deficit-goal-revised-to-bo…

CREDITS : MANSI
BHAVYA DUREJA

Budget Series: Infrastructure

2018-02-16T21:01:00.002-08:00

The total capital outlay for the infrastructure sector has been budgeted to increase by 20.8% to Rs 5.97 lakh crore in FY18-19.
The infrastructure sector expects continued thrust from the government towards revival of investment cycle in the form of further increase in budgetary allocations towards infrastructure sector with focus on roads, railways and urban infrastructure. Apart from these core subsectors the special focus of this Budget 2018 has been on rural infrastructure through development of rural roads, houses, sanitation, irrigation and water supply.
With an aim to bring back the flagging revenues of the national transporter back on track, Arun Jaitley announced a capital expenditure allocation of Rs 1.48 crore for the railways. This includes redevelopment of 600 major railway stations and setting up of escalators and CCTVs and Wi-Fi facilities. This will help digitalization of Indian railways along with improvement on safety. Delays and accidents, the two main problem faced by India’s national railway system, is expected to be solved with current budget allocation. companies that carry out civil works and offer track-laying and electrification services will benefit.
Continuing the focus on increasing air connectivity, the government proposed to increase the standards to accommodate 1 billion flights a year. The government also announced an allocation of Rs 1,014.09 crore for the upcoming financial year towards revival of 50 airports and viability gap funding for improving aviation infrastructure in the north-east states under the flagship regional connectivity scheme. Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the government last year shall connect 56 unserved airports and 31 unserved helipads across the country.The amount allocated this year is almost five times as per the revised estimates of 2017-18.
In order to boost domestic defence production, government aims at bringing out new industry-friendly policy and has opened the sector under FDI.
It has also provided direction on the long-term projects being undertaken under the Smart Cities Mission and AMRUT programme. Of the 100 cities mandated for upgrade under the Smart Cities Mission, 99 have been selected so far. The programme would involve capital outlay of Rs 2.04 lakh crore (projects worth Rs 2,350 crore completed and works of Rs 20,852 crore under progress). Similarly, under AMRUT, state-level plans for providing water supply in 500 cities with a capex of Rs 77,640 crore have been approved.

The increased expenditure in infrastructure to INR 5.97L crore is rightfully been directed towards will help make India more competitive by reducing supply chain jobs. It shall also contribute to the growth in jobs and exports. the company engaged in construction and housing segment coupled with company engaged in railway and road project is expected to get boost. Cement and steel sector should do well if infrastructure does well

CREDITS : POOJA SACHDEVA 2nd year
ISHIKA JAIN 2nd year

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Budget Series : Education Sector

2018-02-16T21:00:00.000-08:00

India’s higher education institutes need to gear themselves up towards addressing the new challenges presented by advancement ot technology and increase in automation systems. Technology can play a big role in taking quality education to masses. There should be no GST or income tax on education-technology companies which are delivering education through online mode.

Ekalavya Model Residential School to be set up in every block with more than 50% ST population and at least 20,000 tribal persons. The schools will also focus on providing training in sports and skill development.

Introducing an updated and current edition of the National Education Policy would be a clear indication of the government’s commitment to the agenda of improving the education sector. The government must look at further improving access to education at all levels and rationalising taxes to make books, notebooks and educational material including those via e-learning education programs affordable for the masses.

The Human Development Index (HDI) of UNDP and the report on inclusiveness and growth released by the World Economic Forum (WEF) have shown that India’s social sector indicators have not performed well and consequently India lags in the WEF inclusiveness index among even the South Asian countries. As education is one of the easiest way to promote social mobility and empowerment, the government must use this annual budget to address these concerns. Increased public spending in education can bridge some inequality of opportunity that seems to be creating a divide among Indians.

CREDITS : AKHILA 1st year
DEVINA 1st year

Budget Series: Health Sector

2018-02-16T20:58:00.003-08:00

The NHPS which will be providing coverage for secondary and tertiary care hospitalization will have approximately 50 crore beneficiaries. TB patients will be provided support at the rate of Rs.500/month for the duration of their treatment.
It is an insult to the people’s intelligence to announce a grand scheme without forethought or preparation or money in the last year of the term of the government.

We don’t necessarily need more allocations rather we need to use the allocations we have more effectively by prioritising improvement of basic health facilities such as infrastructure of hospitals, adequate number of qualified doctors and nurses and, availability of generic medicines.

India has one doctor for 1,681 persons (2016 data) and one government doctor for 11,528 persons, against the World Health Organization’s norm of one doctor for 1,000 persons. We produce only 55,000 graduate doctors and 25,000 post-graduate doctors every year. Each doctor carries the burden of at least two doctors.
Our healthcare system is broadly divided into three categories: public/government hospitals, private for-profit hospitals and private not-for-profit hospitals. Because of lackadaisical administration, public hospitals (with notable exceptions like AIIMS-New Delhi, JIPMER-Puducherry and a few others) are seen as inefficient, turning away patients and refusing to take normal risks while treating a patient while many taluk and district-level hospitals have become just referral hospitals.

CREDITS : AKHILA 1st year
DEVINA 1st year

Budget Series : Rural Economy

2018-02-16T20:56:00.003-08:00

With large parts of the country, including poll-bound states, gripped by a farm crisis, Modi government’s last budget gives top priority to the rural sector.
The focus of the government next year will be to provide maximum livelihood opportunities in rural areas by spending more on livelihood, agricultural and allied activities and construction of rural infrastructure,” Jaitley said.
Union Budget 2018 focusses on strengthening the rural economy in all aspects including from farmers to the salaried class, cutting across the poor and middle class society.

Referring to the measures taken for the benefit of lower and middle class, the Finance Minister said, under Ujjwala Scheme distribution of free LPG connections will be given to 8 crore poor women instead of the previous target of 5 crore women.

Under Saubahagya Yojana, 4 crore poor households are being provided with electricity connection with an outlay of Rs.16,000 crore.

To fulfil target of housing for All by 2022 ,more than one crore houses will be built by 2019 in rural areas, besides already constructed 6 crore toilets under Swachh Bharat Mission.
On the loans to Self Help Groups of women, the Finance Minister said it increased to about Rupees 42,500 crore in 2016-17, growing 37% over previous year and expressed confidence that loans to SHGs will increase to Rs.75,000 crore by March, 2019. He also substantially increased allocation of National Rural Livelihood Mission to Rs 5750 crore in 2018-19.

Sources:
https://scroll.in/…/budget-2018-if-rural-economy-and-agricu…

http://pib.nic.in/newsite/PrintRelease.aspx?relid=176062

http://www.firstpost.com/…/budget-2018-finance-minister-aru…

CREDITS : PRAGYA 2nd year
MUSKAN BHOLA 1ST year

Are we intelligent, educated or literate?

2018-02-11T06:29:00.003-08:00

Are we intelligent, educated or literate?

'The function of education is to teach one to think intensively and to think critically.
Intelligence plus character- that is the goal of true education.’
- Martin Luther King, Jr.

King’s words are as true today as when he spoke them. As I see young students struggling with their textbooks, trying to memorise all that it has, not making bare minimum efforts to comprehend what they are actually putting into their precious minds, I get worried. I get worried about not only their future, but sometimes also about mine and many of my generation, who are part of a society where the idea of education, and unfortunately intelligence, is limited to proficiency in numeracy or literacy. Real intelligence is today what you use in academic studies. Being educated requires that you know everything, even if it means that you actually know nothing about how to make use of that ‘everything’.
“Picasso once said that all children are born artists. The problem is to remain an artist as we grow up. I believe passionately that we don’t grow into creativity, we grow out of it. We are educated out of it”, said Sir Ken Robinson, one of the world’s most influential educators, at a TED event in 2006, making a profoundly moving case for creating an education system that nurtures creativity.

Today, having a degree in a particular field or varied disciplines defines education. But the real aim of education is to enable us to become fulfilled individuals and active, compassionate citizens by understanding the world around us, and learn to critically analyse ideas and situations. Certainly, this paves the way for the idea of intelligence - the ability to learn, acquire, assimilate and use new knowledge. We need to keep our minds open, the creativity of the mind is critical for our development as individuals. But innovation and imagination are rarely valued in a country like ours, where learning is information based, not knowledge based. Schools, colleges and other institutions of higher education are killing creativity, requiring students to merely learn facts and processes, not telling them the significance of these in day- to-day life. Our ability to think, imagine and more importantly question, is smothered the moment we enter a formal learning environment. A closed mind cannot be called intelligent, maybe just educated. Or are we just literate, learning to read and write, without having the skill to make use of what we learn for our growth as well as of others’? Finland has set a striking example for countries like India through its newly introduced curriculum reforms. Emphasising on the importance of multi- disciplinary approach to education, Finland has introduced the concept of phenomenon based learning,
which aims to remove school subjects from the curriculum. This concept was introduced to keep students involved and engaged in their studies by adopting a collaborative approach, making them work in small groups. The focus is on understanding a phenomenon, such as global warming, through different approaches- mathematical, scientific, historical etc. This
provides students with multiple points of view for a particular concept, integrating different subjects and themes in a single class. The textbook way of learning employed in Indian schools provides ready-made answers to questions, and judges students on their ability to reproduce theories on paper during tests. On the other hand, the Finnish education system
protects children from rote learning, helping them to question, ponder and apply the
knowledge acquired, where necessary. This is the true aim of education- to make learning an interesting and organic process for students.

The Indian education system needs to rethink and redesign its curriculum. The methods do not have to be copied, but should be applied according to the Indian scenario. It is also important for us to understand that Intelligence is something inbuilt. We have to stop suppressing it; instead, we should foster it by keeping our inquisition alive. Only then will we
be called well-educated, intelligent citizens.

Sanchi Agarwal

Budget Series: Agriculture Sector

2018-02-09T07:42:00.001-08:00

In Union Budget 2018, Finance Minister Arun Jaitley has announced various agricultural reforms in a bid to double farmer income by 2022. Here we take a look at four key reforms announced by finance minister Arun Jaitley.

Support price for produce
by fixing MSP of Kharif crops like paddy at least 50 percent higher than the cost of production.

Allied-Sectors get a boost
by setting up fisheries and aqua culture with an outlay of Rs 10,000 crore to each sector.

Livelihood creation
by creating employment of 321 crore person per days, 3.17 lakh kilometres of rural roads, 51 lakh new rural houses, 1.88 crore toilets and 1.75 crore new household electric connections.

Tax incentives
by proposing to allow 100% deduction to companies registered as Farmer producer companies and having annual turnover up to Rs 100 crores in respect of their profits for the first five years.

Despite these key reforms, however, consumers may face higher inflation as rise in MSP may put pressure on food prices. Rural consumers could have more to spend as big-ticket schemes and higher farm prices raise incomes.

CREDITS : PRAGYA 2nd year

DEVINA 1st year

You've Been Served: India and the GDP Fudge

2018-02-04T05:47:00.000-08:00

GDP i.e., Gross Domestic Product is defined as the final value of goods and services produced within a country in a specific time period - monthly, quarterly or annually. As per Samuelson and Northadaus in their seminal textbook, 'Economics', GDP gives an overall picture of the state of an economy just like a satellite in space surveys the weather across an entire continent. GDP enables policymakers, central banks, economists and businesses to analyze the impact of various policies and decisions made by the government for the economy.

The task of measuring the economic activities of India and further releasing the GDP of the country is taken care of by the Central Statistical Organization (CSO) which releases the GDP quarterly in every Financial year.

So, when CSO released the GDP of Q3 of FY16, there were many debates about the fudging done by the government to prove demonetization, as a big success. Some were of the view that the government was trying to fudge the actual GDP by changing the base year for GDP calculation. A few stakeholders were in support of the government for a change in the base year as it is required from time to time for accurate measurement of economic growth. And according to the government, change in base year facilitates understanding (data) for analysis and international comparability . Even though Demonetization created a cash crunch in the market leading to less money in hands of the people but as the government took adequate measures to manage the money supply in the market, the problem of cash crunch declined. But the ongoing debates about fudging done by government by changing the base year didn’t cease. There were claims that GDP of Q3 of FY16 would be around 4-5% rather than 7% which arrived due to the change in base year. Such claims didn't arise when the base year was changed in 2010 and then in 2013. According to the recent revisions by CSO, FY16 GDP growth revised up to 8.2% while FY17 GDP growth remained unchanged at 7.1% which shows that GDP was high in FY16 as compared to that in FY17 and this makes the claim of fudging by the government, irrelevant.

GDP is a widely used way to analyze the decisions made by the government and to compare the economic growth of a country with that of other countries. However, as each coin has two sides, GDP can’t be called the accurate measure of the economic growth of a country. GDP has some drawbacks and some of them are-

It does not account for the underground economy.
It emphasizes economic output without considering economic well-being.
Non-Market Production isn’t included.
GDP is sometimes influenced by Externalities.
GDP does not take into account leisure time, nor is consideration given to how hard people work to produce output.
Changes in quality and the inclusion of new goods aren’t accounted by GDP.

References:

-Amisha Garg, I Year