Ramdev, Manmohan Singh and the Art of Misdirection

Last week, my Dad and I were driving to a client's place. There was a road around Shree Nagar, Thane, that needed fixing. Like rest of the city, the Government promised to repair the roads before the monsoons arrived. And unlike rest of the city, this road was actually fixed. However my Dad interrupted my moment long relief by asking me to look at the "finishing" of the recently repaired road. It was bad. Huge chunks of stones were lying right next to the road, the place where cars are parked, and pedestrians walk. 

This observation preceded the following conversation:

Me: "Why doesn't the Government do its job properly? If it decides to get something done after all, why not take the pain to do it perfectly?"

Dad: "This is India, beta.

After 160 seconds. Me: "What if people actually went to the local offices of the Municipal Corporation and demanded that their roads be fixed properly, and not budge until and unless the Government agrees to do so?"

Dad: "Then the Government will call for Police and tear gas, and more tear gas."

Me: "- but they wouldn't fix the problem [?]"

Dad: "No. That they won't."

That was more or less the end of the discussion we had. Two days later, Ramdev actually held a fast till the time Government came up with a plan that stated how much Black Money was accounted for, and what would be their next step. Couple of months ago, the Swiss Bank actually conceded to the demand of providing details to the respective governments around the world about the accounts held by the latter's citizens. India was one of them. Astronomical figure of black money was stashed by Indian (take a guess) Politicians, of course. 

Now Ramdev took to this cause. This was in the spirit of the international popularity and praise earned by Anna Hazare's Lokpal campaign. Guess he also wanted a slice of this earnest respect. We all know he enjoys being called the harbinger of prosperity and peace, through Yoga. If the magnificent Judi Dench decided to grace us with her cameo appearance in the latest installment of Pirates of the Caribbean franchise, who are we to judge, really, about people's claim to a few moments of fame? 

A lot of people, including me, thought that Ramdev's move was politically motivated. And let's face it, he can never be compared to a man as saintly as Anna Hazare. Anyway, let's not cloud our perspective. Back to objectivity: so, Ramdev really goes on a fast-cum-rally in New Delhi. Congress tells him that he's on a hit-list of dangerous terrorists. Baba says well, humour me more. Congress then calls the super cops, unleashes tear gas on the thousands of "supporters" of the cause of Yoga/ Ramdev/ Black Money accountability.

This obviously is noticed by the Opposition and they compare the entire incident to be a reminiscent of the Dark Times of Emergency circa 1975-77. Anna Hazare asks what is the difference between the white English and dusky Indians and says the incident is akin to the  Jallianwala Bagh massacre. 

The Congress bites its nails, and then publishes a report on how Ramdev has 34 companies, one of them being a front for supplying popular Ayurvedic medicines, and how the turnover goes up to Rs. 1100 crores. Right next to this report, PM Manmohan Singh is justifying why the tear gas was unleashed on the commoners in New Delhi that night.  

On the same page, there's a small but significant news article that says the Government will not try and "woo" Anna Hazare's team. What did Anna Hazare's Team want? They simply wanted to put the Prime Minister's Office under the Lokpal Bill, and hence under the independent authority to be investigated. What is it about the Lokpal Bill that flusters the Government so much? The irony is Ramdev was supporting the PM on this ground!

I wonder what the Government is really trying to do here. Are they trying to hide the accounts of Black Money holders? Are they trying to show that Ramdev really is not the right candidate to lead this anti-corruption movement? Is the Congress trying to indulge in a massive character assassination of someone who stands up and asks for accountability? Or all of the above? We all know that Ramdev's Rs. 1100 Crore assets is actually peanuts compared to the astronomical figures of Black Money held by one politician at any given point. 

If a country's Prime Minister can go to the extent of actually indulging in libel and slander against someone who demands an explanation, an accountability - which is the Prime Minister's job, by the way - what really can be inferred from this? Agreed, even if that "someone" is not really who he seems to be, the Prime Minister's job is to ensure the welfare of its people and respect the spirit of Democracy. It is indeed a serious problem if the Prime Minister is not on the same side as his country's people. 

So basically, no citizen can really stand up and hold the Government accountable. If I were to do it, the Government will tell me to shut up because I've broken so many hearts, and I drive an Audi and have a bunglow in Alibaug and I killed a rat once in my life and so on. I'd have to be a monk of Mother Teresa's proportion to point a finger at the Government. Probably the Congress will dig up some dirt on me, even then. Kudos, gentlemen and Madam, Chanakya would be proud. 

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Union Budget 2011-12: Review and Sector Analysis, Major Highlights. What's in it for YOU

First the factual analysis of what is going to be dearer (expensive) and what is going to be cheap. Then we'll look into the effect of the Budget on the economy and the common man at large.


WHAT'S GOING TO COST YOU MORE:
1. Branded Clothes
10% excise duty imposed on ready-made and made-up garments. Consumers are expected to pay around 4-10% more on branded apparel. This is a cause of concern since rising cotton prices have forced the government to hike retail prices by 10% recently.


2. Branded Gold, Bling
Gold was expensive before, but it's become more so, post Budget 2011-12. One per cent excise duty on branded jewellery is back. This is a matter of concern as the prices of gold have increased from 21% (Feb 2010) to now. The prices of polished diamonds has increased over 50%.


3. Hotel Accomodation
Hotel accomodation over INR 1,000/- per day or more, will come under the service tax bracket, along with air conditioned restaurants that have the license to serve liquor. This puts India's travel and tourism industry over six times more expensive than that of Malaysia and Singapore. The industry already pays a luxury tax of over 10-20% in certain states, and with this latest tax burden, it will become the highest tax paying industry in the country.


4. Hospital and Medicare services
You'll have to fork out 5% service tax at air conditioned hospitals and diagnostic centres. 


5. Air travel
Domestic and International air travel will become more expensive w.e.f. April 2011. Service tax on domestic air travel increases to INR 150 - earlier it was INR 100 (economy class) and to INR 750 (business class) - earlier it was INR 500. 


6. Computers
Excise duty exemptions have been withdrawn on hardware items such as computer micro-processors, floppy disc drives, CD-ROM drives, DVD Writers, Flash Memory Drives. They will attract a concessional excise duty of about 5%. Computer manufacturers located outside excise-free zones, will not be impacted as they will avail CENVAT credit. But those located within the excise-free zones will pass the burden to the consumer as the cost of input will now increase.


WHAT WILL COST YOU LESS
1. Nuts - like Pistachios, Raisins, Cranberry
Import duty on pistachios has been cut down to 10% from the existing 30% . On sun-dried seedless raisins, it has been reduced from 100% to 30%. On cranberry products and its juice based products, it has been cut down from 30% to 10%. 
It is interesting to note that there is a bumper growth of pistachios in Paramount Farms, the California based company, and it needs a market like India to offload their surplus. Judging from the FM's generosity, it seems the Indo-US trade talks have definitely taken a headway.


IMPACT ON THE TAX PAYER
1. Taxation exemption limit increased to INR 1,80,000 from INR 1,60,000 
2. Salaried individuals with a taxable income of up to INR 5 lakh may be exempt from filing tax returns. Form 16 issued to salaried employees will be treated as income-tax return. This is a discretion at the hands of the Centre, and it may be notified w.e.f. June 2011.


SENIOR CITIZENS AND SUPER-SENIOR CITIZENS
1. A new category for those above 80 years of age has been introduced: super-senior citizens. For them, income up to INR 5 lakhs is exempt from tax.
2. The senior citizen age limit has been brought down from 65 to 60.


IMPACT ON INDUSTRY/ SECTORS
1. CEMENT
Cement prices may rise up to Rs. 10-12 per bag.  This will add to the cost of construction, and thereby the real estate prices may increase too. The industry currently is struggling with the falling demand and increase price of the input. The fuel cost has risen by about 30%, power tariff by 12-15%, and freight cost by 10-12%. The excise duty rates are slated to be replaced by composite rates having ad valorem and specific component. The customs duty on two most important raw materials of the industry - petcoke and gypsum- are proposed to be reduced to 2.5%.
The government had earlier levied ad valorem rates on the MRP; but now this stands on the sale price. The rate of specific duty over and above the ad valorem rates negates the earlier relief.


2. EXPORT SECTOR
There  have been no relief for the export sector. Experts feel that in the light of fierce competition in international markets, some pro-export policies and encouragement in terms of protection for home currency should have been made available. 


3. OIL AND PETROLEUM
The subsidy pay-out for public sector oil companies has been increased. The industry expected a reduction on duties in petroleum products and crude oil. This is good for the companies as it reduces the impact of global prices of oil, but with no reduction in duties, consumers will still have to pay the existing prices. Two years ago, a barrel cost $24, and now it's at $110. 


4. MSME
Micro and Small enterprises were granted an incremental lending of about INR 5,000 crore through SIDBI. Last year, the government had provided SIDBI INR 4,000 crore for the same purpose. The industry expected an outlay of INR 7,000 crore.


5. SEZ
Bad news for SEZ developers and units, as they now have to pay a Minimum  Alternate Tax (MAT) at 18.5% from their book profits from the next fiscal year. This development annuls all the exceptions specified under the ambitious SEZ Act. The fine print of the Budget however aims at developing a scheme where the SEZ units and developers can obtain tax-free receipts of services and get their refunds in a hassle-free manner.


6. Infrastructure
Undoubtedly, the single most budgetary provision for more access to foreign funds for making roads and highways, the government has allowed NHAI (National Highway Authority of India) to raise INR 10,000 crore through tax-free bonds. This higher FII limit is welcomed by highway developers. FIIs can now invest in domestic construction companies in unlisted bonds, with a  minimum lock-in period of 3 years. The MAT is increased from 18% to 18.5%. In all, INR 30,000 crore outlay is given to the Infrastructure sector. Bifurcations are as follows:
NHAI - INR 10,000 crore
IRFC - INR 10,000 crore
HUDCO - INR 5,000 crore
Ports - INR 5,000 crore


7. Iron & Steel
The Steel industry is content as stainless steel scraps are fully exempt from customs duty. The government has hiked the duty on all variants on iron-ore. Iron ore miners are burdened by 20% of export duty. Iron ore is a precious, fast-depleting natural resource. The government is fully exempting iron ore in a pelletised form so as to encourage the value addition process for fines. 


8. Shipping
The Government has provided for duty free import of spare parts for shipping companies. Earlier, only shipyards were allowed duty free import of spares. Small shipping companies will benefit from this move as they now no longer would have to depend on the shipyards for their requirements. Coastal shipping service operators also welcomed the abatement in the service tax. They are subject to 18.5 % of MAT, though. Out of the INR 30,000 crore outlay to the infrastructure sector, INR 5,000 crore is dedicated to the ports. 


Other Major Developments/ Concerns/ Attempted Policy Reforms of Budget 2011-12 


INFLATION
Excise duty is waived for food and agro-based industries, which involve a large range of equipments used in the sector. Storage facility, warehousing and logistic concerns are also addressed - the government plans to create modern facilities. Mega Food Parks are to be created: 15 during 2011-12 over an expense of INR 400 crore.


BLACK MONEY
The government has suggested the following superficial program to track down black-money:
1. Create an appropriate legislative framework
2. Set up institutions dealing with illicit funds
3. Develop systems and impart skills to manpower for effective action.


AIR INDIA gets a cash injection of INR 5749, out of whic INR 1200 crore through budgetary support, and the remaining is through resource mobilisation. AIR INDIA reported a loss of INR 3472 crore in 2009-10 and INR 5,672 crore in 2008-09.