Budget 2017: The Reality

The FM presented the first Budget of Independent India where the Railway Budget was subsumed with the General budget; the segregation between Plan & Non - Plan expenditure has been dumped. It is a workmanlike budget without flourishes; no bad news is good news, sighed the market, relieved that a LTCG (Long Term Capital Gains) Tax has not been introduced & rewarded the FM with a rally.

The FM leaned on the IMF data that predicted the world economy to grow by 3.4% next year vs. 3.1% this year & India 7.2% next year & complimented himself for achieving an inflation rate of 3.5%, CAD of 0.3%, FDI of 1.45L crores in H1 (36% growth)& $361 billion reserves. He then proceeded to lower Fiscal deficit to 3.2% for next year & promised lowering debt to GDP ratio to 60% progressively to keep the rating agencies happy; lowering the borrowing target for next year to 3.48 lakh crores is a signal to the RBI to drop interest rates. In this tight rope walk, the Budget, however, has shrunk in size as a % of GDP next year as compared to this year, laying bare the promises of a “Modi Stimulus” blared on national TV from the last few days.

The FM quietly sneaked in listing of the PSUs in his budget speech without mentioning the divestment target of 72500 crores which would have invited accusations of selling family silver during the impending state elections. If he does achieve the same, it will be truly transformational. Abolishing FIPB, though welcome, does not mean that everything is under an automatic route as clarified by Economic Affairs Secy. Shaktikanta Das; sectors like Telecom, Defence etc. would still need approvals. That the rules governing FDI, would be released a few months hence indicates that the govt. still continues to make announcements before thinking through the fine-print.

Introduction of the “Thin Capitalization” rule means that company’s interest cost in excess of 30% of EBITDA cannot be tax deductible; this could induce better financial prudence from companies & help Govt. net a higher tax revenue too; highly geared companies would face an uphill task, though, in the short run.

The overall impact sector wise:

Industry

96% of these companies were rewarded with a reduction in the corporate tax (CT) rate from 30% to 25% which could spur investments & job creation. The MSME sector accounts for 45% of the GDP & 80% of the workforce; thus all MSMEs & more would benefit since the rule applies to all companies with a turnover of under 50Crores. CII which had demanded a CT to be dropped to 18% were miffed but the Govt. gains in shedding the tag of “Suit Boot Ki Sarkar”

3.96L crore capital expenditure, with a major 2.41 Lakh crore in the transport sector (Railways: 1.31L; Roads: 0.64L) though welcome, might not unleash the animal spirits of the economy.

Agriculture

The FM, incredulously, promised that agricultural growth would continue to grow by 4.1% without unveiling the plans. Plans to double farmer incomes in 5 years too are still unknown. About 50% of the population are dependent on agriculture although it accounts for only 14% of the GDP; this data point, though, is sufficient, to indicate that this is crying for investment.  Enhancement of farm loans to 10 Lakh crores, apart from the PMs announcement on 31^st Dec of a 60 day interest waiver were the only concessions. While a muted rise in MSP during the last few years has kept inflation in check, a strategy to achieve the BJP’s manifesto promise of a 50% increase in farmers’ incomes in 5 years is yet to be unveiled; advise to farmers to diversify incomes by adding animal husbandry, pesi-culture etc. are not helpful enough. E-NAM to connect mandis to ensure that farmers access a national market, though welcome, is a slow burn. The govt. has now recommended removal of perishables from the ambit of the APMC; states like Bihar have rightly abolished the APMC but that strategy alone has not helped agriculture become profitable. While Investments are an urgent need for this sector, the budget merely promises to circulate a contract farming model act to the states.

Against a budget of 38500 crores, for NREGA, the Govt spend 47500 crores in FY 2016-17, possibly to cushion the distress of demonetization, negating the PM’s stand against the ACT in Parliament earlier. A further increase this year to 48000 crore, with a promise for more, along with a shift towards asset creation, is welcome. The UBI (Universal Basic Income) thought triggered by the Economic Survey would cost about 5% of the GDP while the NREGA costs only 0.3%. NREGA has the advantage of self-selection too; UBI would be a dole transferred to the account of a poor man without any need to work while a poor man would have to work to get NREGA wages.  

Transferring, however, the 2.3L crore of subsidies - Food, Fuel & Fertilizers - through DBT (Direct Benefit Transfer) to the recipients, is welcome since it would be more directed & would also eliminate leakages. Subsidies account for about 1.7% of GDP & along with NREGA 2%.

Services

No specific measures to the service sector in the budget. An increase in the ST rate to 18% was not announced, perhaps paving the way for multiple service tax rates in the GST; the budget too expects a 11% increase in service tax revenues this year as against only 5% for excise.

The reduction in the lowest slab of IT (2.5 - 5 Lakhs) would be welcomed by the 1.95 crore people who file taxes in this bracket since it translates into Rs 12875/- gain. The FM announced that the reduction in tax would lead to an outgo of 15500 crores; 2700 crores, though, is recovered through a 10% surcharge on the salary bracket between 0.5 – 1 crore, translating into a minor stimulus of about 12800 crores which coupled with the OROP rises, 7^th Pay commission wages & the likely wage increases to be announced by the states could spur consumption.

The reforms in political funding mooted by the FM include Electoral Bonds & mandatory disclosures - of contributions received beyond Rs 2000/- against the current norm of Rs 20,000/- - is nothing but hogwash. Political funding smacks of quid pro quo & anonymity helps the culprits which calls for greater transparency. It is also true that ruling parties target the funders of their opposition who might therefore demand anonymity. The solution suggested by the FM neither supports anonymity nor transparency; banks that issue electoral bonds would have the data regarding the identity of the funder & the parties who have redeemed the bonds which if accessed by the govt. of the day would continue harassment. Lowering of the disclosure norm to Rs 2000/- would only increase the workload of the accountants who would now show 10 times the no. of funders.  Transparency in elections is a sine qua non & all political parties should be mandated to reveal every paisa received as funding; simultaneously, mandatory disclosure of expenses at the booth level by all political parties, monthly, regulated by the EC & open to a hawk eyed opposition shall bring a genuine transformation in our polity. 

Conclusion

To circumvent the twin balance sheet problem – banks loaded with NPAs & the private sector gasping for breath because of a debt overhand – a huge increase in public spending & an aggressive FDI invite were needed. The budget, unfortunately, fails to give a massive push to investment in a bid to retain fiscal prudence; a larger disinvestment target to fund investments while still retaining a fiscal deficit target of 3% would have been a better choice. Treat this budget, therefore as more of consumption & less of a massively Investment driven one; it is a political budget which pressed all the right buttons to influence the impending state elections. Only time will tell if the govt. has indeed achieved its economic & political objectives.

Budget 2017: Expectations

Despite protests by the opposition, the govt. has secured a Supreme Court approval & an Election Commission concurrence, with caveats though, to present the Budget on Feb 1^st. While preponement of the General Budget makes eminent sense, to ensure a quicker disbursal of funds to the states, presenting the same this year after Mar 8^th – after the conclusion of the assembly elections to the 5 states – would have been morally suasive to avoid any undue advantage to the incumbent, especially when the same is seen as a semi-final before the 2019 final.  That the govt. insisted & got its way indicates that some sops are in the offing to obliquely influence electoral outcomes, camouflaged as benefits for the entire populace.  Expect therefore a populist budget.

Subsuming the Railway Budget with the General Budget, though, is welcome for the Railways can now operate under the radar, away from populism, to rectify its distressing financials.

Five broad principles shall guide the Budget preparation

(1)Stimulus to the economy post Demonetization

India’s growth could shrink from 7.6% last year to 6.6% this year, as per median estimates, due to a tepid global economy & demonetization. An agile finance ministry would however ensure that the fiscal deficit would be maintained at 3.5% by playing around with the tax rates on petroleum.  While the commitment as per FRBM (Fiscal Responsibility & Budget Management) Act was to meet a fiscal deficit of 3% by FY18, it could in all likelihood be pegged between 3- 3.5% for next year, since Finance Minister (FM) Jaitley signalled such an outcome during the 2016 budget speech; he shall now be armed with such a recommendation from the NK Singh committee too.  This move is welcome especially when the private sector is reeling under the impact of low utilization & is in no position to enhance investments even with a corporate tax reduction or a dip in interest rates – another of their pet asks.

Expect an infra push in roads, railways & inland waterways. While ports too would be an ideal candidate, for investment, the opposition from the port unions for corporatization to raise money has tempered the govt. launch of port based China style mega Industrial cities one in AP & the other in Gujarat is however likely to spur manufacturing & job creation.

Analysts have been alluding to the Trump triumph & his commitment to reduce corporate tax (CT) rates to 15% to spur investment & hence job growth. A roadmap to reduce CT to 25% without exemptions has been announced by the FM earlier. In a bid to avoid the tag of “Suit Boot Ki Sarkar” to stick, the govt. would marginally reduce CT by 1-1.5% this year & announce a concession on the personal income tax front too; the later could drive consumption. Parity demands that the peak income tax rate be reduced to 25% with an option to pay either at 25% without exemptions or 30% with exemptions; the other two personal tax slabs, of 10% & 20%, likewise, can be dropped to 5% & 15% respectively. This shall be the most widely welcomed direct tax reform which shall have election traction too. Demands for enhancing standard deduction or slab amounts might not be accepted since only 1% Indians pay income tax & accepting either of those demands might reduce the fig. further.

(2)Incentivize cashless Transactions aka Digitalization

Experts opine that the informal economy in India is about the size of the formal economy.  Demonetization even with its flawed implementation & gaming of the system by interested parties has left some trail which could help in enhancing the size of the organized sector if cashless transactions are incentivised.

For individuals payments upto Rs 1000 vide plastic (Credit/Debit) attracts a transaction charge of 0.25% & upto 2000, 0.5%. Mohan Guruswamy opines that a Rs 100 note has a lifetime value of 1lakh courtesy 1000 transactions & costs Rs 1.8/- to print. However if the same is taken through a digital transaction at the lowest slab of 0.25%, it would mean the citizens expending Rs 25, much higher than the cost of 1.8/- for printing the note. Therefore, there is an economic story to drop the transaction cost to 0.01%. The govt. is better served implementing his recommendation instead of concentrating on capping the MDR (Merchant Discount Rate) on PSU banks only. Pushing for Aadhar based transactions apart from mobile payments is also necessary but by keeping costs nominal.

It must however be mentioned that despite 87% of Kenya’s GDP passing through MPesa in 2014, Kenya is 145 out of 176 countries on corruption perception index 2016 released by Transparency International indicating the digital transactions per se might not lead to a reduction in corruption. Therefore, while not recommending a police state it is necessary that the govt. uses big data to do the needful in a non- intrusive manner.

(3)Strengthen the Indian Defence Establishment in a troubled neighbourhood

India needs to be prepared for a war on two fronts – Pak & China. The Indian Defence Budget is at about $40 billion against Pak’s $8 Billion & China’s $150 billion. While India cannot match their combined spends, focus has to on outcomes than outlays especially when there is less of fiscal space; expect a further push to “Make in India” to resonate in the budget.

The governments’ strategy to spur nationalism by invoking the armed forces as a metaphor is commonplace & surgical strikes raised the crescendo.  They would be keen to ride such a wave again while entering the electoral fray.  However, unless matched with increased spends, this propaganda would be seen as mere rhetoric, which would be suicidal, especially when forces – including those from the paramilitary – are sharing viral videos of food, facilities or arms inadequacies.  The govt. could use an emotional sentiment to fund the forces as a route to sell family silver: the Public sector insurance companies & other un-revivable units would see disinvestments & an outright sale respectively; an overall budget target of about 1 lakh crores in disinvestments is not unlikely.

While Modi rightly hinted on Dec 25th that Capital market participants should contribute more through taxes for nation building, the FM quickly intervened to clarify that it was not a signal for introduction of Long Term Capital Gains Tax (LTCG). Likewise, a proposal for making foreign companies with more than 50% of their assets in India to pay indirect transfer taxes while exiting their investments has also been kept under cold storage with an intention not to spook the markets. Logically, the tenure of Short term Capital Gains (STCG) for listed securities should be equated to that for the unlisted ones which is currently at 2 years; however, to achieve a higher disinvestment target these proposals could be kept under abeyance. GAAR (General Anti Avoidance Rules) would however be effective from April 2017.

(4)Support for the Marginalized

The Rangarajan committee recommendation pegs Indian BPL figs at about 30% of the population.  While the traditional wisdom doled out to the populace is that the govt. has been supporting these marginalized sections through subsidies – Food (1.34L crore), Petroleum (0.27 lakh crores; 0.20 lakh crore on LPG & 0.07 lakh crores on Kerosene) & Fertilizers (0.70 Lakh crores) – accounting for about 2.3 L crores yearly, the same is not entirely true. Food stocks in the Food Corporation of India rot due to lack of storage spaces & has been diverted to liquor firms; mills make merry too.  Kerosene subsidy has contributed more towards adulteration of petrol & hence pollution rather than reach the intended recipients; transferring money through Direct Benefit Transfer (DBT) for buying 2 solar lanterns & removal of kerosene subsidy makes eminent sense.  Fertilizer subsidy is transferred to the producers & black marketing of this farm input is rampant; neem coating to prevent its use in chemical industries has helped only marginally.

The govt. cannot announce rationalization of the Kerosene or Fertilizer subsidy before the elections, an announcement through an executive order after Mar 11^th is not unlikely, if the electoral results are favourable to the BJP.

Since the CEA (Chief Economic Advisor) has indicated that the new economic survey would contain a large section on Universal basic Income (UBI) it is reasonable to assume that the govt. would announce more DBT for the marginalized. Transferring Rs 500 per month to the bottom 30% of the population (about 40 crores) would entail an expenditure of 2.4L crores; replacing subsidies with the UBI makes economic sense for it shall mean targeted subsidy.  While 111 crore Indians have already enrolled for Aadhar, this announcement would spur the others too to embrace Aadhar quickly.

Interest subvention of upto 4% for low cost housing has already been announced by the PM on Dec 31^st 2016.

The salaried class would be incentivized through increase in Deductions allowed under Sec 80C from 1.5L to 2L; Infra bonds could make a comeback. Doubling the exemption on medical reimbursement from 15K to 30K would give much joy. Change in LTA regulations that currently mandate pay-out for only 2 travels in a block of 4 years should be changed to a yearly pay-out & should include expenses on food & lodging rather than travel expenses alone; excluding foreign travel, though, would make sense to spur domestic tourism.  Pension income could become tax free & income upto 4L left tax free to provide relief to senior citizens.

 (5)Attack Black Money

The govt. would announce its continued resolve to tackle black money. Indonesia had announced an amnesty scheme with a  tax rate of 2- 10% on black money & succeeded in eliciting massive declarations in assets, since the amnesty seekers  were cowed by the fear that they shall have no place to hide once the automatic exchange of information between countries rolls out in 2018.  While the tax rate is low it propels disclosure thereby creating a perpetual stream of income. A replication of the same avoids legal & diplomatic battles & is hence economically pragmatic although it could invite accusations from the opposition of being soft on the bourgeoisie.  While this would serve as one of the best bets to fund UBI, the Govt. would be wary of such a strategy.

Conclusion

In short it will be a political budget to soothe the frayed nerves of a section of the populace reeling under the onslaught of demonetization. While the usual noises on public investment & support for job creation through start-ups support would continue, only the informed are willing to vouch that job creation of 1.2 crores per annum is a mirage. Hopefully the FM will skilfully juxtapose the political with the economic & announce a budget that is truly “transformational”.

The rules for Success & Happiness

New Year is generally a time for introspection & resolutions; the latter many a times last but only for a few days, if lucky, while the unlucky ones enjoy only some fleeting moments of fame. You need not always wait for the onset of the new year to herald a good practice; did Kabir not say” Kal kare so aaj kar; Aaj kare so ab”?

In a Harvard study spread over 75 years, starting 1938, on 724 men, 80% started with the notion that wealth determines happiness while another 50% felt it was fame.. The conclusions of the study, based on a sequential yearly feedback on health, home life & work, not surprisingly, are different.
(1)Good close relationships keep us happier & healthier; stronger social connections - Family, Friends, Community - are good for ensuring that people are healthier & live longer.
(2)Loneliness is toxic. People who lead isolated lives experience health declines earlier during midlife, their brain function declines faster & they live shorter lives.Unfortunately 1 in every 5 Americans is lonely.
(3)You can be lonely in a marriage or a crowd; therefore, quality of relationships matter. High conflicts marriages are definitely worse off for health than a divorce. A person's happiness in a relationship at 50 determines health at 80.  Else emotional pain enhances physical pain.
(4)Great relationships not only protect bodies but also the brains. If you are in a secured relationship in your 80's, your memories stay sharper & longer. This does not mean the absence of bickerings but as long as the couple believe that they can count on the other when the going got tough, the arguments did not take a toll on their memories.

Given below are 6 sutras which could be attempted to achieve happiness which ultimately determines success; the sequencing is deliberate for research proves that happiness determines success & not the other way round. Donald Nielson once said "Success can be fleeting. Don't let it define you. Friends & Family become increasingly important as you grow older. Make sure you cultivate them when you are young. Happiness is the best measure of success"

Take care of health

Do people live at a house? They do but more importantly, they live in their bodies first. Paradoxically, while a clean, Vastu compliant, furnished villa is what everybody dreams off, a similar care is missing while taking care of ones’ body & soul. Unhappiness, disease & death are logical consequences; while mortality is an immutable law of nature, one can delay the inevitable with care. There is a link between health, happiness & success. Health is a consequence of a good sleep hygiene, eating good food & regular exercise.

Control your diet & exercise regularly. Reduce carbohydrate intake & go for a brisk walk for 30 minutes daily as a starting point to avoid an unhealthy lifestyle. A more rigorous one hour of daily exercises can commence later. Needless to say, do whatever is needed, even (an apple a day) to keep the doctors away.

Spend time with family

In this fast paced world, it is advisable that all members of a family should have at least the dinner together. Many of the double income families find that a lofty aim leading to complications later. The children feeling neglected could seek comfort elsewhere. Remember that ultimately that you are only as happy as your saddest child.

Not children alone, elderly parents too feel neglected. Today you have money but no time & hence parents who seek the latter feel abandoned. Spend time with them & answer their sometimes senile questions with the same warmth that they displayed while answering yours during your toddler years. Remember: it is more important to be kind than right while dealing with them; needless to say they deserve your respect & time too.

Replace screen time with people time

Technological advances have ensured that we are constantly exposed to at least one of the 4 screens in our lives: TV at home, Mobile while out of home, Laptop at offices & perhaps Cinema screens during weekends.  It is widely acknowledged that millennials are facing social issues; for all their brilliance in showcasing themselves on social media, they end up showing withdrawal symptoms while meeting up people in person.  The Tinder generation seeks instant gratification both personally & professionally.  This disease is spreading rapidly to non-millenials too with greater technological diffusion.

The high that people realize while being associated with liquor, cigarettes or sex is what people achieve in the proximity of screens today.  Making comparisons with friends or relatives on social media is pushing many into the depths of depression.  Remember that the lives of people are not as happy & great as reflected on social media & it is unwise to make comparisons & regress to the squalor of despair. Reduce your exposure to the 4 screens & meet up face to face with your friends instead. Your emotional quotient would see a steady rise & personal & professional success is a logical consequence.  Always remember that EQ (Emotional Quotient) is more important than IQ (Intelligence quotient); unfortunately, our education system focuses on the latter.

Avoid thinking on issues you cannot control

Hindu philosophy ordained: Karm kar; Phal Ki Aasha mat kar. Do your job to the best of your ability & leave the rest to destiny.  Another one: If you want something badly & you get it, good; if not, don’t get depressed for it portends that you are destined for something better. On initial scan these statements to an ambitious person look defeatist but experiences in life shall prove otherwise. 

It is foolish to break your head on issues you have no control on. Say, you bid for a contract after getting all the information available in the public domain. Blaming oneself after failing to secure the tender is a waste of mind resources if you have given your best shot. If the winner was helped by insider information, which you lacked, it is foolish to cry over spilt milk. If your ethics permit you to seek insider information, do so the next time; else, happily keep your values intact & move on. Needless to say, the latter is always preferable.

A student studies to the best of his ability & secures 80% in the board exam & sulks that his efforts have not borne fruit.  He needn’t traverse such a path if he has given his best shot. Either he appreciates that his standard is at 80% & lives happily ever after with that revelation or should start believing in the dictum “Life is 1% inspiration & 99% perspiration” & start putting in more effort to get to 90%. Either way it is time to move on.

You are the average of the people you surround yourself with

If you surround yourself with mediocre people you might exult with the experienced kick of being a one eyed king in the land of the blind. Many enjoy such adulation & regress downhill. Surround yourself with excellence instead, to enhance your standards.   It is probable that you capability is seen as low & some of the groups associated with excellence deny you entry. Try to befriend people better than you as a starting point & eventually walk up the ladder for excellence is not an exclusive domain which can prevent entry to the capable & persistent.  Some forces can only delay the inevitable.

Off course, always stay away from toxic people & if your judgement has deceived you, give up on them without delay.  Remember toxicity could rub off on you too.

Give back to society

India is a deeply religious society; isn’t it paradoxical that our relationship with our gods is transactional? We promise to drop offerings in the hundi in lieu of sins forgiven or boons granted.  While the latter is a matter of faith, the former seems atrocious. It would be preferable to lead an exemplary life & give back to society for none of us would carry the wealth accumulated during our lifetime. If you do not want to give away your wealth to charity unlike Warren Buffet or Bill Gates, you could promise to donate your organs, instead, when dead. Start small; spare some time for an NGO – in the health or education sector - as a starting point.

These 6 sutras, if followed diligently, surely, shall reduce the stress in your lives & that would act as a steroid to propel you to greater happiness & success.  Ultimately, leave the world a much better place than what you inherited. 

Heralding 2017

Hi Friends,

"Dil hai ki Manta Nahi" that 2016 has elapsed into history to be replaced by "Zabardast" 2017. Wish you all a very Happy & Prosperous New Year 2017 - free from the "Dangal" of demonetization & serpentine queues.

"PK" you feel like a "Rangeela" that reveals your "Andaz Apna Apna" ; hope, therefore, that prohibition is not launched across the country like it was done in Bihar last year. 'Dil Chahata Hai" that "Lagaan" (Read Personal Income tax) be reduced this year during the budget presentation by the Finance Minister rather then by the PM who constantly steals the former's thunder; he did it again last night. "Akele hum akele tum" we have become today; hope we become more tolerant to an "Argumentative Indian" this year. AAP has respected the "Parampara" of all political parties & removed the list of donors from their website; hope they find their "Pehla Nasha". It is time for the Congress to move away from "Yaadon Ki Baraat"; else it will turn to "Raakh".

Trump may dump climate change initiatives but you should fall in "Ishq" with the "Earth" & protect it. There is "Aatank Hi aatank" across the world" & people akin to "3 idiots" are getting elected. Hope the trend gets reversed. 

"Dil Chahata Hai" that your "Talash" to clear your "Mann" & find the real "you" is revealed this year. Finally, this is annual appraisal time - accept the dictum: "Jo Jeeta Wahi Sikander"; hope you get the "Awwal number" not "Luck by Chance" & win your "Baazi". Praying for a "Mela" of great increments this year. 

'Isi Ka Naam Zindagi" 

"Satyamev Jayate"

"Love, Love, Love"
Ram

Movie review: Dangal

Aamir Khan emerges from his 2 year hibernation post “PK” in “Dangal” a movie of the sports genre, magnificently mixed up with a cocktail of patriotism & gender sensitivity. The “intolerance” remark cost him dearly vide a right wing backlash some time back & he appears to have taken care this time to make all the right comments that include “goose bumps” he experienced while the national anthem was played in the movie.   Not sure if it is the right wing push or the Supreme Court ruling that made people stand up twice for the national anthem: once before the movie began & later during the movie when the protagonist Geeta  wins gold at the commonwealth games. Children insisting that their reluctant parents stand up for the anthem were needless to say, a positive change.

Mahavir Singh Phogat (Aamir Khan) a wrestler retires from the mat forced by circumstances: a family to feed & a truant father who admonishes him. Going about his chores along with his wife Daya Kaur (Sakshi Tanwar), he dreams of a son who shall bring laurels for the country - a gold medal for the nation – a hark back to the sentiment amongst all Indian parents who drive their children, perhaps recklessly, to fulfil the aspirations that they themselves failed to achieve.  Destiny, however, wills otherwise & Mahavir is blessed with 4 daughters. His dejection transforms to hope when his 2 elder daughters – Geeta (Fatima Sana Sheikh) & Babita (Sanya Malhotra) beat up the village boys for passing snide remarks at them.  “The blood of a wrestler flows in them” he concludes & starts training the girls in wrestling widely seen as a male sport in this country including parochial Haryana where the plot is based.

The Haryanvi lilt of the movie is enchanting & has been used extensively in movies like Matru Ki Bijli ka Mandola & Tanu Weds Manu returns in the last 5 years. Bhojpuri was used extensively in Ganga Jumna more than 5 decades back. People paid for tickets as they do so now alluding to the fact that as long as our political class stays away from dividing India on linguistic lines, Indians by nature are tolerant & language agnostic.

Coming back to the movie, despite opposition from the society that include  refusing to allow the girls to use  their akhadas, meagre financial means & his wife refusing to serve non- vegetarian fare - a prime protein requirement  for a wannabe wrestler, Mahavir fights all odds & emerges triumphant. The daughters themselves resent his strict regimen & hilariously invent excuses to avoid the pain of rigorous training which he circumvents through creative solutions; difficulty in running in pyjamas is addressed by offering them half pants & complaint of greasy hair as a consequence of fighting on the sand pits addressed by cutting their hair short.  Only when one of their friends reveals her pain at getting married off in her teens by her father while Mahavir was at least thinking about his daughters future do Geeta & Babita soften up & seriously take to training. Geeta confesses that the real “Hanikarak” Bapu was tougher than what was portrayed in the movie.

With his wards now trained in his farm backyard, Mahavir takes them to wrestling competitions - ‘Dangals” in rural parlance - to take on male counterparts, initially, only to be ridiculed by the organizers; views change when they see the economic potential of attracting larger crowds & hence greater ticket proceeds by showcasing the glamorous girls & not because of any altruistic aim of transforming society or out of genuine gender sensitivity. Incidentally, Haryana has an abysmal gender ratio & is also plagued by a high percentage of female infanticide.

The girls initially win laurels in the “Dangals’ & later in the nationals which takes Geeta to the NIS (National Institute of Sports) Patiala, Punjab.  Initially, Geeta responds positively to her coach’s attempts to force her to “Unlearn” & even takes on her father in the bargain in what is an intensely poignant scene.  However, when “aggression” - her forte - is replaced with tactical patience she starts losing international bouts. Her rapprochement with her father & how his guidance to change tactics after going through the match videos puts her on a victory path forms the remaining part of the movie. However this puts Mahavir in conflict with her coach Pramod Kadam (Girish Kulkarni). Yet, Geeta, finally, wins the Commonwealth gold, in 2010.

The movie seems to have taken some cinematic liberties deviating from reality. Mahavir in reality is a stoic man whom Aamir tries to play sensibly until the script forces him to regress into mild histrionics to tug at the heart strings of the audience. Sakshi Tanwar, caught in a rut between the demands of her husband & the pleas of her daughters plays a helpless mother to perfection. India, unfortunately, has many such mothers caught in this grind of a patriarchal world.  While Geeta won her final bout in the finals quite easily in 2010 as the score read 1-0, 7-0 unlike the score of 5-1, 4-6, 6-5 claimed in the movie & shown as a cliff-hanger of a contest – a nail biting  finish - that was only settled in the final seconds of the third round. Off course she had longer hair in the actual bout too unlike what was claimed in the movie.   It is also untrue that Geeta did not win any contests before 2010; infact, she had earlier won the gold medal at the Commonwealth Wrestling Championship in 2009, where she competed in the same 55kg freestyle wrestling category. The actual coach PR Sondhi has protested that he was unnecessarily shown in an unflattering light & that Mahavir was not locked up during the finals but was in fact in the crowd cheering his daughter.  In Mahavir Singh Phogat’s biography, ‘Akhada: The Authorized Biography of Mahavir Singh Phogat’, Saurabh Duggal confirms the coach’s assertion.

Aamir has confessed that the movie mixes fact with fiction while retaining the essence of the original story. Despite the deviations the movie is a dish to be savored for 2 reasons: Aamirs’s body transformations as part of “method acting” to fit the different age profiles of Mahavir , perhaps an ode to Robert De Niro in the 1980 Martin Scorsese film "Raging bull"; & a reminder to society to shun gender bias for a girl child can bring, perhaps, more laurels too. Hope the audience is listening.

Year 2017: The Predictions

The assassination of the Russian Ambassador to Turkey, Andrei Karlov, on Dec 19^th, by an off-duty Turkish police officer, Altintas, in Ankara, after proclaiming “Allahu Akbar” & “Don’t forget Aleppo” - a reference to the Syrian cataclysm - is perhaps an indicator of more violent things to come.  Paradoxically, on the same day, Russian President, Putin, had to cancel his schedule to see the play Woe from Wit - written by the poet and diplomat Alexander Griboyedov, murdered by a mob when he was ambassador to Tehran, in 1829 - to attend to the event. One only fervently hopes that this event would not do to Europe today what the assassination of Archduke Ferdinand did in 1914. World War I happened then, leading to about 17 million dead. The other predictions for 2017

Russo-US Entente

Strategic experts aver that covert support to the ISIS by the US to unseat the Bashar- Al Assad regime, in Syria, is the genesis of the Syrian crisis. Eliminating both the ISIS & the Syrian regime is an unrealistic aim for one can’t run with the hare & hunt with the hounds simultaneously. With accusations flying thick & fast regarding Russian hackers help in a Trump win, in the elections, it would be reasonable to expect the Trump regime to work on a Russo-US entente to refashion the West Asian conflict. The nomination of ExxonMobil CEO Rex Tillerson - a known friend of President Putin - as the next US Secretary of State alludes to such a possibility.  However complexities abound.

Shia-Sunni/ Abrahamic Religion Conflict

While the Russians are friendly with the Shia regimes of Iran & Syria, Trump intends to back-off from the Iran deal struck by Obama; this could placate Israel & the traditional US supporters – the Sunni Arab regimes including Saudi Arabia - who are annoyed with the Obama regime for opening up to Iran. Obama’s parting shot was to surreptitiously support by abstaining on a non-binding UN resolution that chastised Israel on pushing settlements in West Bank & East Jerusalem, thereby keeping the two nation – Israel & Palestine – theory alive, in West Asia, Trump has promised to reverse the same & is insistent that the US ambassador should be based in Jerusalem & not Tel Aviv, which would reopen the old wounds of “holy wars”. He has taken a position on the West Bank that is more right to the one peddled by the Israeli PM, Benjamin Natanyahu which has the potential of annoying the Gulf Co-operation Council(GCC) & the Islamic Umma & that could serve as the powder keg, the conflation of which could rekindle the Arab-Israel wars of 1967 or 1973. Expect the Middle East to be a heightened battle ground between religions & sects accentuating the chaos.

Caliphate would try to regain relevance

ISIS & Al-Qaeda are fighting for supremacy & the former is the current darling of the Jihadis. ISIS will initiate & if unable to execute will at least take credit for lone wolf attacks across the world particularly Europe & North America - the forces which it sees as arraigned against it.  A petulant Putin & an impetuous Trump are likely to plan muscular reactions which have the potential of reigniting the crusades which will have religious, social & economic consequences. Therefore expect a violent 2017. A world war 3 is not unlikely.

Weakening of the International Order

The rise of right wing nationalists with the promise of making their countries “Great Again” is unlikely to stop with Trump. Expect more to join the ranks of Abe in Japan, Putin in Russia & Xi in China. Prodded by masochism, they are likely to overturn the world trade, economic & social order based the narrow pursuit of nationalistic objectives. Expect a further weakening of the UN & WTO. More no. of regional trading blocs would emerge while some like the TPP (Trans-Pacific Partnership) would disappear. Consensus on issues like climate change would weaken further.

Unravelling of the EU

Brexit is a consequence of voluble debaters playing on xenophobia & instilling in citizens fears regarding loss of jobs & terror threats. Right wing parties have gained in the European Parliament & are likely to storm to power in certain countries. The perceived German high handedness is dealing with the issues plaguing Europe could implode the European Union. Angela Merkel could lose the elections & not make it to a 4^th term in office.

South China Sea: The new area of conflict

Trump accepting, ostensibly, a congratulatory call from the Taiwanese President Tsai Ing Wen, predicts a fraught start to the US- China relationship since it challenges the “One China” policy which successive US regimes have respected since President Nixon’s historic rapprochement in 1972; the immediate consequence of that action is a US drone being captured by the Chinese in the high seas.  It is conceivable that Trump would attempt to fulfil his electoral promise of extracting trade concessions from the Chinese & the latter being patient & prolonged negotiators would wear him down. Attempts to arm-twist the Chinese would be responded through dumping of US debt that could effect the stability of the dollar plunging the world into an economic crisis. Alternatively, trying to hem them in the militarily would see tensions mounting especially in the South & East China Seas.

While Trump has already expressed his intentions of moving ahead with tightening the H1B visa regime which has the potential of impacting Indo-US relations, its ill effect could be softened through a closer Security & Defence partnership.  A closer US – India - Japan- Australia- South Korea- Vietnam axis to counter China is likely. Expect the South China Sea to be the focus of much duelling in 2017.

Conclusion

The world in 2017 will never be the same again. The fissures that have developed during the last few decades are waiting to be exploited & there is no shortage of interested parties.  In short expect social, economic & political upheavals across the world in 2017 & that is definitely not music to any ones ears. 

Demonetization: Consequences & The Way Forward

The govt. has called the current demonetization move as a “surgical strike” on black money - building up on the military strike on Pak earlier - unleashing yet again the patriotic sentiment of the people. The Supreme Court averred that it is actually “carpet bombing” while hearing a PIL requesting for staying the move; a stay has not been granted though. Kejriwal & Mamata Banerjee, the two leaders with aspirations of leading an anti Modi front, have issued an ultimatum to the govt. to reverse the move in 3 days; perhaps protests shall follow.  As Abhishek Manu Singhvi put it eloquently, we are in a “scrambled egg” situation & recovery of the egg is, therefore, ruled out. It would therefore be prudent to think on way forward to ease the inevitable pain.  

That the demonetization plan was ill planned is a fact. How will once explain the spelling mistakes on the 2000 rupee notes?  Earlier we had news reports on Marathi misspelt & now it is Urdu’s turn. Terror funds have dried up says MOS Home Ministry, Kiran Rijuju & perhaps Naxals are hand tied. Relative peace in Kashmir, as per analysts, though could either be attributed to the shortage of Rs 500/- notes paid daily to the demonstrators or temporarily suspended due school examinations underway; only time will tell. Other details of whether demonetization is good or bad is analysed in the following article.

http://meetrk.blogspot.in/2016/11/demonetization-in-india-good-or-bad.html

As per an India Today report, India has a capacity to print 26.66 billion notes per annum in two shifts across 4 currency printing presses: Nasik (Maharashra) & Dewas (MP), Salboni (WB) & Mysuru (Karnataka).  India has demonetized 15.7 billion 500 rupee notes & 6.8 billion 1000 rupee notes; Arun Jaitley has indicated that there are no plans to re-issue 1000 rupee notes unlike the 500 rupee notes.  Therefore, if the 2000 rupee note replaces the 1000 one, we need to print 3.4 billion notes along with 15.7 billion of 500 notes for replacement. If the printing presses work for 3 shifts they can print 40 billion notes per annum & printing the 19.1 billion (15.7+3.4) would take about 6 months. Clearly currency worries would not end on 30^th Dec as the PM would like us to believe even if we incorporate the news that the 2000 rupee note printing started at Mysuru from Sept.

What are the options then?

Religious Trusts: The govt. has persuaded religious trusts to deposit small change into the banking network to help liquidity which is unlikely to be a successful intervention since only 14% of the overall cash economy is in small denominations & not all of the same lands up into places of religious worship. 

Mobile Payments:  87% of Kenya’s GDP is transferred vide “mobile money” & it would seem an enticing opportunity for replication. However, It is pertinent to note that while India has over 1 billion of its 1.25 billion population, with mobile connections, urban tele-density is about 150% while rural tele-density is only about 50%; clearly, 150% penetration in urban indicates multiple SIMs with the same person which alludes to the actual mobile penetration being less than a billion while rural penetration at 50% indicates that many are yet to be incorporated into the mobile revolution. Incidentally, 68.8% (86 crores) of the Indian population resides in rural which means about 34 crore people have no mobile connections. Perhaps they belong to the BPL (Below Poverty line) segment.

Furthermore, overall tele-density in states like Bihar, Assam etc. is under 60% & hence mobile option in such states is rather limited – rural or urban. Thus mobile payments or wallet options is thus a slow burn.

Use Plastic: As per the RBI, at the end of Aug 2016, India has 71 crores debit cards & 2.6 crore credit cards. India has about 25 crore households & the debit card fig indicates that each family has at least 2 cards; however averages mislead. It would be safe to assume about 30 crore people to be BPL (Below Poverty Line) – despite various figs being bandied about - & in all probability many of those people would not have either a Jan Dhan account of a RuPay card activated.

Even if the above argument is disproved, one cannot wish away the paltry count of ATMs & POS machines in the country.  As per the same RBI data, end Aug’ 16 India has 2.02 lakh ATMs & 14.6 lakh POS machines; 1/3^rd of India’s 2 lakh ATM are based in the top 60 cities & 60% are located in urban.  Clearly the rural economy would go cashless for many more days for their inability to access the bank network - branches or ATMs.

In Aug’16,  71 crore debit cards were used to dispense 2.19 lakh crores from ATMs & 0.18 lakh crores from POS machines vide 7.5 crore transactions & 1.3 crore transactions respectively indicating that less than 10% of the people could be using the cards; clearly, these people need to be educated on how to use cards. 2.6 crore credit cards have a better story but their nos. are small; they were used to dispense 0.03 lakh crores from ATMs & 0.25 lakh crores from POS machines vide 64.63 crores & 83.95 crore transactions respectively.  Thus machines would dispense only 2.65 lakh crores of the 14.5 lakh crores cash notes being demonetized; surely, the current infra would be inadequate to handle the additional rush. Add to that the fact that there are only 2000 engineers to re-calibrate the ATMs to dispense the new 2000 note implies that many of the ATMs are currently forced to dispense only 100 notes leading to the proliferation of serpentine queues; safe to assume that it would take 3-4 weeks for the recalibration work to conclude. 

Activating the 1.2 lakh banking correspondents, inadequate in number though, is a solution but the process would be excruciatingly slow.  Logistics problems abound in supplying cash even to the 1.5 lakh post offices across the country - 89.9% of which are in rural.

Go Online: Govt. has already asked PSUs & central govt. departments to make all payments possible online. Responsible citizens have also started doing the same which needless to say is welcome.

   

Engage additional Printing presses: Since reversal of the demonetization decision is foolhardy, the only option left is to arrange for printing across presses across the world; security however could be compromised.

Conclusion

If 25% ($500 billion) of the $2 trillion Indian economy is “black” & 50% of the $217 billion in value of 500/1000 notes are assumed to be part of the parallel economy, it is unlikely that the entire money would be forfeited. The govt., perhaps, believes that if about $40-50 billion is forfeited & the RBI transfers the same as a dividend, the same could be used for pump priming the economy. While the aim is laudable, lack of cash for 6 months would ensure that the infra projects, even if announced, would fail to take off.

The rural economy which is largely a cash based one would be in shambles.  APMCs (Agricultural Produce Marketing Committees) at many places have started refusing to buy edibles since liquidity squeeze at the destination markets have effected payments. Farmers now have an option to either sell directly to the consumers, perhaps, at huge discounts or allow the vegetables & fruits to rot. The situation would worsen once the Kharif crop is harvested; it is probable that prices would drop or farmers store till liquidity eases. Purchasing power in either case, in rural would be an unfortunate casualty.

The industrial situation in urban is deteriorating rapidly. MSMEs facing a cash crunch have started retrenching labour which could start an unfortunate spiral of migration back to the villages. Production is surely going to drop effecting exports further. The drop in GDP during the next 3 quarters, including the current one (Sept 2016 - June 2017) is therefore a certainty.

While demonetization was a politico- financial move – to break the back of political financiers, largely of the opposition apart from sending across a signal to the electorate that the govt. is serious in tackling black money - the lack of detailed planning to ensure a smooth transition is a worry.  Needless to say, the path to hell is often paved with good intentions.