Reality Check India

Pretty good, definite, fairly solid, credible mess

Posted in Uncategorized by realitycheck on October 25, 2006


I didnt want to write about this when I first saw our National Security Advisor (NSA) M.K. Narayanan on CNN-IBNs Devils Advocate with Karan Thapar aired on Sunday 9:30 PM. See transcript here.

Confused had already written about it here and I didnt want to make M.K.Narayanans gaffe more important.

Perhaps, he was not able to handle Karan Thapars style and blurted out. However, in diplomacy the price you pay for messing up is huge. In this case, it is so huge that you will not be able to confront Pakistan on its role at all.  See what Pakistan Foreign Office Spokeswoman Taslim Aslam has to say about it the very next day.

“It is a propagandist statement as they have no evidence whatsoever”.


“It was a lesson which must be learnt by Indian agencies and security forces that they should not blame Pakistan without evidence,” Aslam was quoted by the state-run APP news agency as saying to the Voice of America.  More.

See the hyperbole in her language. “No evidence whatsoever”. How did “Pretty Good Evidence” become “No evidence whatsoever” ? . Even a lay person knows that in diplomacy you have to talk big, puff yourself up, and work into a position of strength.  Anything less than clinching amounts to “No evidence whatsoever”.

  • Rumors and confessions are “pretty good evidence”
  • Everything else is “clinching evidence”

Now, the NSA MK Narayanan has embarrased the Mumbai Police Commissioner  AN Roy and the ATS Chief KP Raghuvamshi. If we have confessions that lead to arrests, seized passports, a chain of linkages,  – thats it baby ! this is clinching. We are home. The NSA ought to work with much much less than this evidence. You are NOT going to catch a ISI operative red handed. Even if you did how can you prove he is not from Indian Snooker Institute ?

So what now. We have bungled big time. We have clarifications from PM (“clear enough” to “credible”), from the Home Secretary VK Duggal (“good” to “fairly solid), from the Defence minister – but not from the NSA MK Narayanan.

Reality Checks views on Talks with Pakistan.

  • Pakistan will, and has the right, to plant spies in the Indian military or intelligence apparatus. It is in their national interest to do so. Do not make a fool of yourself asking them to cease and desist from this. I was surprised when some official on TV claimed they were going to raise this issue in the upcoming talks. Instead focus on infiltrating and destabilizing the ISI and Pakistan military instead.
  • The line, “stop support for terrorism or we will stop talking” is flawed. Talks by themselves mean nothing. This is why I support Operation Parakram after the Parliament attacks. Yes, there are doves in India who oppose it – but it worked. Yes, it could be termed as a waste of money for India, but it bleeds Pakistan more.  They have no choice but to match India in operational readiness. Defense postures do not come for free. They can only be weighed in what it costs the other side.
  • The softness associated with our PMs words, “Pakistan and India are both victims of terror” – has repurcussions on the ground. The morale of our forces and police get affected. Like B.Raman says – Pakistan is a victim of its own terror – but India is a victim of Pakistans terror ! Big difference.
  • Overall, I believe that we should not approach talks from the “let us talk because we are not going to war” angle.  We ought to assume that war in inevitable, and “lets talk because we really dont want to go to war“. In the meantime, preparing the frontlines and other frameworks as if we are fully prepared for that option as well. Only then are we talking as equals – otherwise it is tantamount to telling a bully to “Hey! Stop pinching me when I am talking to you”.

Link : Reservations and Tamilnadu

Posted in Uncategorized by realitycheck on October 23, 2006

Read this link (extremely informative) about the TN quota system.

The recent SC judgement about the SC/ST quota is only for promotions. It only says that when it comes to promotions a rich SC must make way for a poor SC. How on earth can anyone oppose that ? Under no circumstances will a non-SC candidate have access to the reserved promotion (ie. roster position). So, other castes have no role to play in this.

The judgement is available here. Please read it and you will be amazed at how studied and well written this judgement is.  We live in the age of the internet – why read the media when you can directly read the judgement online ?

SC upholds promotions based on caste quotas

Posted in Uncategorized by realitycheck on October 19, 2006


The supreme court today passed an order today that indicates how seriously it views ad-hocism when it comes to classification. The judgement was pronounced on a bunch of petitions challenging the validity of the 77th, 81st, 82nd, and 85th amendments.

Can anyone guess what the 76th amendment is ? What the very 1st amendment is ? See here and here

The key part of the order is :

We reiterate that the ceiling limits of 50 per cent, the concept of creamy layer and the compelling reasons namely backwardness, inadequacy of representation and overall administrative efficiency are all constitutional requirements without which the structure of equality of opportunity in article 16 would collapse,” the bench, also comprising Justices KG Balakrishnan, SH Kapadia, CK Thakker and PK Bala Subramanyen said.

Source : Times of India

The bold emphasis is mine. The court has directed that backwardness and inadequacy of representation is a constitutional requirement. In other words, it would be unconstitutional to ignore any of these criteria. Even an amendment to do away with data may be struck down.

More :

However, if they wish to exercise their discretion and make such provision the state has to collect quantifiable data showing backwardness of the class and inadequacy of representation of that class in public employment in addition to compliance of article 335, the bench said.

Same source as above quote.

This is pretty strongly worded. First of all, we all know that quite a bit of data IS available for both scheduled castes and scheduled tribes. Individual caste data within these groups may not be available – but atleast we know for sure how many scheduled castes there are in each state. This information was collected as late as 2001 (and every 10 years before that).

The lack of data for OBCs is much more serious – in addition to dramatic regional variation that is unexplained. According to the recent NSSO survey, Tamilnadu has almost no forward castes (about 10%) whereas Bengal has almost no OBCs (only 6% – TN has 65% OBC). For OBCs the need to establish backwardness is far more basic than for SCs because the rationale for SC quota is caste itself and the atrocities committed on them.

The honble court may do well to clarify the following:

  • Inadequacy of representation : What does that mean ? Does it mean adequate representation or proportional representation ? In either case, the lack of individual caste (yadavs, kurmis, vanniers,..) based data will make this impossible to establish.
  • Quantifiable data showing backwardness : Is it backwardness relative to the national average or to the topmost slice ? Compared to the Parsis, should everyone in India be considered backward ? If there is no benchmark reference here – then it is open to political manipulation.
  • Exclusion of creamy layer : A slight clarification, if a SC or ST person is promoted out of turn due to his/her caste to a Class – I or Class – II position. Then that person is automatically in the creamy layer, how would that work then ?
  • Creamy layer definition itself : There is a major loophole here. The politicians will exploit it to the hilt. What is the benchmark reference point for the creamy layer ? Today it is 2.5 lakhs per year (which is a person who earns the per capita of Malaysia  in India) – in a poor country only a very few fortunate souls are able to pull this amount in. What if tomorrow some politicians bumps it up to 6, 8, or 10 lakhs per year ?

Article : Powers of separation

Posted in Uncategorized by realitycheck on October 18, 2006

Check out this article by Pratap Bhanu Mehta on the recent events involving the judiciary.

The Supreme Court’s order in the case concerning OBC reservations seems to yet again set the stage for serious awkwardness in the relationship between the judiciary and other branches of government.

Very mildly put. I think we are unfortunately heading for a landmark showdown. Politicians raise unrealistic hopes among their vote banks, then when faced with constitutional questions will try to point fingers at the judiciary. The creamy layer example is a case in point. 

But if you ask the question, who decides when separation of powers has been breached, the answer turns out to be the judiciary. Thus rather than establishing the equality of the three branches, the separation doctrine inevitably ends up undermining itself by privileging the judiciary.

Is there any other option ? We all want a harmonious relationship between the two branches of democracy – but a more agressive legislature will invite a more aggressive response from the judiciary.  Laws are forever, politicians are only for five years.  We are only a few short steps away from total anarchy.

The judiciary has unequivocally excluded the creamy layer in the past. But therein hangs a tale of the de facto limits of judicial power. The creamy layer provisions have often not been enforced, the court has not been able to punish anyone for flouting its orders, and judicial directives on reservations have easily been overturned by constitutional amendment.

See, we are a cycle gap country. If judgements and policies are not watertight and leave a crack in the door for exceptional cases. We will attempt to drive a 18 wheeler through that gap.

Moily Committee report and other stats

Posted in Uncategorized by realitycheck on October 16, 2006

A lot is happening on the OBC quota front.

The Moily Committee report is out. It is available at the Oversight Committee website at (125 Pages)

I am still in the process of reading it.  I think Mr Moily has done a good job. I really applaud him for taking a bold view on the creamy layer issue and including the Appendix in the report. Please read the Appendix. There are some facts about the regional distribution of OBCs in it.

One key statistic that we would like to see is the regional variation of OBCs. How “OBC Heavy” or “SC Heavy” or “ST Heavy” is a particular state ?

To get this statistic  we need.

  1. Population data of each state. This is readily available on the census website This link contains total population of each state as well as the rural / urban divide in each state.
  2. OBC/SC/ST/Other breakup of each state. This is available for SC/ST in the 2001 census, but not available for OBCs after 1931. We cant use 1931 numbers anyway because the OBC list may not have been the same and/or the geographical boundaries of states were different. This apart from the fact that Pakistan, Bangladesh, Burma were considered part of India.  The best non-census source is the NSSO survey done in 1999-2000. This contains SC/ST/OBC/FC breakup for the major states. This is available here Download the file named 87th  Issue of Sarvekshana towards the bottom of the page. You have to register on this website firsit. This survey contains a breakup of SC/ST/OBC/Others for each one of the major states into rural and urban tables.
  3. Squish these two reports (the census and NSSO) together and you can obtain the “loading” factor of different states.

IT SEZ : Everyone loves a holiday

Posted in Uncategorized by realitycheck on October 13, 2006


And now for something completely different.

I love Indias IT industry. This is not your usual rant against the low-tech wage arbitration model. I have no problems with moving down the so called value chain if that is what it takes to enable growth. I think lower down the value chain is even desirable in India because it takes 100x more people to produce the same revenue as a product company. This means 100x more jobs. Indian IT industry has provided an escape vent for millions, enabled large scale immigration and resultant forex remittances, replaced snake charmers as the image of India. I admire Narayan Murthy, Azim Premji, Ramadorai for keeping their focus and transforming their companies into multi-billion dollar corporations.

So, what seems to be the problem ?

The problem is the tax holiday enjoyed by these companies. Like other things in India, the exception always seeks to become the rule.  Once benefits are given they cant be taken back or cut down. The existing tax holiday under the STPI scheme is set to expire in 2009. This means all IT companies will have to pay 30+% corporate tax as well as indirect taxes like any other company. While this would result in a major revenue boost to the central and state governments, the IT companies are setting up SEZs or lobbying to extend the 2009 deadline.  Before I dive deep, some background about the existing tax holiday.

STPI Scheme:

STPI (Software Technology Park India) is a scheme that dates back to the early years of the IT industry.  It allowed for a 10-year exemption from Corporate Income Tax (upto 90% of turnover), Sales Tax, Customs Duty, Excise duty. Details here . Back in the day, the infant IT companies could not deal with the astronomical cost of telecommunications, archaic customs duty rules, and a high rate of taxation. So the initial 10-year tax holiday helped an infant industry attain critical mass. Even though companies like Infosys are 20 years old, they are still able to avail of the 10-year tax holiday by setting up new units with fresh 10-year extensions. For companies outside the STPI, the corporate income tax rate alone is 36-37% ( Corporate Income Tax = 35%, Surcharge = 2.5%, Education cess = 2%).  Sales tax exemption is 10-12% for states and 3-4% for Union Territories (UT). This is why you dont find all IT companies in UTs.  The contribution of the STPI tax holiday to the overall success of the IT story cannot be underestimated. I would rate it as one of the best initiatives undertaken by the Indian government. Some more here in Basab Pradhans blog. He is an ex-head of global sales and marketing at Infosys.

The problem is, we have all grown up now. IT is a $30 billion dollar industry. Infosys, TCS, Wipro are all on track to cross $3bn in revenues this year.  They have all built giant campuses, have long term customer contracts, have large cash reserves. Their founders are no longer needy entrepreneurs who need to fight against bureaucracy.  As they are primarily wage-arbitrators (nothing wrong with it) – they do not have to invest in R&D or long term product development. These three are already the top three private sector employers in terms of headcount. TCS at around 75,000, Infosys at 66,000 and Wipro at 65,000, beatTata Steel at 38,000 and Reliance Industries at 40,000.

India needs money, lots of it for its social, education, military, and infrastructure programs. I question the very logic of inviting private sector for every highway project. To keep such a cash-rich and mature industry out of the corporate and excise tax regime is ill advised. The IT industry, atleast the big ones can easily absorb the tax charge. Even the IT bosses admit that readily.

So, anyway the party it set to end in 2009. If all IT companies come out of the scheme – the Indian government will realize between $3-5 billion dollars (15-25000 cr) in direct taxes alone (this figure is based on projected size of the IT industry at a 36% tax rate on a $50bn size).  Some figures for profit before tax : Wipro (2005 profit 2400 Cr), Infosys (2005 profit 3008 cr), TCS (2005 profit 3356 cr). If these companies maintain the current growth I think the $3-5 bn figure is in the right ballpark.  This does not take into account the customs duty, excise duty and sales tax exemption. That could push the figure even higher. I dont want to get further into these statistics. I realize the dangers of voodoo amateur economics. Can some one who is more knowledgeable provide accurate numbers ? Probably someone like Atanu Dey.

Enter the SEZ

The SEZ policy is welcome, very welcome. We need islands of non-interference.  The devil is in the details as usual. The centre has formally approved  212 SEZ units with an inprinciple approval to 152 more. Read more here. I dont buy the usual rhetoric that poor farmers will be affected and the like. First of all, large landowners are not necessarily poor. Everyday, dozens of large landowners are turning into instant millionaires by turning in their lands to real estate / IT giants.  The government must assure prevailing rates to them and/or issue bonds tied to the future development of the area.  It must also take into account small and marginal landowners interests and device a new scheme for them which ties them monetarily into future development in that area. The issue must stop there. 

Now back to the IT companies. Since the SEZ policy has been announced the IT companies are wondering if they can use it to extend their tax holidays.

Infosys, Wipro, Satyam, TCS – the big boys of Indian IT are each setting up a Special Economic Zone. Why just them, over 100 IT SEZs are in the offing. That’s more than half the total number of SEZ applications cleared by the government. The big attraction – tax benefits! After all the industry has not yet got an extension to the tax holiday on software exports upto 2009.

Source : Moneycontrol

The SEZs provide a 15 year tax holiday to the IT companies after 2009. The details : 100% exempti0n for the first 5, 50% for the next 5, and variable for another 5 based on reinvestment in SEZs.

Why the government should withdraw or minimize tax holidays to IT companies ?

The government should seriously consider the forward and backward linkages of IT companies to the local economy before granting tax benefits.

Yes, IT companies employ a lot of people who pay taxes.  That is not a valid argument because even if the tax holiday is withdrawn the employees will still pay taxes. So, it is not a “either-or” question. Employees pay individual income tax and companies pay excise and corporate income tax. If this is to be used as an argument in favor of the tax holiday – then you have to establish that imposing taxes reduces employment opportunites and retards growth.

The tax holiday is a precious tool. If used right, it will help such as the case with the STPI. If abused, it will spoil the already powerful corporates and will stifle new competition.

Tax holidays for strategic companies such as Nokia, BMW are worthwhile – they bring technology into Indian soil that does not exist.  We must consider tax holidays to LCD panel manufacturers, semi conductor fabs, memory makers, and contract manufacturers for electronic and white goods. We dont have the capabilities in these areas yet.

Tax holidays for software product companies are needed. The services and products companies are totally different. While there is some overlap in terms of engineers, the processes and business models, and the technical depth required are different. This industry is still in its infancy, and needs to be encouraged. Tax incentives provided to these units will be reinvested by them in research and development activities.

The most important reason is : The IT companies cannot function as castles isolated from the society around it. Today you see IT companies running their own trasport buses side by side with dilapidated city buses which have hapless folks hanging on for dear life. The right way is to pay taxes, make the governments richer, so every citizens standard of life improves.  In the face of such disparity between the haves/have-nots we need more information from the government about why this IT Tax holiday should continue from STPI to the SEZs.

I love money and I think everyone should. I am not in anyway envious of the wealth created by these companies for their founders or employees.  

An unsophisticated state Vs Mohd Afzal

Posted in Uncategorized by realitycheck on October 8, 2006


There is a whole lot of debate going on in the blogosphere about the convicted terrorist Mohammed Afzal. As with so many other issues, the Indian blogosphere is light years ahead of the mainstream media in terms of analysis – even without having the same access to the corridors of power.

The bottomline is that we are increasingly becoming an unsophisticated state. We unable to see through deviousness nor communicate it when we do.  How quickly the same newspapers who urged for a harsh punishment for the perpetrators have now forgotten their own editorial opinions ? Just for curiosity’s sake – I pulled up the archives of newspapers dated Dec 14, 2001 – the day after the terrorists struck.

… the five militants who stormed the Parliament complex have been killed, they could not have perpetrated this outrage without the support of a well-knit organisation. It is vital that those responsible for investigating the attack determine the identity of the group and come down both quickly and heavily on it. A failure to do so will only heighten the vulnerability of a nation which has been rudely shaken by the attack…

The Hindu Dec 14, 2001 Read full edit here

We wonder what does “come down heavily” mean to the Hindu ?

We are so unsophisticated that we cant even place a check on the most obvious : “Mohammed Afzal is not asking for clemency – others are asking for him on his behalf”

To the village idiot, this small detail means nothing. Does it really matter whether Afzal or his wife asks for clemency ? Probably not even worth writing a story on, right ?

WRONG! This is the core of the issue. 

You see Mohd Afzal is a hardcore jihadi, this is self-evident from his refusal to ask for clemency himself. A jihadi will never cry and ask for mercy that too from a kufir state like India. Yet, they will make political hay by asking others to lobby on his behalf and thus preserving his violent terrorist holy warrior image. Our media will faithfully carry his views that “I have lost faith in Indian justice” and so forth. The flip side is he and his followers can trash talk India, its judicial framework, its police, its government, and how he is being executed because he is a Kashmiri. Our media will faithfully broadcast the rantings of a convicted terrorist on death row.

Even a moderately sophisticated government would first insist on a WRITTEN clemency note from Afzal himself and a VIDEO RECORDED clemency petition.  No wife(s), minor sons,cousins, well wishers, co-accused, or politicians.  Just insist on this and see how the equations change.

Blogosphere roundup:

  • Most bloggers are confused by their opposition to the death penalty vis-a-vis the clemecy petition. See, if there was no death penalty – we would have no clemecy petition, would we ?.  Please state your arguments for a total ban on the death penalty independent of Mohammed Afzals case.  Polite Indian on death penalty,
  • Bloggers believe the people who discredit our judiciary and weaken our state. If he did not get adequate legal help, then Arundhati Roy, Nandhhita Haksar, congress party (except Digvijay Singh), J&K politicians, JKLF leadership – should have pooled in money and setup a “Save Afzal Fund” and arranged for legal help. Dont worry, there are enough lawyers in India who will defend anything for money! You cant clam up and come to the surface after the trial is over and three courts have pronounced him guilty. Why didnt Nanditha Haksar a so called “civil rights activist and closely associated with the rights of defendents in the Parliament attack case” tell us about this earlier ? Why did she not put together a “Save  Afzal Fund” ? These kinds of funds are setup in the USA for many defendents fighting the death sentence.  The irony is that Nandita herself is a leading Supreme Court lawyer – why was she not able to clear him in court ? Every convict will claim that the courts suck and every acquit will say the court system rocks. This dont mean nothing.  Anoop Saha
  • They are neither wrong nor right, they are just against some people. In stunning displays of naivete they will oppose an issue just based on who supports it.   Dilip at Other India , Shivam Vij

To sum up: Reality Checks position on this issue.

  1. The clemency petition has to come from Afzal directly. This is a must to avoid granting clemency to a remorseless killer. You cannot and must not establish a precedent here. 
  2. The state must adopt a scheming course of Chanakyagiri here, dont be afraid of being evil and cunning when dealing with these people. 
  3. If you can discredit Jihadism and extract assurances and statements of remorse from the various terrorist supporters of Afzal – AND – if you are sophisicated enough to play the media and appear to be a benevolent state who granted mercy on a terrorist who has himself discredited the jihad concept – then by all means grant the clemency. The gains must be immediate and obvious – the bulk of the terrorist outfits and people like Geelani must stand discredited and the state must stand as a benevolent but strong master to a killer who has openly expressed remorse for his actions – and who has openly denounced the concept of Jihad.
  4. If we cant pull off (3), then please dont interfere with the law. Let it run its course and at least ensure justice is delivered to the families of the six brave men who defended the soul of our democracy one fine December morning five years ago.

Thanks for listening.

OBC students outperform general merit students

Posted in Uncategorized by realitycheck on October 3, 2006

Imagine a courtroom in La-La land.

You see, in La-La land the rules are different from other inferior lands. In the courtroom of La-La land, the prosecution arguments are used in favour of the accused and the defence arguments are used for the plaintiff. This is weirder than Alice has ever seen – there are mad hatters everywhere and they all talk simultaneouly and then keep quiet at the same time.

See this story:

BANGALORE: The great OBC myth has been busted. The biggest concern of the anti-reservation activists that introduction of castebased reservations in higher education institutes would deteriorate the quality of education has been debunked.

. . .

While OBC students have a pass percentage of 93.01 to 97.4, general merit students recorded just 66.09 to 94.77 from the 1998-2000 batch to 2001-2005 batch.

. . .

The percentage of first class with distinction among OBC students was between 37.7 and 42.38,while among SC/ST students it was between 9.32 and 11.90 in the same period

Now in any other country this is the strongest evidence possible to the position that the method to select castes to the OBC list is totally invalid. However in La-la land, this is used as an argument to further even more concessions to a group that is already advanced. 

In countries other than La-La land, this study would be interpreted as:

  1. Some castes need to be taken out of the OBC list immediately – if that is not possible then abolish the OBC quota itself.  The OBC list is seriously compromised and renders the entire OBC quota system farcical.
  2. If the OBC castes are able to perform equal to or better the general “merit” category castes; then what is the rationale for the special quota. This is a clear cut case of “the unequal treatment of equals” – the very definition of state discrimination.
  3. This data is not sufficient. You need to tell us the profile of the OBC castes surveyed. The OBC quota is a group quota. The core issue is the initial selection and continuation of castes in the OBC caste list.  It is no secret that in the south, the wealthiest and most dominant communities are classified as OBCs.
  4. The distance between the OBCs and the SC/ST is striking. Remember that Ambedkar envisaged quotas only for the SC/STs.  So this study points out they havent advanced much – this pointing to a hijacking of Ambedkars scheme.

Next in the series:

  • Study points to wealth of OBCs. In a shocking revelation Mr Shetty says that OBCs are several times weathier than general category. Mr Shetty has conducted a study of land deals in Shimoga, outer Bangalore, Mysore and found that the so called elite forward castes and the scheduled castes own next to nothing.
  • OBCs provide more educational services than the general category. In a study done by Mr Shetty, he points to startling data. Over 90% of the educational institutions are controlled by OBCs in some states. Since all Christians in TN and KA are backward and they control many medical and engineering colleges – it can be inferred that they are more socially conscious.

I think Mr Shetty should look in the mirror and answer the following question.

If a community is equal to or better than the general category in education, way better than the general category in wealth, dominant in political power, owning more assets than the general category, controlling more educational institutions than the general category, then on what basis can it be called backward ?

Maybe in La-la land the answer to these questions lie in the question itself. In other words, the question is the answer and the answer is the question.

Gawd, my head is spinning – I need another shot of rum.

A litmus test of impartiality

Posted in Uncategorized by realitycheck on October 3, 2006

We all know who Praful Bidwai is and tend to ignore his extreme anti-american and pro-communist views. In this article, he takes it upon himself to prejudge the Malegaon blasts from his armchair.  I apologize in advance for urging you to read this poor quality article, but this reveals the current mindset of the so called pro-left opinion makers.

Fairness of the investigations into the Malegaon blasts will decide whether the Indian state can re-establish its secular credentials and win Muslim hearts.

Thanks Praful, millions of morons around India were thinking along the lines of:

Fairness of the investigations into the Malegaon blasts will decide whether the Indian state can re-establish its secular law enforcement credentials and win Muslim hearts bring the perpetrators to justice.

Your article has woken us into a new dawn. Please continue to guide the way into a kingdom where justice, law and order, criminal investigations, acquire a new meaning.