Taxing the farmer

Associated Chambers of Commerce and Industry in India (ASSOCHAM) is planning to raise the issue of introducing income tax for farmers with finance ministry. This is based on the survey conducted by our great industry body ASSOCHAM. Surprisingly, the participants/respondents in the survey are 300 CEOs. The results of the survey indicate that about 80% of the CEOs (respondents) are in favor of bringing the farmers under the tax net. It is also reported that the industry body will highlight the results of the survey during their pre-budget consultations with the Ministry of Finance.

We need to appreciate the efforts of ASSOCHAM and the CEOs participated in the survey for their ‘concern on the revenues of government’.

Unfortunately, Government of India’s published reports indicate that at least 1.5 lakh farmers have committed suicide from 1997 to 2006 in the country. These suicides are reportedly higher in ‘richer, prosperous and industrialized’ states. NSSO survey on indebtedness of farmers during January to December 2003 reported that 43.42 million (48.6%) farmer households are indebted. Another report of NSSO reported that average expenses and receipts for cultivation per farmer household, during July 02 - June 03 for which the data is available, was Rs.20,315 and Rs.8,791 respectively. This means an average income of Rs.11,524 per annum which turns out to be Rs.960 per month per household. This income may be less than your ‘pocket-money’. This income will not increase significantly even if we assume that farmers are involved in other activities for income generation in villages.

Imagine a household (family of a farmer) managing all his needs and of his family in less than Rs.1000 per month. These average figures are for one agriculture year. If we consider the situation over the years the income may turns out to be negative (loss) in some years due to droughts, floods, crop loss due to pest and insect attack or price fall. Farmer has to save the income earned in one year to protect his family, if possible, against the possible crop loss in the subsequent year. We have insurance guarantee for many things in the country but not for agriculture. Government has introduced insurance against rainfall, recently, which is dependent more on political conditions rather than rainfall conditions. My father is still waiting for the rainfall insurance for the year 2003. Agriculture is one of the toughest and riskiest professions where farmer has to play with nature and unethical market forces.

Our great industry association and CEOs want to impose income tax on these farmers. Great concern!!! What prevented these CEOs and ASSOCHAM from raising the issue of farmers’ suicides with government if they are really concerned? How many of these CEOs and businessmen who earn lakhs and crores are paying the tax honestly? How many hi-tech companies are paying the salaries honestly without diverting the salary in the name of bonus to avoid income tax?

What was the logic of involving only CEOs as respondents in the survey? Why not farmers and others? That too the sample size of the survey was only 300. How representative is the sample?

When more than 1.5 lakh farmers committed suicide in the last few years what action did the association and CEOs took apart from conducting surveys for agri-business companies? What moral right do they have to ask farmers to pay tax? At least, let them clarify who the farmer is in this country. Is it Amitab Bachhan or Deve Gowda or a poor man who has dependent on agriculture for his livelihood? In fact, businessmen, politicians and people like Amitab are evading the tax by showing their income in the name of agriculture and these are the real culprits.

It is to be mentioned that the aggregate measures of support (AMS) offered to farmers in our country is negative. This means that farmers are cross-subsidizing consumers. This trend is not seen in any other sector. These CEOs demand the government to provide tax incentives for export if the Dollar value is falling to maintain their profits. When farmers are cross-subsidizing and committing suicides what prevented these CEOs from raising the issue with government? At least let them pay the right price for the farmers’ produce and stop exploitation.

Why our government is not holding any pre-budget consultations with farmers’ groups? Why only with industry bodies? Even god cannot save the poor farmers from the bias of government and the so called ‘CEOs’.

How Nobel is Nobel Prize

Noble prize is the ultimate recognition of Human mind.Its a vindication of the fact that Humans are there to support humans and it motivates us to achieve the impossible.Alfred Nobel in his will said "it should be annually distributed in the form of prizes to those who, during the preceding year, shall have conferred the greatest benefit on mankind".And so begun the quest of humans for that coveted prize.

But the selection for Nobel Memorial Prize in Economic Sciences over the years has left me baffled.Noble prize has had its share of criticism over the year but of late a disturbing trend is coming up.The Noble bouquet(committee that selects the winner each year) is probably committing the greatest error of all time,which in many ways is belittling the prestige associated with it.

For last 10 years the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel(as its official called) has being going to the people whose theories are just theories and are not applicable in real world.Just going through the citation of few winners,I can quote the contributions as "for having laid the foundations of mechanism design theory ", " having enhanced our understanding of conflict and cooperation through game theory analysis" or "for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms".

Well it doesn't take us time to see that most of the theories are either very complicated or practically impossible to implement.Moreover a general trend that has occurred is that most of the winners either supports capitalist model or gives more evidence to prove that its the best model.Here I will like to give a disclaimer that I m one the biggest supports of capitalism and firmly believes that its the best model for a society.But this doesn't make me a blind supporter of capitalism,as there are examples of countries that have done very good under different forms of economic order.USSR was the only country to survive in the great crash of 1929.Cuba has better and cheaper medical facility than USA.Even India is doing well under a mixed economy.China is the next super power.Then why there is such a obsession over capitalism .The answer lies in the new world order.An unipolar world where USA is always correct because it pays our bills.Most of the international organization get their majority funding from USA and thus are held on ransom by it.

Its this fear that does not allow the Noble bouquet to give Mohd. Yunus the Nobel prize for economics and give it to Robert C. Merton who devised new methods of determining the value of derivatives.Ok getting the value of derivatives is important for a trader on the floors of wall street but is it in any way solving the problems of millions of poor across the globe.Is it in any way bringing a smile on their faces?Is this theory giving them a bread for a day?The answer is a pale NO.

Now let us see what Mohd. Yunus has done,he pioneered the micro-finance system in Bangladesh.These Micro-finance or Microcredits are small loans given to entrepreneur who are too poor to qualify for loans from a traditional bank.In a country like Bangladesh where poverty is a way of life,his initiative has changed the life of millions.It all began with a loan of $27 given to 42 women who made around $ 0.2 profit each and repayed the loan to him in 1 year.Thus began the revolution known as Grameen bank which todays caters to over 10 million people.More than 94% of Grameen loans have gone to women, who suffer disproportionately from poverty and who are more likely than men to devote their earnings to their families.The Non Performing Assets of the Grameen bank stands at just 1%(Bear strean once a symbol of USA economy collapsed under these NPAs and Lehmann Bros. have a NPA of over 22%.Our own ICICI has 18% NPAs).The microcredit has brought a sea change in rural Bangladesh,where small entrepreneurs are mushrooming and is helping millions to get a decent and respectable life.Grameen Phone,another non-profit venture of Mohd. Yunus has provided cell-phone ownership to 260,000 rural poor in over 50,000 villages since the beginning of the project(polli phone) in March 1997.Its has changed the way rural Bangladesh used to communicate with their loved ones all over the world.It was these contribution that made him famous all over the world.

But the Nobel bouquet seems to live in another world where poverty is just another incorrigible word,where begin poor is align and bring smiles and joys on the face of poor is just a normal thing or is it the fear of new economic order which replaces big multi-nationals banks and huge financing with a smaller,non-profitable banks or is it the fear of showing the richness and goodness of a different economic approach which a capitalist US economy is so devoid of.For them "having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms" is an important achievement which according to Alfred Nobel's will of greatest benefit on mankind, deserves a Nobel prize for economics.If it hadn't been for the people like Bill Clinton,the achievement of Mohd. Yunus might have been forgotten in the pages of history.

It still amazes me how can the Nobel Bouquet think of giving him Nobel peace prize when he has been the greatest economist of 20th century.Is this not an insult of this great man or more importantly is it not the insult of the coveted prize itself,which has not been given the privilege to honor the greatest social-economist mankind has ever seen.

Rising Prices-blame it to the Hawk,theTiger and the Dragon

Every Friday as Indians prepare for their weekends,something happens at around 12pm.The government comes out with inflation number.Last week it was 7.82 %,a marginal decline from 7.83% the previous week.Economist all over the globe signaled danger as many believed that it would be revised to 9.5% as many items were not taken into account.But for a average Indian it is this just a number.For those IT engineers who spent their election holidays enjoying in PVR cinema instead of standing in queues to cast their votes(pardon me for being cynical),I believe for them its just a number.
To get you how this number affects you,let me first give you an scenario where inflation is at 7%.
This 7% means that what you brought last year at 100 bucks will cost you 107 bucks this year.In short your will lose 7% value on your money.But many of us invests in stocks,mutual funds,FDs and various other schemes to grow our money.We want our money to work harder than us,to grow faster than us and support us when we require it.But now at 7% inflation what we getting out of our investments.The saving account gives us 2.5% return,a FD today gives us 9-10% return and a avg. return of sensex over the past years has been 15-17%.And one more thing except Sensex everything else gave you a simple interest.Also as I was talking about inflation at 7%,the return of your money from a saving account is -4.5%,FD is 2% and from sensex its 10%.In three years time,we could lose all our investments,our parents future(retirement) could become painful and we could also lose our jobs.
But hey,why is there is so much of a fuss over inflation this time around.India has seen inflation of over 15% for two decades.Anything under 10% should be good.My answer to that thought is India has changed and the world has gone Flat.Todays inflation is not triggered because there was a weak monsoon and the crop production went down.It is also not due to the fact that the the imports have been delayed and there is shortage of goods.Its because we don't care about rising food prices.The privileged class is ready to roll out Rs.395 for a bucket full of chicken at KFC,so how can you expect them to raise their voices when petrol becomes 3 rupees dearer or when onion sells Rs.25 to a kilo.For them its still cheaper than the parking fee that their car has to pay for a show at PVRs.But I m in no way asking these people to stop or change their lifestyle,they are the backbone of the Indian economy.They spend,they enjoy but they also create jobs,these jobs supports more people and the country prosperous .
But how these people are encouraging inflation ?Well when I was a kid,for me a perfect way to enjoy was to be at park playing cricket with my friends.But for todays kids,it about play station,theme parks,a 3D movie at a multiplex and a trip to pizza hut.My cricket costed my parents around 2000 bucks spread over 10 years.All I needed was a bat,ball and six stumps.But nowadays a week end costs over Rs.2000.Initially a budget of 2500 was enough for my mom to run the house and today the total budget allocated to my mom is around 10K.Then also my mom complains how difficult its to run the house.
What the hell has happened to us.Why can't we just be satisfied with what ever we have?Well the answer to it is,we have become globalised.We want nothing but the very best for us.Its no more aloo paratha at breakfast but its cornflakes,its no more Bata sandal but a Nike shoe,its no more CRT TV but an LCD or plasma for us.We want more and more and more and think that getting the best for us is our birth right.There is nothing wrong in asking for the best,but have we thought what it is doing to the world.
Indian economy is growing at 8% per annum and china is at 11%,we together hv 35% of world population.Now imagine the fact that 35% of world population is wanting more and more from the world,the axis of demand is shifting from West towards the East.We want wheat,we want Rice,we want Steel,we want energy and we want OIL.
I once read an economist saying China and India are like a champagne bottle which is being shaken for past 2oo years and now they are bursting out.But are we bursting out the right way?Are we not destroying the world instead changing it for good.We are the worst culprit of environmental damage.NTPC is third largest contributor of CO2 in the world,China has destroyed forest area equivalent to the size of Sri lanka to prepare for Olympics.For common wealth games in 2010 and Olympics in 2008,India and China will need steel that would be enough to make a four lane road to the moon.At current rate we would require 250 billion barrels a year by 2030.We want more and better and for that we are ready to pay any price,be it economical or human.

The great press in India often forgets to bring important news to the focus,its not until you look into a TIME magazine or Economist,you realize the tensions between India and China over Africa's resources.Many countries in Africa are under civil wars,initially these were started by USA and USSR.But now the backing power is India and China.Both of them want maximum control on the resource rich Africa.And yes don't forget,USA is also there.They are even ready to sacrifice human lives for it.Millions have lost their lives in Uganda and Congo,because the nations like USA,China and India wants their control over it,whether directly or indirectly.All this because we, sitting at our homes want the very best for ourselves.

So next time when you hear or read that inflation number on a Friday afternoon do think of the Hawk,the Tiger and the Dragon.