The economics of spot fixing

Yeah Yeah, I am that sort of a nerd. While much of India is agog with the spot fixing scandal that broke yesterday, this blogger ruminates on the economics of it. Yes, he is a weirdo !

Having got that out of the way, a few words on the scandal, for the 3 million non Indian readers this blog gets :)  There is a nonsensical game (anybody who suggests the word cricket in this connection will be personally bashed up by me) in which there is a cash machine called the Indian Premier League. Yesterday three players were caught, allegedly  hand in glove with bookies, manipulating results. That's all you really need to know.

What is baffling me is the economics of it. There are all sorts of reports, but I think it is safe to say that at least Rs 20 lakhs (some $40,000) was allegedly paid to the players to give away a minimum number of runs in an over. Let us say, for this to be profitable to the crooks who are betting on it, they must wager at least an equivalent amount at odds of say 5:1, otherwise its not worth it.  For this sort of betting to be accepted by the bookies and to remain valid, there must have been others betting at least 5 times this amount. So all in all some Rs 1.2 crores ($ Quarter a million) must have been bet.

All this simply on one over !!!!  An over, for the uninitiated, is of 6 balls and takes 3 minutes or so to complete. The way this scam seemed to have operated, there was about 2 or 3 minutes notice to the crooks that it was going to be fixed in that over.

What I want to know is who are these blokes who are prepared to gamble quarter a million dollars in 3 minutes on something as arcane as the number of runs given away in an over in an inconsequential match. And there are 40 such overs in one match and there are some 70 or so matches. The arithmetic is mind boggling.

Who are these jokers ? What do they look like and which planet do they come from ?

PS. Just for the record, the GDP per capita of India is $1,492.

Thou shall be subsidised whether you want it or not

The law is an ass. Governments are a bigger ass. Ramamritham is the chief ass. But even by those standards this takes the cake.

Those familiar with India knows that this poor country indulges in wasteful expenditure of the worst sort. Free colour TVs, grinders, etc have made the news. But the criminal, inexcusable and worst sort of government waste is the subsidy on Liquefied Petroleum Gas (LPG). If there was a word stronger than criminal, I would use it.

LPG  is supplied to all and sundry at a subsidy. It is sold at roughly half the cost - the government is supposed to pay the balance half to the oil companies , but it does so as and when it feels like it, or not at all. It is actually quite difficult to estimate how much the total subsidy is as the government hides this in different pockets but my estimate is that this monstrosity costs us some Rs 30,000 crores.

The really poor don't use any cooking fuel at all - maybe firewood. The poor use kerosene. Only the relatively rich use LPG. Its actually the middle class which is pocketing all this money.

The middle class moans about the cost of cooking gas . And yet you only have to go 1 mile near T Nagar and the gold shops in Chennai to see the amount of money the middle class has. The total "subsidy" for a  year that you can now get is Rs 3600 or so per family. Are you telling me that the middle class household cannot afford to pay Rs 3600 more per year for cooking their food. This is the same middle class which is snapping up the newest model of smartphones every year.  Its a complete farce.

The impact overall of this organised stealing is simply awful. India has made no investments at all in piped gas supply. LPG cylinders are  still being trucked all over the country. There is zero interest in any alternate fuels.  A whole bureaucracy has evolved around oil companies, agencies, transporters etc. Try getting a new cooking gas connection now - its possibly easier to learn quantum mechanics.  If you wish to do a case study on how not to treat a consumer, all you have to do is stand near a gas agency for an hour and witness the tales of woe of the people coming there.

Actually, raising the price of cooking gas cylinder by Rs 1000 per cylinder might be a good idea - it will cause Rajalakshmi to reduce her girth ! Eating less food, especially by the middle class, is a desirable social goal :)

The problem is that there is really no other choice. Private gas companies do offer unsubsidised cooking gas without all the contortions, but they are small scale and unreliable. Even then, quite a few consumers have opted to go there, simply because of the impossibility of handling Ramamritham's requirements.

Being a contentious citizen (!!!), this blogger went to his agency and asked not to be given a subsidy. He was willing to pay the full price. He was promptly told that this was not possible and he has no option but to take the subsidised price.

What sort of a place is this where a consumer offers to pay more and the seller refuses. If ever proof was needed that governments, and Ramamrithams, are an ass ..........

I don't want to win a lottery

What is man's greatest weakness. No, its not sex. No, its not even gambling.  It is his uncanny ability to fall for every "get rich quick" scheme.

Take the case of the collapse of the Saradha  (and probably numerous other such schemes) in West Bengal. This was a classic Ponzi scheme. Investors were attracted by fantastic returns (15-50% !!!). The early investors were paid off with money collected from subsequent idiots. Bingo. An avalanche started. Two years on, it has collapsed leading to much hand wringing and vociferous shouts of indignation.

What attracted my attention was not the scheme per se. They are dime a dozen. Remember the Emu farm scheme a little while ago in Tamil Nadu. Emu farming I believe - never mind that not one soul who put money into it had seen an emu in his life. But what has really got my attention is the response to the affair after it broke news.

There has been much clamour for regulation of such funds and criticism of governments for not regulating them well enough. Ramamritham must be rubbing his hands in glee at this new opportunity that has fallen into his lap. They want the death penalty for the owner of Saradha. A few people who have lost money have committed suicide. The loud lady who holds sway in the part of the country where this mess happened has announced a Rs 500 cr package to reimburse those who lost out . Never mind that the state is plain broke - there isn't money to pay salaries of government employees. The economically challenged lady, plumbed record depths by saying that she is going to  fund this by raising taxes on cigarettes and then exhorted her fellow citizens to smoke more !!!!! I kid you not.

The ancient fossils who are in opposition to the shrill lady, obviously oppose this, but their alternative is that those who lost must be reimbursed by auctioning the property of the owners of the chit funds. No wonder that this state has little hope of any advancement, if it is blessed with such wonderfully economically literate leaders.

Not one word has been said against the  lot who invested in such schemes. Pray ; why reimburse the clowns who lost money in this. They are no saints. They were simply attracted because somebody promised incredibly high returns. Any human with an ounce of intelligence must pause and think whether such returns are possible. Where will they come from. There is no return without risk and the correlation is direct. So if you let greed rule you, then don't cry when you lose your shirt. You deserve to be fried. 

One of the great rules of life is that winning a lottery is actually a curse. Getting rich quick is the surest way to misery. There is plenty of research to show that the majority of lottery winners do not find happiness.

The way to a better life is to get rich, of course. But slowly. Through hard work. Through initiative, through endeavour, through education, through innovation and through blood, sweat and tears. That is what brings true wealth. And happiness.

By the way, talking of Ponzi schemes - the biggest Ponzi scheme of all is property.  The only difference is that it operates on a time scale so large that an entire generation can become rich before it starts to unfold.  Pause and think about it. Every one of us gloats about the land/flat/house we bought some time ago and how its value now has an added zero to it. If you really think about it, its just another Ponzi scheme - some sucker will be left holding the curse sometime into the future. 

Grant me Lord, the ability to do a hard day's work, to make money by ethical and honest means, the strength not to be carried away by temptation, the courage not to want to get rich quick and some compassion for those who weakened and got burned. Compassion yes, but bailout, NO.

"Lala" Infosys

Infosys was , is , and will be a great company. Unarguably. But even great organisations suffer from malaise. Surprisingly, Infosys suffers from the malaise that you would not normally attribute to it - the Lala problem. Yes, I know, I am throwing mud at a great company, but you have to expect it if you lose 20% of your market value in one day.

Wait a minute. Isn't Infosys one of the most professional of companies ? A company that sets the standard for corporate governance. The company that raised the bar on ethical business. The company with the middle class values ? All true. But Infosys suffers from the same problem that family run companies have - the company is handed down from one  "family" man to another.

Only in Infosys' case, the "family" is not blood related, but the group of founders who set up Infosys. The peerless Narayana Murthy established it. The relentless Nandan Nilekani drove it to the status of a world leader. Kris Gopalakrishnan then took up the baton and reaped the boom years. And then , just like in a family,  the company was handed over from brother to brother, to Shibulal, the last of the founders. And as we all know, second and third generation families are never the same as the first generation.

In all this, quite a few senior managers stepped away, knowing they had reached the end of the road - not just that they could never lead the company, but that in the set way of things, they had done all that they could.

Infosys is not known in the market as a great company to work for. This, despite its undoubted brilliance, its strong values, its untarnished reputation and its incredibly strong balance sheet.  It simply does not attract the best quality talent that a leader in the industry should. And it loses talent far faster.

Calling it a "Lala company" is an insult to a great institution. But a staunch admirer of the company, and its founders that I am , I am usurping the right to be unfair.  A classic response of an organisation that is in the situation that Infosys is in now, would be to make an acquisition - especially since there is a mountain of cash burning a hole in its pocket. If its does that, it surely is then a Lala company. For that's what Lalas do.

Infosys will bounce back. It is suffering from the middle age blues - as all of us in our personal lives do too. It has reached middle age perhaps a little earlier than its peers - even in that it is a trail blazer. But its bounce will be faster if the founders leave. Lock their doors and go.

Its time for Infosys Gen 2 to emerge. One where there are no more "Lalas". 

An unfair post this one. For sure.  But you are only unfair to somebody you admire.

The economics of an election

My state is coming into election time. The politics of it - who will win; who will lose, etc is beyond the purview of this blog. But this blog will certainly muse on the economics behind it.

I am foxed as to why anybody wants to stand for any election - for the economics behind this is akin to a Las Vegas casino. On a conservative estimate, each candidate would spend about Rs 15 crores in each assembly seat ( see this speech as evidence of such numbers). More than three quarters of it is not for campaigning, but to bribe the voters (shame on you and me). Traditionally it used to be just cash and liquor.  But apparently now even water drums, watches, sarees and T shirts feature, as evidenced by this photograph and this article from The Hindu today.

The number of assembly constituencies in Karnataka is 224. There are four political formations in the fray. So that makes for 900 serious candidates. At Rs 15 crores per candidate, that amounts to an expenditure of Rs 13,500 crores .  Karnataka's GDP is about Rs 4,60,000 crores. So, something like 3% of GDP will be spent by candidates - that by any stretch of imagination is a staggering sum.

As JP Narayan, says in the video I refer to earlier, you have to spend this money to stand a chance. Spending it does not guarantee victory, but not spending it guarantees defeat. So, if you stand, you have to spend.

Consider for a moment, the ability to have a sum of Rs 13500 crores created for spending. Since much of the spending is illegal, the money has also to be generated by questionable means. It is actually not so easy to siphon away 3% of GDP - even corruption has its limits. Add the problem of keeping Rs 13500 crores in cash. If it is all packed in Rs 500 notes, each crore weighs 34 kgs. So Rs 13,500 crores weighs 460 tonnes - that is 46 lorry loads. You can't brazenly transport 46 lorry loads around - some will be stolen, some will be seized by the Election Commission officials, etc etc. And consider the logistics of buying so much liquor (and water drums). Its a mammoth logistics exercise and all has to be done surreptitiously.

And there can be only one winner in each constituency. What about the three blokes who lost. They have washed Rs 45 crores down the drain. They will virtually be bankrupted, for there is no way to earn it back until the next elections and , even then, only if they win. For the winner, he has to recoup a decent return on his investment - let us say he must make Rs 60 crores - to recoup a return on his investment and to create the capital for the next election. That is also not easy -  each winner to make Rs 60 crores is not an easy task.  A few can make that, but for everybody to make this sort of an amount is a tall order, however brazen the corruption is. And this alone is not enough, for each of his hangers on wants to make money as well. 

If you put your money in a bank deposit you can make 50% in 5 years, virtually risk free. With a little more luck, in the stock market or in gold, you can double it in 5 years. So, why take such wild risks for relatively meager returns and the possibility of losing it all. Obviously economics is not the strong point of those who stand for elections.

Many of the citizens are disgusted with those who would like to be our elected representatives. The best way to give them a big knock on their head is to vote such that the government will fall every year and elections are needed. Three elections in three years is enough to bankrupt them all. And then, maybe fresh air will emerge.

What on earth is a KRA ?

I am in trouble because my KRA with CDSL consequent to having submitted some change of KYC, is apparently pending, which I have no recollection of. Therefore I am stuck with my DP who is quoting arcane SEBI rules to make my life miserable.

 

If you don't understand one word of all this, welcome to the club. I don't understand it either ! And I am supposed to know something of finance !!

 

This perfectly sums up the status of how consumer unfriendly the financial sector in India has become. Try doing anything - opening a bank account, or buying a mutual fund  or even changing your address. You will tear your hair in frustration. Such is the state of affairs.

 

This is all because Ramamritham and his political masters have , over the last five years, exclusively been framing rules for catching Kasab.  The starting assumption is that everybody is a Kasab unless they prove otherwise. Rules and procedures have become so complex that an honest simple  man has no chance of understanding, let alone complying.  No wonder that the percentage of the population which even has a bank account is miniscule - fat chance the RBI has of achieving financial inclusion. To understand why they are failing, all they have to do is go and try to open a bank account themselves.

 

I have a Passport Number, a Aaadhar Number, a PAN, a DIN, an IEC, a Cust ID, a DL No, a ST No. It appears that is not enough for Ramamritham. I now need a KRA.

 

Laws must not be framed for the law breaker. They have to be framed for the vast majority who will follow the law if given a chance. Yes, crooks must be caught, but it is even more important to make it simple for the 99% of the population who are not crooks.

 

A beautiful example of killing an entire industry is what they have done to Internet Cafes. In a country like India with a miniscule computer population, but  burgeoning educated class, you would expect a zillion internet cafes at every street corner. No chance. Have you wondered why ? This is what an idiot who wants to start an internet café has to do.

 

• Every cyber cafe owner has to register and obtain a  licence
• Every user who comes to the café has to prove his ID. 
• The cyber cafe owner has to maintain a log of every user, his ID, his photo, and sundry particulars
• The owner has also to maintain a log and submit the return of the log each month of
• History of websites accessed using computer resource at cyber cafe
• Logs of proxy server installed at cyber cafe
• Mail server logs
• Logs of network devices such as router, switches, systems etc. installed
  at cyber cafe
• Partitions of Cubicles inside the Cyber Cafe should not exceed four and half feet in height from the floor level. The screen of all computers shall face the common open space of the Cyber Cafe.
• Cyber Cafe owner must ensure that all the computers are equipped with    safety / filtering software so as to the avoid access to the websites relating to     pornography, obscenity, terrorism and other objectionable materials. Cyber Cafe shall take sufficient precautions to ensure that their computer resource are not utilized for any illegal activity.
• They will be visited and inspected every now and then to ensure that they are complying with rules (of course, those visiting are extremely honest and straightforward and there is no question of a bribe)

Now you know why there are no internet cafes to be found anywhere. I am yet to determine whether they need a KRA too !!

Eyes Right

 There are times when you have to feel good about India. In the prevailing atmosphere of extreme negativity, it is easy to fall into the trap of despair. Patriotism may be the last refuge of the scoundrel (no thanks Samuel Johnson), but it has its uses and I don't mind being a scoundrel. The Republic Day parade is one such occasion, to feel good.

I know very few watch the parade these days, but it is an eminently watchable spectacle. Other countries put on a show like this - the Bastille Day parade in France and the Victory Day parade in Russia, being the more prominent. But the Indian parade is extremely impressive and can raise goose pimples, especially if you can understand the honour and significance of it.

It all begins with the laying of the wreath at the Amar Jawan Jyothi - the tomb of the Unknown Soldier and the sounding of the Last Post - a tribute to the fallen. The Parade itself is rich in tradition. The President's bodyguard gives the order for the National Salute and you cannot but help feel a lump in the throat as the National Anthem in played. After the Parade Commanders, come the living recipients of the Param Vir Chakra and the Ashok Chakra - India's highest gallantry medals.  This year it was nice to see all the three living PVC holders in the parade - Subedar Major Bana Singh, Naik Subedar Yogendra Singh Yadav and Havaldar Sanjay Kumar. The 61st cavalry often leads out the marching contingents - this is probably the last Cavalry regiment anywhere in the world ; old traditions kept alive.  The impeccably turned out Army contingents lead the parade - this year the famous Maratha Light Infantry, the Dogra Regiment, the Kumaon Regiment, the Garhwal Rifles were all there - regiments with traditions going back 200 years. The Air Force contingent had a surprise with Flight Lieutenant Heena Pore leading - probably the first time a lady officer was the commandant . When the camera cut to probably her family wildly cheering, you could not have failed to be moved. Contingents vie with each other to win the best marching contingent award. To me the highlight is often the NCC boys and the NCC Girls contingent ; when she gives the call to salute the President, you can't quell the surge of emotion.

I normally discount the cultural shows that follow ; the military parade is the highlight. Its is an honour to march - if you wish to know how much of an honour it is and how much of training and selection precedes it, read this lovely account by Smriti Rao.

The dampener is the extremely poor coverage by Doordarshan. For a lesson on how not to cover an occasion of such grandeur, turn to Doordarshan. They have to cut all the time to show the faces of sundry VIPs - this being Delhi after all. How can you cut away, when the commandant's deep bass voice is giving the command for the salute. They couldn't even get the national anthem right - there was static and blackouts. Yuk !

But despite Doordarshan, this is an event that can make riveting viewing. You can watch it here, if you like.

Which is why, I say - I am sorry Colleen Braganza - I simply cannot stomach your article in the DNA.  There is a time to protest and make your voice heard. There is also a time to honour and cherish.

Coffee is bad

What does Ramamritham have against coffee ? I would have thought the caricature of Ramaritham included a cup of coffee and The Hindu. Yet here's this venerable gentleman having an angst against coffee . Why ?

I am referring to IKEA's application to open retail stores across India. You may recall that the move to allow foreign owned retailers to set up shop in India is a recent one (Didi notwithstanding).  IKEA has been one of the first to submit their proposal, willing to bring it no less than Rs 10,000 crores of investment. You would have thought that they would be welcomed with open arms  - it is difficult to see boxed furniture being a threat to national sovereignty. But what they got was not a red carpet - instead they were treated with the full attention of Ramamritham. (in the guise of the Foreign Investment Promotion Board - FIPB)

I am no fan of IKEA stores. If you've been to one, they are all predictably the same format. You are forced to walk along one km of winding corridors that entirely destroy your sense of direction. You have to gaze at their full force of merchandise even if you want to buy a safety pin. After all those wanderings you are dying to sit down and rest your aching legs. Dutifully at the end of the trail you can buy a cup of coffee. Their format world over is the same.

Its the cup of coffee that has aroused Ramamritham's ire. Believe it or not, Ramamritham has turned down IKEA's application saying that they could not have a coffee shop - it appears that would become multi brand retail as the coffee is not IKEA branded coffee and hence would fall foul of the rules. Never mind the Rs 10,000 crores investment. FIPB is disallowing the proposal objecting to the coffee shop.

Finally the Commerce Minister had to intervene and suggest to Ramamritham that this is utterly nonsensical. He has asked IKEA to submit their proposal again and has promised them that he is partial to coffee.

Long long ago, when P Chidambaram was still a starry eyed reformer , he summoned a character called the Controller of Imports and Exports ( a terror those days) and asked him what he did. The worthy launched an impassioned plea as to how important and onerous his role was. PC's riposte was that he could perhaps understand that he had a role to play regarding imports, but pray, what was he doing trying to control exports ?? Within a few months he simply abolished the post.

I suggest he does a similar hatchet job on the FIPB. They perform no useful role. Open up investment in every sector barring maybe defence (even there there are arguments to  opening up for investment). Remember opening up for foreign investment does not mean that they can violate the law of the land. That provides the country ample protection against misbehaviour.

The only way to deal with nonsensical behaviour of objecting to the coffee shop is to abolish Ramamritham entirely.  Can Anand Sharma, the Commerce Minister, take a leaf out of his old predecessor and abolish the FIPB ?

PS :Newcomers to this blog who may not have been introduced to Ramamritham may get acquainted here.

Cash transfers instead of subsidies

India is embarking on a major revamp of its social security system - replacing subsidised food, fertiliser, fuel, etc etc with direct cash transfers to the bank accounts of the "poor". Is this good or bad ?

The current system involves heavily subsidised foodgrain, fertilisers, fuel, etc being made available to ration card holders through the public distribution system. This suffers from a whole host of problems. Bribery, corruption, pilferage, etc ensure that only a fraction of the stuff ends up in the hands of the targeted people.  In some areas like fuel, cooking gas cylinders are widely misused and the diesel subsidy lands into the pockets of rich car owners. The waste is so incredible that something ought to be done.

The solution proposed is to eliminate all subsidies progressively and instead simply transfer cash by electronic transfers to bank accounts of the target population. Initially it will cover various anti poverty schemes, then extend to cooking gas and kerosene and only finally to food and fertiliser. The Aadhar scheme is intended to enable foolproof identification. This way middlemen and cheats are largely eliminated. The poor use this money to buy their requirements from normal shops selling products at market prices.

The scheme has lots of advantages. Firstly corruption will go down, although it will not be eliminated. The middlemen taking cuts will be put largely out of business. The country's subsidy bill will drastically fall - as the waste will significantly reduce. The entire rotten public distribution system can be disbanded (although it works quite well in states like Tamil Nadu and Chattisgarh).  Today's technology can ensure that fraud and stealing can be drastically reduced.

However, my worry is that once cash reaches the intended family, what will they use it on. The problem is that their buying behaviour is not predictable or controllable. Undoubtedly many men will use this money to drink . Families will use this money for atrocious causes such as dowry, or  to show status. The brilliant book, Poor Economics, draws on extensive research to prove how their decisions might not seem rational. Research shows, even with present incomes, the poor could spend 30% more on food, if they cut out liquor and tobacco.  When they buy food, the choices are not based on calories or nutrition, but on taste and style. On the medical front, they shun expenditure on low cost preventive measures like mosquito nets or chlorine tablets, even when provided free, and instead go to the local quack for a costly useless injection.

Of course, it is not for me, or anybody else, to prescribe what any individual wishes to spend money on. But I certainly have a problem if my tax rupees  go to fund drinking liquor.

Cash transfers have worked in some other countries, notably the Bolsa Familia in Brazil. But this is a conditional transfer scheme - they get a small amount of money ($12 a month) if  the children stay in school, mothers attend pre natal care, etc etc. India plans to give some $70 a month or so as a straight dole.

On balance cash transfers appears a good thing, but it is not an altogether perfect solution and needs to be implemented with care (not gunghoism). It is wise to recall how Kamaraj in the 1960s raised the literacy levels in Tamil Nadu. With great insight he introduced the mid day meal scheme. Families sent children to school so that they could have a square meal. I doubt the move would have been that effective if he had instead given cash for them to buy a meal.

Grow, baby, grow - all the guar you can

I don't know what to make of this story. An economics soap opera ? How the most unexpected things can happen  ? How sometimes prosperity can hit you from the strangest of directions ? Read on - judge for yourself.

The story starts in a very boring manner. Everybody knows Americans guzzle gas. With the Sheikhs turning the screws, Americans are feeling the pinch. Ouch - the price of oil is hurting. Drill baby drill, is fine, but oil is, alas, not to be found. Need new forms of cheap energy so that Americans can continue to guzzle away. Suddenly they discovered a new "source" - Shale gas.  Apparently natural gas is  found in rocks called shales. And apparently shale gas is rather plentiful in the US. Wonder of wonders, use of shale gas even releases lower greenhouse gases than evil Oil.. Voila, the new gold rush is on. 

All very good. What's new. This sort of thing happens all the time. The real interesting bit is that, in order to extract this gas, you have to do "hydraulic fracturing" or "fracking". Without getting too technical, an essential ingredient in this process is an obscure agricultural product called guar gum. You simply can't extract the gas without guar gum ! Guar gum is derived from the , rather ordinary, guar bean.

Cut to Basni, on the outskirts of Jodhpur in Rajasthan state in India. This is a drought prone area, near the desert. The sight of fat , sweaty Americans is not new in this area as they come to tour the Thar desert and see the palaces and forts of Rajasthan. But suddenly the villagers started to see far more Americans than usual. This lot was different. They did not want to see forts or palaces. They wanted to buy all the guar you had !

You see, Rajasthan is the guar producing capital of the world. The farmers here are mostly poor - this is after all desert area. They have been cultivating guar for centuries to feed their cattle. For some strange reason guar doesn't grow well anywhere else in the world. 90% of guar is grown in India - the balance 10% in neighbouring Pakistan. Some 70-80% of guar in India is grown in Rajasthan.

It was, as if, money was raining from the sky. Guar used to sell at Rs 10 a kilo. At Rs 40, the farmer made a nice profit.  In December last year it touched Rs 70. And in March, this year,  it touched an impossible Rs 300 !!

Farmers who were in debt , or dirt poor, are suddenly seeing untold riches.  They've built a house. They've bought colour TVs. Two wheelers are plentiful - even the odd car is seen. Thousands of farmers have suddenly been lifted out of poverty into, what for them, is a quality of life they could not have even dreamt about. Guar gum is suddenly, back gold. The largest Indian agricultural export last year by far, more than basmati, more than cotton, was guar gum !

Of course, it has all the makings of a stampede. Everybody, man, woman and dog, is trying to grow guar.  Factories have sprouted adding crazy capacity to extract gum from the guar beans. Traders, middlemen and the usual scoundrels have descended to trade on the guar market - there was so much of the Wild Wild West going on that the government has banned the futures market in guar.  There has also been much stockpiling by the energy firms that the next season demand for guar might plummet. Lots of punters will burn their hands.

But for the next few years at least, the trend is inexorable. Shale Gas will be an important source of energy in the future. The largest reserves are in China, another energy guzzling economy. Nobody has yet found a way to extract this gas without guar gum. Nobody has also found a way to grow this economically outside of Rajasthan. So there is much prosperity waiting in store for the agriculturists of Rajasthan. Its a great story - those hardy souls deserve every bit of it. However you could be forgiven for some rather puzzled faces as to how come money is raining from the sky when even water doesn't. And the even more puzzled stare of their cow which is wondering, whatever happened to the guar bean it used to chew contentedly, not so long ago.

47% vs 97%

Mitt Romney is in a  soup over his 47% remark. In some remarks he made at a private meeting he said that 47% of Americans do not pay income tax (fact) and implied that these were scroungers (rubbish). But he was factually accurate in that 47% of Americans do indeed not pay income tax - although to be fair about that half of that lot do pay payroll taxes which is a form of income tax meant for funding social security and Medicare.

The purpose of this post is not to wade into the political controversy. But simply to point out the fact that if Romney were in India, he would say 97% of the population does not pay income tax. That's right - only 2.8% of Indians pay any income tax .

That's not to say 97% of the population does not pay any tax at all. Indirect taxes like VAT, Sales Tax, Octroi and a whole host of devilish taxes are levied on everything. Even a beggar buying beedis is paying all these taxes. But income tax, the largest revenue earning component of the budget is paid by only 2.8% of Indians.

Of course, this is a headline grabbing statistic that somewhat obscures the facts. India is a young country with a large number of children. They obviously are not meant to pay taxes (although I am somewhat loath to mention this as Ramamritham might pounce on the idea and design a tax for them). But clearly there is something very wrong in the Indian taxation system.

Surely so much of India is not dirt poor. The fact is that lots of people dodge taxes. Perhaps the true number of those who should be paying taxes is three times this number. Still, even if you say by rigorous enforcement of the law the number of tax payers would rise to say 9% - three times the current number, even then this is awfully small. How can a country which wants freebies and subsidies for everybody be financed largely by just 10% of its population.

Three things are blindingly obvious

- Economic growth for everybody should be the single most important priority of the government and society ; millions must be given the opportunity to earn enough income that they pay taxes. If ever there was a case for learning from the China model, this is it. Get rich first; then worry about income distribution.

- Tax evasion is clearly rampant. Here Ramamritham is indeed trying hard, but the scale of the problem beggars belief

- Tax exemption for agricultural income and long term capital gains has to go. If you earn sufficient income, whatever the source may be, you have to pay income tax.

You can only soak the 3% so much.

Ramamritham acquires a new fan

My good friend Sriram, appears to have become a fan of Ramamritham, just like me. Sriram is an excellent blogger of incredible energy ; who else can keep the scorching pace of 2 or 3 quality posts a day.

His post of a few days ago, On the life sucking bureaucracy in India,  makes a very good read. Heartily endorse the post for readers of this blog.

Its a telling comment on our respective energy levels that by the time I have summoned up the effort to cross post, he has already made 3 newer posts despite the fact that he is traveling ! Ah, the advantages of being a younger man !!

Down with corruption; Oh really ?

End corruption; a favourite slogan in India, especially in the recent past. Really ?? Beware , what you wish for.  If that really happened, it would profoundly alter life in India, as we know it. Are we actually ready for it ?

• If we don't pay the bribe to get our driving license, we really have to learn driving to get one.  It is an absolute certainty that if the driving test were to be strictly administered, 90% of Indian drivers will fail
• We have to really declare the right price of your house when registering the property. Is anybody ready for that ?
• We probably have to vacate the house you live in - chances are that few of them meet statutory safety requirements. Fire safety - what's that ?
• If we are "rich" we can't slip those crisp ones to witness/cop/judge and stay out of jail , every time we get up to mischief
• If we are "poor" we can't accept the Rs 500 and one bottle of liquor at election time
• We are  most likely evading tax. Even the salaried lot, who think that  taxes are deducted at source - are we really declaring the interest income on our savings bank account in our tax return ? That is , if we file a tax return.
• We have to spoil our hairdo by wearing the helmet while riding the two wheeler. Slipping twenty bucks to the traffic "mama" won't do 
• I know the concept of municipal/metro water is a joke, but the tankers of water our building society is buying is probably mostly illegal and much of the price that we pay actually is to grease some palms. 
• Slum life is real tough and unfair, but we still cannot throw a piece of wire to the line and tap electricity. You see the Rs 150 being slipped each month to the linesman can't go on.

I can go on and on. Corruption, in India, is a story where its considered "smart" if you do it, but its a scam if anybody else does it.

So, do we REALLY want to  abolish corruption ??

A political addenda to the economic blueprint

Politicians will do anything to win elections; even good things ! You can't blame them , for after all that is the objective in politics. As I observed in the previous post, an economic blueprint is of no use unless a political way can be shown as well. So the task is to show that an economic plan will win an election. Or at least not lose one.

I believe the time is ripe for that in India. The Congress government is almost certain to lose in the next general elections due in 2014. They have no plan to win it. No amount of cash doled out to the voter is going to help them win. Therefore they have nothing to lose. Ideal conditions to try something drastic.

Make a fresh beginning. Manmohan Singh should retire and a grateful nation should say thanks for a lifetime of public service. Pranab Mukherjee can be kicked upstairs. Chidambaram, Anthony , Pawar etc are to exit with a 21st century Kamaraj Plan. For the lack of any other leader, Rahul Gandhi should take over as Prime Minister. He should form a new cabinet - 50% from the political class and 50% from technocrats and experts who are complete strangers to politics (imagine Sreedharan as Railway Minister). Form a government of national unity, giving a couple of Ministerships to the BJP and the Left as well - this may not happen, but no harm trying. This government has a two year mandate to do things .

Bribe the states to fall in line. No state is opposing any of the measures on grounds of ideology or conviction - every opposition is simply politics. The best way to overcome them is to bribe the states. Every state that wholeheartedly supports the entire agenda of the government will get say Rs 2000 crores as a dole. Fund this by running a one time deficit. States that still do not want to toe the line are welcome to stand alone, but the rest of the nation will go ahead.  If and when they join, they won't get the Rs 2000 crores.

Form a "conclave of experts". From all walks of life - social workers, businessmen, government officials, environmentalists, politicians, etc etc. Say about 50-100 eminent Indians. Appointed; not elected. The government should "sell" the plan to them. Debate and incorporate the sensible changes they recommend. Make them inclusive in the plan. Appeal to their nationalism that single point agendas (like say an environmentalist opposing any dam whatsoever and not  taking any responsibility for economic development) cannot work. There are no easy solutions. Some tradeoffs must be made. The governing principle is 75% agreement (since all cannot agree), but 100% commitment once the plan is finalised. The plan then goes through Parliament for adoption.

For two years banish any strike or agitation against any aspect of the plan. The conclave of experts have to commit that they will not agitate outside the conclave (that's what 100% commitment means). Opposition or ruling coalition parties who wish to strike are welcome to do so; the government simply ignores them and goes on ahead, daring anybody to bring down such a young, new, active government. It is unlikely that Mamata Banerjee or Mayawati or any of the usual trouble makers will increase their seats in a new election; so what's the joy in bringing down the government. The one likely gainer can be Jayalalithaa who will probably have to be "bought" by more dole to the Tamil Nadu government.

The government fully backs the bureaucracy and the judiciary to take quick decisions and implement like crazy( a bit of Sarkozy style hyperactivity would help). No bureaucrat would be punished for taking risks or taking a wrong decision - he would only be in trouble if he was corrupt. Sack the current grandstanding Comptroller and Auditor General who sees a scam in going to the loo and replace him with an eminent person from industry. Equally judiciary is "bribed" with doles to take a fast track for economic issues. The principle would be that its OK to get it 20% wrong , but quick, rather than hoping for the mythical 100% right and getting nothing done. Create a frenzy of activity - it tends to be self fulfilling and gathers a momentum of its own.

What about corruption ? It will never go away anywhere in the world. In India, contrary to public opinion, personal enrichment is a small part of corruption. Much of corruption is to create the war chest to fight elections. And the bulk of the spend is not in campaigning like in the Western world. Most of the spend is doling out cash and liquor to voters. But that has never won anybody an election. Everybody does this; so you can only lose by not doing this, but will never win only because of this. This can be lessened by moving towards proportional representation, instead of the first part the post system. Something to do immediately after winning the next election. This is an idea I wholly borrowed from Dr  Jayaprakash Narayan, an extremely impressive politician from Andhra Pradesh, where he is a MLA. For those interested, you can watch to him eloquently arguing the case here - incidentally it will also be an eye opener that such politicians also exist.

Meanwhile the current government just says no to building a war chest for elections. The Congress breaks ranks and refuses to bribe the voter with cash and liquor (remember it cannot win by doing this). Instead it tries to stand on the planks of freshness, action and two years of solid work.

Will this win Rahul Gandhi the next election. Maybe, maybe not. But he's not going to win it currently and he has nothing to lose. And maybe, just maybe, it might win him the election . The Indian voter is not an idiot. In the absence of any other compelling reason, he votes on caste lines, or whoever bribed him or sheer anger at the incumbent or fractures his vote. But give him a compelling reason and he votes in a wave irrespective of any other considerations. Remember 1977 after the emergency. Remember 1984 and the Rajiv Gandhi wave. Even the last elections in West Bengal is an evidence of the wave.

A fresh competent government may create a wave. Somebody trying this may lose, but will still go in a blaze of glory. Really worth a try.

An economic blueprint for India

It isn't enough to just criticise. A critic must also state what is the alternative.There have been lots of criticism of India's economic performance in recent times and the government's seeming inability to do anything right, economically. The blogger has been one such critic too. But precious few have really laid down a comprehensive argument of what needs to be done , and equally how this can be done; for we cannot, and should not,  wish away political realities.

Government action should be for sustained long term economic development - not short term fixes. Improving "sentiments" , like trying to bolster the stock market, is a waste of time and should not be anywhere in government's priorities. Issues like FDI in retail, fiddling with tax laws, which are getting a disproportionate amount of airtime, are all side shows - they won't make or break India.

This blogger is no expert on anything. He is just a concerned citizen. So here's one citizen's blueprint of what can be done and how it can be done. This blog is not a research paper, so there are a few ideas but no space to present data and research to back this

Stimulate agricultural growth:  Right through the last two decades, agricultural growth has lagged way behind GDP growth. This is unsustainable in a country where the majority depends on agriculture and therefore do not see the country's growth as inclusive. Some thoughts

• Significant investment in agricultural research and wholehearted acceptance of genetically modified crops . In doing so, insist on clear labelling of genetically modified crops and let the consumer choose - take on the environmental lobby and stand firm.
• Large investment in the power and water sectors of infrastructure referred to in manufacturing is also important for agriculture. Remove the freebies like free power (what use is free power when rural India has 14 hour power cuts).
• Revamp the APMC rules that distort trade and let the agricultural sector freely export - there is a massive opportunity to feed China.
• `Drive cooperatisation of agriculture ( a al Amul model) and even allow corporotisation without allowing any of these entities to acquire land.

Arrest the fall in manufacturing :   India's growth story is stalling primarily due to the decline in manufacturing. In Jan-Mar 2012, Manufacturing actually declined by 0.2 %. Manufacturing growth is the only route to creating jobs for the large population of India. Here's what can be done to drive the manufacturing sector

• Setting a land acquisition policy that is sensible (the current one is not). This is an incredibly difficult thing to do; no country, including China, has managed this and there is unfortunately  no easy way. The current attempt in India is a step backwards. We must learn from states like Gujarat which have managed this well.
• Decide on mega projects that require high level government approval quickly. Today every large project is in complete paralysis as the government is terrified of doing anything for getting dragged into controversy and accusations of scams. You can't be accused of a scam if you do nothing !
• Significantly step up investment in infrastructure. The government has actually done a great job in two sectors - roads and telecom (although the misguided courts are trying their best to reverse the gains in telecom). It has performed abysmally in Railways, Power, Water and Urban Development. These are the four sectors for concentration
• Implement the Goods & Services Tax, Direct Taxes Code and the new Companies Bill.
• Do nothing else and let both private and public sectors drive the growth 

Fiscal Responsibility : Both central and state governments have to adopt fiscal responsibility. Do the following

•  Statutorily fix a ceiling (low) on deficits as a % of GDP . Neither the Centre nor the states can breach this under any circumstance.
• Phase out subsidies slowly - it is impossible to phase them out in one shot, but over 5-10 years they can be phased out. In order of priority, they should be petroleum , fertilizer and then finally food. Some component of food subsidy can never be phased out and should always remain as an anti poverty safety net.
• Reduce significantly doles such as the Rural Employment Guarantee Scheme
• Increase tax revenue by broadbasing tax - remove the exemption for capital gains and agricultural income and go after taxing property transactions

Fight Inflation : Fighting inflation must assume almost religious proportions (a la Germany).

• Make RBI truly an independent Central Bank and task it with monetary policy. The government must abdicate its right to tinker with monetary policy. In the current environment, RBI is completely right to keep interest rates high
• Fiscal responsibility referred to above, will automatically reduce inflation
• Fight inflation supply side; boosting GDP growth is a good way to fight inflation.

Inclusive Growth : Mere GDP growth, without benefiting most (all is impossible) is not sustainable in any society. Growth must touch a large proportion of the population.

• That is why, agricultural growth is at the top of my list
• Invest massively in education. Inequity must be tackled at the level of opportunity. It is NOT an objective to achieve equity of outcome.
• We should establish a social security net. No Indian shall starve and nobody will go naked. No child will be unable to go to school. Everybody will get basic medical care (note the word basic). Anything more than this is an agenda item after 10 years.

That's it. Do nothing else. Results come from doing a few things very well rather than lots of things poorly. 

None of this is new, and I am not vain enough to believe that this is an earth shattering blueprint. Wiser minds exist in government who know all this and more. The problem is the political will for implementation. Politics and economics cannot be divorced. So how do we make all these things happen politically ?? That's for tomorrow's post.

The curious public reaction to Facebook IPO

You couldn't have missed the public fury over the Facebook IPO, over the last week, even if you not economically inclined !  Facebook was a darling before the IPO - great company, stratospheric valuations, etc etc, which this blogger has been heartily against. But now after the IPO , Facebook is a pariah, it botched up the IPO, lawsuits threatened, etc etc. This time this blogger is completely on the side of Facebook and totally flummoxed by the public reaction.

What is the main charge ?  Facebook's price did not shoot up 10 times after the IPO. Instead it has declined by some 16% or so, over the IPO price, in the first week. The company has committed sacrilege. Really ??

Who are the moaners and bleaters. The punters who bought in the IPO wanting to sell on the first day after listing and make a 5000% profit. Please tell me why the company has any obligations to these greedy leeches ? What economic activity have these speculators done (never mind that in this lot might be Oregon widows who didn't know what they were doing !)? Why should they make any profit at all ? Why should Facebook "ensure" that the stock rises manifold on the date of listing ? It can be argued that Facebook should actually be doing precisely the opposite. After all if the price shoots up after the IPO, the company is shortchanging the original investors who first invested in the company to the benefit of the sharks who want to make a whopping profit in one day. By that yardstick, Facebook has done precisely the right thing.

The second charge is that the IPO price was overvalued. Now do you need a MBA to tell you this ? Of course the company is overvalued like crazy. Everybody knows that. People chose to close their eyes and believe that in a stampede they would make a killing. They've now been trampled. Tough luck. 

The third charge, and a more serious one, is that Facebook let some analysts know that its latest quarter's numbers would be lower than expectations, but didn't inform everybody. This is what is triggering the threats of massive lawsuits.I don't know the facts behind this allegation, but I suspect this is a fig leaf behind which the punters are wanting to hide. As if their stampeding to buy Facebook shares had anything to do with numbers or logic or any sensible model of valuation based on earnings. Would they have behaved any differently if Facebook had said they would earn half of what they did ??

I have zero sympathy for those moaning today, I am actually delighted that they have lost their shirts and would be even more delighted if they lost their underwears too. The right course of action for them is to wait a year or two, and see if Facebook's performance doesn't lift the share price. Fat chance of that happening - this lot has the patience of an ectoplasm !

I am totally with Facebook on this one, even though I am not with them on anything else. That's why I am not updating my timeline !

A matter of grave import to the nation

The Hon'ble Supreme Court of India is a very esteemed body and is concerned with matters of grave constitutional importance, on which hinges the future of this nation of 1.2 billion people.  Therefore when this august body makes a ruling, we should take it very seriously and comply. It also goes without saying that the Supreme Court only rules on extremely weighty matters and does not lend itself to trivialisation. It is therefore very clear that the removal of sun films from car windows is one of the most important and pressing of issues that confronts India today.

The Supreme Court has ruled, after intense deliberation, and careful consideration of legal issues that pasting a sun film on your car window is illegal. That it has devoted its valuable time to this, while it is suffering from a massive backlog of cases is enough evidence that this is an extremely grave matter. A very concerned citizen of India, Mr  Avishek Goenka (it is completely untrue,  that the aforesaid gentleman is an old f@*$, of the qualities I alluded to in this post) filed a Public Interest Litigation that sun films on car windows was an important reason for rape, dacoity, murder and a host of heinous crimes . The Hon'ble Supreme Court agreed. From now on , thou shall ride a car with sun films on the windows at your peril.The implication of this judgement is obviously that as soon as sun films are removed, the incidence of dacoity, rape, etc etc shall drastically fall. Please monitor the statistics in the next few months to see this dramatic fall.

The police in each state is getting ready to diligently implement this critical matter of public policy. They shall now treat sun film violations on par with catching those driving without a license, driving on the wrong side of the road, driving without any lights at all, five people riding a two wheeler, parking in the middle of the road etc etc. These matters already receive the highest attention from the police, so much so that these problems are largely licked ; they will now have the time to tackle sun film.

The Hon'ble Supreme Court did not mention this, but we can speculate that the corollary effect on public health also influenced its opinion on the matter. We are somewhat concerned that Vitamin D deficiency is at an unacceptably high level in India. Exposure to sunlight, especially the intense summer sun that we are blessed with, is really a significant aid to the health of the nation. With no sun films on car windows, my vitamin balance will be strengthened by the absorption of more sunlight.

A byproduct of this move shall also be to enhance public morality. Activities of an amorous nature, carried out in the confines of a car will now be visible to the, umm,  naked eye and therefore act as an effective deterrent.

I shall also compliment Mr Avishek Goenka on services to the nation and exhort him to continue to strive for further reducing dacoity , rape, etc,. Considering that a significant proportion of such crimes are done indoors, its time to turn the attention to buildings. It is deplorable that building windows are tinted and the view blocked by curtains. I am exhorting Mr Avishek Goenka to move the Hon'ble Supreme Court to also deliberate upon the legality or otherwise of curtains. (Reflections, please note).  After winning this, Mr Goenka is also exhorted to move the Hon'ble Supreme Court to ban the wearing of sunglasses so that potential rapists who are ogling at women with the intention of committing rape can be more easily found out.

I am extremely happy to be living in a land where the institutions are so concerned about my welfare and safety. I shall now feel much safer on Indian roads knowing that policemen are on the look out for sun film offenders. I commend and applaud all those who have diligently framed this public policy. Jai Hind.

Pranabda ko gussa kyon aata hai

Statutory Warning - This post has language which may be offensive to some. Reader discretion is advised !

Why is the  Finance Minister  an angry old man  - approximate translation of the title of this post for non Indians. He is one of the most mature and level headed politicians in India. And yet, these days, he is behaving like an "old f&*% with that perpetual scowl on his face" - you can see zillions of this category in any apartment owners' association in India. Either he has gone a bit batty or has let Ramamritham loose - both of which are awful developments for India

I am referring to their collective antics relating to the tax laws in India. The Vodafone story is now well known and is the subject of an earlier post of mine. Pranabda is simply being extremely churlish and petty in pursuing this. I continue to be amazed that they are going after Vodafone (which was the buyer in this transaction and made no capital gain) rather than the seller, Hutchison Telecom, which is really the company they should go after. If Ramamritham has any b*&@$, he should take on China.

But they haven't stopped there. They are loudly defending the retrospective changes they have brought into the Income Tax law . In this process, they are also overriding bilateral tax treaties with many countries. Nonsense regarding sovereignty and the right of Parliament to enact any law it pleases is being spewed. They are seeking to impose GAAR (General Anti Avoidance Rules). In layman's language, GAAR  simply means that you as a tax payer have to prove your innocence (the taxman is simply going to assume that you are guilty). Fantastic. Grrrr.

I can understand the pressing need to raise revenue - given that they are spending money like water on doles and giveaways and simply borrowing their way to nirvana. Even grant for a minute that curtailing expenditure is a non option (wow).  But is this the way to raise money ?

Only 35m Indians pay Income Tax. That's 3% of the population. Is really 97% of India poor ? How about getting some more people to pay instead of screwing those who do ?? Just look at the fantastic (and mostly ill gotten) wealth in property most of which is in suitcases. How about tightening the noose on those. Even today you can earn Rs 10000000000 crores as "agricultural income" and not pay any income tax at all. Why not tax that ?

The relationship between the taxman and taxpayer is one of extreme confrontation in India - anybody who has been at the receiving end of attention from Ramamritham knows this. Laws are draconian and the concept of guilty until proven innocent is well engrained. Dispute resolution in a sensible way is non existent - everything is confrontation. With the latest scowl on Pranabda's face, its only going to get worse.

When will we ever learn that making laws simple and fair , keeping tax rates reasonable and letting economic activity boom is the surest way for governments to increase revenues. Pranabda knows all this - he is a wise and extremely experienced minister. And yet, look at what he has become.

Will the Pranabda of old resurface please ?

For a more level headed and saner piece on this issue, read here.

A cross post

Should we worry about India's economy ? Yes says Sriram, a friend and a most prolific and versatile blogger. He makes two or three posts a day  and has wide and original views on a number of issues.  On India's economy, he says

"Less than a fortnight into the hundred days in India, the more I observed, the more I wondered whether India's economic "success" story was more hype than real.  That line of thinking morphed into to this column in which I wrote that "the economic health of India is not looking good."

Every day, evidence seemed to pile on to further reinforce the impression that India could run into some serious economic troubles really soon.  I was particularly concerned that the country was not paying enough attention to the long-term requirements of resources, energy, and infrastructure."

You can read his full post here.

Yes there's much to worry and despair about. We have made some progress, but make disproportionate noise about it. The real tragedy is that India is capable of so much more - Oh what a huge unfulfilled potential there is. With this much poverty around, its a crime to let potential go unfulfilled.

Sack Ramamritham

Ramamritham must be sacked - plain and simple. He is usually just a nuisance and a pain in the posterior, but otherwise a good man. But recently he has crossed the barrier and is now a genuine danger. He must be read the riot act and told to go.

I am referring to his contortions and nonsensical behaviour in the Vodafone case. For those not familiar with this saga - here's a short summary.

Some years ago Vodafone bought a 67% stake in Hutchison Essar. Vodafone's Dutch company bought the shares from Hutchison Telecom which is a Hong Kong company. Neither the buyer, nor the seller was an  Indian company although the shares they bought were of a company whose operations are in India. Under ordinary tax laws in most countries in the world, including India, the place where the selling company is and the buying company is dictates where tax would be paid on the gains from the sale of shares (in this case neither was in India). This should have been a straightforward matter.

But Ramamritham decided to put his grubby fingers in. He levied a demand on Vodafone that capital gains tax was to be paid in India as the underlying asset was in India. Specious argument, but then Ramamritham is not exactly renowned for cold logic. The judicial process being what it is, Vodafone had to cough up a substantial amount (Rs 2500 crores of the total demand of Rs 12,000 crores ), before it could go on appeal.

The case duly went to the Supreme Court which told Ramamritham to *$%& off. That should have been it.

But Ramamritham decided that he would not return the money he had expropriated from Vodafone (you see he had spent it on giving free colour TVs to all and sundry). So he amends the law with retrospective effect in the latest budget to say that Vodafone has to pay. He has excelled himself - he has amended the law with retrospective effect dating back to 1962 !!!!! He can now open every sale or purchase of shares from 1962 and go after everybody. His justification - government will lose a lot of money if it has to refund Vodafone. The mind boggles - next he can simply rob you and me of all our money and then refuse to return it on the grounds that government will lose revenue.

It does not matter to him that the Supreme Court has ruled time and again that the law cannot be amended retrospectively. Ramamritham is trying to get away in this case by claiming that he is not amending the law but the notes to the law !

Have you noted that the blighter is going after Vodafone, which was the buyer and made no capital gain - it was Hutchison Telecom as the seller which made the gain. The simple reason is the Vodafone is in India and unfortunately in Ramamritham's grasp. Ramamritham can always find logic for his tantrums ( in this case the grounds are that Vodafone did not deduct tax at source). Hutchison Telecom does not exist in India; so he cannot go after them. They exist in China which of course has told Ramamritham where he can go and stuff it.

No sensible businessman can do business in India if Ramamritham continues to get away scot free. He must be sacked,  banished to Dhanushkodi and told never to return.

PS - For newbies to my blog, here's an introduction to this frustrating character called Ramamritham.