Reality Check India

Just scrap the SEZ scheme already !

Posted in Uncategorized by realitycheck on January 10, 2009

I have said many times in the past that the tax holidays for IT services companies must end (see links at end of post). Must have ended 10 years ago. They are sitting on mountains of cash with nowhere to invest. Their core business of outsourcing is dependent on billing human resources. Apart from training and facilities management (buildings, gensets, travel / visa ) – there is really nowhere they can put the cash.  If you think our IT companies are much more and need cash investments, this site might be more suitable for you.

This article says that the tax holiday might have made it much easier for Satyam to cook its books.

In some ways, the tax-free status of IT companies may have allowed the Satyam promoter to cook up numbers in the company balance sheet. Had the  company been paying tax at the regular rate, inflating revenues and profits would have been that much more difficult, as tax payments mean real cash outgo. Indeed, when corporate accounts come under a cloud, investors should look at tax payments and dividends, both of which entail cash outflow from the company, as a source of comfort about the sanctity of accounts. The IT sector was given a 10-year tax holiday under section 10A & 10B. The benefit was to end in March 2009, but the government has extended it by one year.

Source : ET

Cash on books of companies requiring little investment invites corruption. 

The SEZ scheme must be scrapped immediately.  Whether it is Murthy, Nilekani, Premji, Raju or thousands of others. They must made to pay fair tax . Kicking and screaming.

Alternately, these stalwarts need to come out and clearly quantify how their growth (not profit) will be impacted if they paid normal corporate income tax.  I am sure we can use the cash for the welfare of the poor and oppressed classes. No?


Also read previous posts on the grand SEZ scam :Nilekani Imagining India,  SEZs need to go in Goa,  SEZ Chat, PIO University in an SEZ ? , IT SEZ – Everyone wants a holiday, Minimum Alternate Tax issue, Everything is wrong with us (maximum size cap on SEZ), Panel extends IT holiday to 2019 , and more


SEZs need to go in Goa

Posted in Uncategorized by realitycheck on January 3, 2008

They show us images of Jebel Ali or Shenzhen but end up giving us SEZs the size of Parking Lot 3A in Shenzhen.  Some say – a simple tax avoidance anti competitive land grab. 

Cipla, for instance, has already started work on a notified SEZ and has even pumped in about Rs 500 crore into the project. The Commerce Secretary has also made it clear that any claims for compensation will have to be borne by the state.

The eager investors should realize the extremely low amount of buy-in of the entire SEZ policy among the public. There is no government official who can articulate the SEZ policy which envisages individual companies to setup 10,20,30 hectare private tax havens. There is no parallel to this anywhere in the world. Given such a ground reality, the policy risks are clear. Companies that have already invested in notified SEZs can still operate these new units. Software written in non-SEZs will still work, drugs manufactured in non-SEZs will still be sold. 

See what the famous architect Charles Correa has to say.

The intention of permitting SEZs is to reap the benefits of industrialisation and consequent employment generation. These can be served without SEZs (also) if incentives are extended to incoming industries,” internationally renowned architect and vice-chairman of the task force, Charles Correa, said while reading out the body’s resolution here.

In any event, the Goa government was wise enough to see the light of commonsense and scrap all the 15 SEZs following widespread public protest.  Now, we hear the Union Commerce Secretary.

Pillai said, “Notified means the State has no locus standi to withdraw anything –  there’s no provision under the law for the State Government to recommend denotification.”

Source: Moneycontrol

Yes, yes, we have all heard this line before. In bold letters.

Goods once sold cannot be taken back or exchanged.


Also read previous posts : SEZ Chat, PIO University in an SEZ ? , IT SEZ – Everyone wants a holiday, Minimum Alternate Tax issue, Everything is wrong with us (maximum size cap on SEZ), Panel extends IT holiday to 2019 , and more

SEZ Blog

Posted in Uncategorized by realitycheck on November 9, 2006

Found a new blog focused on the new SEZ policy called the Reliance SEZ Blog.

Check it out :

Somethings for us bloggers to take up.

  • Collect details of SEZs in China and Middle East (especially Jebel Ali in Dubai)
  • Scan the SEZ appovals granted so far.  See Interesting to see that Wipro can got an approval for a 6 hectare (thats right 6 hectare SEZ) in Hyderabad and two SEZs of 5 hectare and 6 hectare each in Sarjapur Bangalore. Hexaware (Software) and Syntel (Software) have approval for two 11 acre SEZs in Chennai. Note these are SEZs not mere units within an SEZ. You cant blame them because they will take advantage of any policy to maximise their profits. The government must not allow such tiny SEZs to come up. It will spell disaster for existing infrastructure around these SEZs.

While the entire nation is focused on divisive policies such as unmonitored quotas based on caste / religion / or gender. We cant allow such a land scam to go unnoticed.

PIO university to be set up in a SEZ

Posted in Uncategorized by realitycheck on November 8, 2006

A sign of things to come ,

”We want to make education in India affordable for our overseas students,”

Overseas Indian Affairs Minister Vayalar Ravi said at the two-day Economic Editors’ Conference that began Tuesday in New Delhi.

The full story is here  India to extend affordable education to diaspora.

In the meantime, a project that NRIs can look forward to is the setting up of the PIO (persons of Indian origin) university—fully funded by NRIs and PIOs. According to ministry officials, the government has already okayed the proposal in principal. Ravi said the new policy for the proposed PIO university is in the final stages.

The university, spread over 100 hectares, is likely to be set up in a special economic zone, which would give the investors tax exemptions.

The SEZ policy itself is atrocious, this just takes the cake. Does anyone actually know the meaning of the word “NRI” ? It is someone who has said goodbye to India for greener pastures. There is nothing wrong with that, but it must be remembered that they have factored into account the education conditions in their adopted country.

We all know that all incompetent desi kids who fail to make it to pre-med state schools in USA or Carribean would now flock to this PIO university established on the soil of an impoverished country. Of course, our government would lobby with the appropriate US Justice department to get the coursework approved. There is absolutely no way a US NRI kid will come to India if he has an admission from a med school in the USA.

NRI students have always faced discrimination in India where education was concerned. There are huge disparities in fee structures in private professional colleges—overseas students oftentimes have to pay five times more than the general category.

However, there is hope of justice. According to Overseas Indian Affairs Minister Vayalar Ravi, India will take the necessary steps to extend affordable education for NRI students.

Yes Mr Ravi, NRIs are charged more than locals because their daddy and mommy are earning in dollars , pounds and dirhams.

Note to NRIs / Diaspora : Please be loyal to your adopted country that has given you everything.  Let your kids join the US Marines, law enforcement,  rock bands, get season tickets to baseball games, celebrate thanksgiving,  integrate into american society. The PIO card can be used to reduce visa hassles. Please do not lobby for special universitites, schools, parks, or zones for you and your kids to play around.  There are others in this poor country that need attention.

( I had to document this story)

SEZ online chat

Posted in Uncategorized by realitycheck on November 8, 2006

The SEZ fever is upon us. Dont expect Shenzhen  / Pudong / Hainan / Sharjah / Jebel Ali style cities in these SEZs ? They will be mostly small units enjoying unprecedented tax benefits (estimated direct tax loss to government is 90,000 crores) walled off from the surrounding unfortunate non-SEZ areas. Is this economic aparthied ?  You decide.

Chat with SEZ officials

In the meantime, the government has an online chat where you can ask questions to SEZ officials at and If you cant access these sites try :

I went online and left a few questions for them. I will post replies when someone answers them.

Consider this tax scheme for Chinese SEZs (details).

  • No tax in startup years (when you dont make a profit).
  • The year you make a profit is “year one”. Your tax clock starts now.
  • Year one and two after your tax clock starts – you pay NO TAX
  • Year three and four after – you pay 50% TAX
  • Year five onwards – you pay FULL TAX

This my friends is China. Contrast with Indian SEZ (more details).

  • Note: Most SEZ units (esp IT Services) are hugely profitable from day one
  • 100% TAX FREE for the first 5 YEARS (even for already hugely profitable units just emerging from the STPI tax holiday scheme – eg, Infosys, Wipro, TCS, etc)
  • 50% TAX FREE for the next 5 YEARS
  • Open ended tax rebates thereon subject to ploughback of profits
  • Excise duty and Import duty exempted

Side note: Does anyone know of any country in the world that has private SEZs ? All of Chinas SEZs are huge (eg, Pudong, entire province of Hainan, etc) and setup by the government.

Think about this : SEZs are allowed to build golf courses, hotels, shopping, schools, and educational institutions inside their “walled hectares”. I wonder if those unfortunate enough not to be employed by an SEZ unit (read 90% of India) can access these facilities freely.

Unfortunately, I dont have too much time at the moment to write more.  I had written another post about this earlier.

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.  

Demonetization as a window to force a Digital flip

Posted in Uncategorized by realitycheck on December 25, 2016


Kayyila Kaasu  Vaayila Dosai !

(Old Tamil Saying : Cash in hand  Dosa in mouth)

If something persists for a long long time despite multiple attempts to defeat it – it is always wise to step back and see if there is a reason for why it is persisting. This catchy aphorism ” Cash in hand = Dosa in mouth” may seem too simple but it captures the essence of what people are expecting from a settlement system.Cash OUT Dosa IN. End of story. Captures the beginning, the middle, and the end of the transaction. No intermediaries as facilitators (telcos) as final approvers (banks, wallets)  loggers (govt, authenticators) or commission brokers (cards). As Prof Jayant R Varma puts in so eloquently in his article A Digital Device for every Indian  he says  “Cash gives the poorest of the poor access to a retail payment system that meets the gold standard for payment systems: real time gross settlement in central bank money. It is unacceptable to give them anything less than this in a digital solution”

An instant bilateral settlement of Dosa eating at zero cost  with no third party who holds a veto power over this.  Bank deposits and Wallets are comparable to ‘tokens’ –  inferior forms of money.  You can only access bank money through a particular bank, with their tools, through your specific type of account, tier of service. You can only access Wallet money in certain situations.  Access to this gold standard settlement with cash is what the poorest of the poor had at exactly the same level as the richest. Pardon me for dwelling a bit more on this because it is important to set the framework for the rest of the article.

This super slick transaction mechanism  described above of course has its well known downsides. The costs of machines to detect counterfeits are high,  cash is unwieldy to carry around in large amounts, the test of ownership is “possession”. This means if a robber takes your cash it is his (generally).

Transactions are invisible to government authorities and they have to rely on ever smarter Financial Intelligence (FININT) systems to detect these.  The first three drawbacks are not real  because people factor those into their usage patterns. Very few people go any buy a car or even a TV with a suitcase of cash.  The risk of getting mugged or pickpocketed is real so people are wary of crowded or iffy places when carrying cash. The last drawback : the invisibility of the transaction from a government point of view is the main criticism of cash.  If sufficiently large number of these invisible transactions take place over a long time period, they can lead to build up of an alternate “overlay” economy called the Black Economy.   Cash can move at ease between the two layers testing and teasing the various Financial Intelligence, NMS (Non Filer Monitoring systems) and Bank Analytics systems that exist at this boundary.  This was the state of cash India. A super efficient settlement tool that supported a  level of transactions amounting to about 55% of all economic activity by value and 95% by volume. But also one that was being exploited by tax evaders and other nefarious elements.

On Nov 8 2016, Prime Minister Narendra Modi shocked the nation by taking a very audacious move.  Over 85% of all currency , those held in Rs 500 and Rs 1000 denominations roughly 16 Lakh Crores of paper was declared invalid except for the purpose of depositing at a bank.  At that time I had immediately hailed the move saying “Modi has belled the black money cat“.  It is remarkable and a tribute to the man that he would take such a decision that would disrupt his own party and a large part of this support base.   I hailed then and continue to hail now : Demonetisation as a truly fundamental and necessary disruption. My position is in contrast to people like P. Chidambaram who view the demonetisation itself as a bad move.

But from Day one,  I and some allies on  twitter have been warning that to pull this off we need a war like effort. An effort whose main thrust would be a frictionless swap of new tender and that needed a full time focus with a war-room-dashboards approach. This was not to be.  Today is Dec 25 2016 with only 6 days to go for the Prime Minsters 50 day deadline.  The overwhelming majority of ATMs (keep in mind these ATMs are part of the white economy) are still closed even with very low withdrawal limits at 10% of earlier limits. Authoritative figures are hard to come by but it appears only about 30% of the notes have been replaced with a large number of them being siphoned off.  The government has long pivoted from “War on black money” to  a “Cashless” economy.  This is where I part from most of the Right Wing and Center Right supporters.  Demonetization YAY. Cashless NAY.

The first step to recognize is that these  are two independent campaigns.  If you do them simultaneously it just means you have sucked in the peoples cash – which continues to be their  settlement mechanism of choice –  and are not going to return it.

How would a demonetization exercise but without the Cashless hoopla look like?

Step back a minute and understand the main issue here. The Black Economy and the White Economy are not isolated. They are overlay economies. Say you are hoarding a stash of cash, you can cut off a slice and buy your son a Bajaj Pulsar. You have just effected a cross-layer transaction. The income shows up in the Bajaj dealers books but if you are lucky it never showed in yours.  The government is not stupid either, they have complex Financial Intelligence, Anti Money Laundering (FININT) software at key points where the black and white layers collide ( auto dealers, jewellers, real estate, banks etc). On the other hand they turn a blind eye to other places where the layers collide (political parties,  and in general allied activities of politicians like education,mining,campaigns, lending).

A prolonged expansion of the black economy created pockets of very high capital accumulation (cash hills) that made FININT systems harder and harder to work effectively because there were fewer transactions crossing the boundary. An entire ecosystem of credit, financing, property registrations that in turn fueled growth segments construction, commercial rentals, political initiatives, meant that you could stay completely within the Black Economy and rarely cross the line.  Particularly the borrowing and lending of black money meant the you could make your Black money work for you just as hard as the White (via Capital Markets, FDs, etc).  The intertwining of political muscle with black capital was doubly potent. A thuggish politician could count on recouping any outstanding loans by leveraging muscle power and that also neatly ensured his ascendancy in the political arena.  So what do you have here. Emergence of an almost stand alone economy increasingly harder for FININT to detect when crossing the checkpoints. A situation hard to reform due to involvement of politicians and corrupt govt officials.  This was the state of things.

What demonetization did was wreck this.

It would destroy the Black Capital held as cash and would put all outstanding loans in jeopardy thereby destroying the Black Credit sector. Why? because loans availed in black would have to be paid back in white. Not going to happen. By forcing everyone into the White Layer they would have to meekly surrender to FININT . A brilliant move. So all you had to do was to recall the old notes and hand out new ones at a rapid pace.  I view the friction caused by paperwork in the first week of note swap, the unnecessary change of currency sizes, the chaotic and unplanned printing process, the headroom given to bank staff causing loot of new currency notes, a near total shift of focus to e-Payment, were all avoidable errors.

The next step is the tricky one. Say you had the entire black layer cross the perimeter and FININT systems alerted and lit up like a Christmas tree. Does the state have the capacity to follow it up?  Mr Ravi here just plonked 20L in his ICICI account – what next?  If the state doesnt even have this capacity then think about it. How can it have the capacity to detect and respond to frauds in any situation – cash or cashless? This is exactly the same tragic situation in Police capacity  with Sec 13(1) of the Prevention of Corruption Act – the Disproportionate Assets clause.  Once people wisen up to it, the cases get harder and harder to prosecute and the Police get more and more complacent. This is what some people say when they mean ‘failing institutions’.

In summary, Demonetization by itself would have wrecked the black economy, primed the FININT systems to the brim, and yet left the power of the ‘golden cash settlement’ option back in the peoples hands.  If this had been done, by this time of late December we would be on our way – moving on to bigger battles like the Core Right Agenda.

What is wrong with cashless?

There is absolutely nothing wrong with cashless. It is a perfectly valid payment option in certain circumstances in certain tiers.  I use it in many situations and fall back to cash in many other situations.  It also depends on the tier of service and the product.I would not use a credit card that has a annual fee for instance or one that needed a security deposit in the form of a FD. I try to use credit cards over other options due to ease of chargebacks and returns.  It all depends.  The movement to cashless is linked to increasing trust in government and society.  People quote Sweden as the ideal here – but forget that Sweden and Norway janta also get drinking water on tap.  The challenges of a First World country with very high trust in government and very high respect for the ruling elites is different from a Third world country that has a mountain to climb.  Then they switch the comparison to Kenya and cite the success of m-PESA. They forget that m-PESA has limited success outside of Kenya.  In fact it was rolled out in India too by Vodafone. Failed.  This is not to say that cashless has no chance to succeed but that in both Sweden and Kenya , cashless won over the people from cash. In Sweden, people just moved to less and less cash rendering banks pulling back cash operations due to low volume. In Kenya, poor access to ATMs and violence was the factor.

The real problem here is the forcing of cashless options – not for high value (car, house) or even medium value (TV, insurance) but for petty transactions. The messaging led by Modi’s advisors in Niti Aayog  is how the providers on the other side of the middle class interface  – the subji (vegetable) wala, the doodh (milk) walla, some maids, servants, paan walla are moving to cashless. The Middle Class : Service Provider interface can be loosened up if the main objective was to ease the pain of the middle class side.  Many provided their  servants with a take it or leave it option and they opened a bank account.  But that is not the only interface. The “servant” also have payables to others – like the slum lord or the pawn shop or the informal chits. At this point – we usually say. Its their problem.

In India, there are a number of cashless options available today and have been for a very long time. In spite of massive venture capital leveraged cashbacks and discounts  there is still not a winner over cash. The underwriters factor the risk that if the cashbacks stop, people might just  revert back. The range of products are not all comparable in quality, speed, security, or access.

One of the most exasperating arguments put forth by NITI Aaayog goes  like this “Cant do Wallet , then do UPI, no smart phone, then do USSD, nothing use Aadhaar app (to be launched)”. The problem is this is not equivalent to “Dont want Pepsi drink Coke”. The alternatives offered are not identical replacements ie. not fungible.  People using USSD will go through a much poorer, slower, intrusive (having to interact with humans) than upscale options.  This comes back to Prof Jayant Varma’s point. The access is tiered.  This tiering was  not a problem as long as the gorilla sized competitor to all of these systems – the cash settlement – was around. But when by Govt policy the main competitor is knocked out  (or crippled to a great extent) then you enter into a very inequitable situation.

Even within what I call the corporate Right Wing , the tiering is present but not involving matter of dignity.  So I can have a personal banker and a Amex Centurion card and someone else has a ICICI Coral Card – it doesnt make much difference. My experience is going to be uniformly superior to yours but yours is not too bad either. You know English and can call a Toll Free number and smash the customer support rep and get any perceived injustice (eg late charges, fees, fines, etc) waived while I may never have to pay these things.

On the other side of the divide things are not that rosy.   Semi literate people with hand down barely working feature phones with a solitary bank within 10Km are not going to be so lucky.  Cash was the ultimate equalizer in this situation. A rich guy is unlikely to be able to wave his 20 Rs note and cut the line for a Vada Pav over a coolie who also has a 20 Rs note.  I could go on , as long as you are able to role play or empathize with unfamiliar situations, you will  get this part. If not, stop reading here.

Then the issue shifts to – ‘look its not cashless but less cash”.  No one really believes cashless means a ban on cash. These two are synoyms referring to the same policy.

Cash supply held at a crippling low level so people are forced to adopt inferior products which they otherwise would not were the supply to be were increased.  A new phrase “Digi-monetisation” is now doing the rounds.

What would a cashless, sorry less cash economy look like ? I predict the first changes would be a dramatic roll back of the ATM network – if the caps are held so low and supplies crunched, the cash management company model will no longer be viable.  You may well see the ATMs that are closed since Nov 8 2016, may never re-open again.  This could mean a comeback of human tellers  which are a throwback to the 70s to 90’s are back.  I am not saying any of these are wrong but pointing out these are not emerging naturally but by force.

Another aspect of Niti Aayog PR blitz that is distressing is the concealing (innocent for sure) of the charges involved in each of these methods. They temporary waivers of charges are not highlighted, there is no legal framework of regulation which would guarantee the charges cannot be slided up or down at will, to all or to some segments of the population.  It is also odd that people like S Gurumurthy and Prof R Vaidyanathan who are very familiar with the efficiency differences in informal lending vs mainstream bank lending are not speaking up on the forcible switch to bank credit system. The replacements for chit funds, pawn brokers, are not there yet.  No doubt these activities could be tax evasive but will the banks then provide the same efficiencies?  Remember the previous government even instituted sectarian lending targets based on religion caste etc euphemistically known as “Priority Sector Lending” – this is of course in #core2 territory and is continued by Modi govt.  The informal sector treats such distinctions with disdain. Should we ignore this?


The cashless campaign is an un-necessary distraction at best in midst of a noble demonetization exercise. The fin tech startups and banks  need to compete with cash and win over the public , otherwise sooner of later we will find the govt indirectly favouring individual players in this segment to save face.  The equity aspects of the switch to cashless are real, the regulatory, inter operability, security aspects are real too. Legally the new regime that places arbitrary curbs could push up against Banking Regulation Act and other statutes.   All of this is unnecessary.  Promotion of a cashless economy is a completely discretionary and separate exercise can be undertaken at any time. Start with digitizing all govt and PSU payments,  reduce excise & import duty on cashless tech, tax holidays for Fin Tech (like you did for IT with the STPI and SEZ schemes), etc etc.

On the political aspect, I have no comments to offer. The main difference I see with fellow “RW” critics  is that I dont view demonetization  as a great agenda. The real battles are in what I call “Core Right” , by betting your house on the Cashless horse, you are running a risk which I view is too great. You could be out before you even take a single swing at Core. Think about that.




LOLWATCH 4 : Public Edu in Idea of India response to PB Mehta

Posted in Uncategorized by realitycheck on December 25, 2015

PB Mehta has a new article in the Indian Express “Upside Down State” that talks about the Indian state and public goods.  He rightly notes the trend for the Indian state to  vacate space that any state ought to dominate (education and health) and to occupy space that has little public utility (airlines and hotels being the stock examples).

Yet proportionately, so little political effort has been expended to improve public education. It is a pipe dream to think that we can build a good, equitable education system without a major revival of public universities and government schools. And a strong public system will automatically “regulate” the private system by reducing demand. But it is a sign of how warped our thinking on the public and private has become that we are happy to hollow out the public where we should not, and regulate the private in ways that are counterproductive. –

Source IE :

Instead of a tweet series, I thought I’d just put up a short post on it.

The increasing trend with any analysis of Indian issues is the unwillingness of policymakers, think tanks, and public at large to confront the most glaring underlying framework that gives rise to the anomalies on the surface. This is the strange legal doctrine called “Idea of India” and the apparatus that is built around it. If you ignore this – you get everything wrong. Instead of a proper analysis you get only hand wringing.  Take the public education system.

  1. The division in Indian edu law is not private vs public at all. But  Minority vs Non-Minority. Call me a bigot but hear me out first. In Indian edu, law private minority aided schools which ought to be identical to public schools operate as defacto private schools . Post the Right to Education Act : Public Minority operates as Private.  Private Hindu operates as Public. When I say ‘operates as public’ I mean the loss of two things – 1) nomination power (which students to select)  2)  quotas which represent state confiscation.
  2. The high barriers to participation of majority community in education is the reason why politicians enter the education sector. They control the NOC (a No Objection Certificate) process – hence are able to self deal. Is this undesirable? The group here typically is largely not interested in education per se but for the profits in the sector. They maybe brawny netas but are in reality unsettled due to transient nature of their power and lack of legal guarantees – so do not invest in long term initiatives. It is also pertinent to note that they usually only enter higher ed and not schooling which is a tougher problem.
  3. What about Govt Schools ? PB Mehta  asks “so little political effort has been expended to improve public education”. What would a political effort in this space look like ? First of all it is very important to recognize the herd of elephants in the room. In “Idea of India” land the day to day realities are completely disconnected from these high level questions.  Post the 77th Amendment and even before that – communal quotas in Teacher Recruitment and Promotion far from delivering social justice has changed the nature of the product itself.  To explain : “More representation in Sector X (meritocratic teaching order) is not the same as Pro-Rata representation in a (communal group quota teacher order)”. In High court after High court – the cases of violation of recruitment in Teacher Recruitment Board, communal roster point anomalies, sub quotas are the routine cases. Keep in mind – govt teachers are extremely well paid, so there is no point in pouring more money into this. They also almost no accountability because the roster point system ensures their intra-se status relative to their peers.  I suppose at this point I need to mention how the 200 point communal roster in teacher promotion works but that would blow up this post.
  4. Why is there no political effort to do XYZ..” is only a question if the political effort to do XYZ will result in the blokes getting re-elected.  This is true in Rule of Law countries as it is in Idea of India.  A political effort to improve govt schools would require you to open up the following issues 1) Minority Aided school issue where different service and recruitment rules apply 2) Opening up the entire issue of quotas in recruitment and promotion 3) Subjecting teachers to measurement  not based on qualifications but on performance 4) giving the principal who may belong to an outside-group full power over teacher cadre from inside-groups 5) reopening the 77th amendment .. and on and on. see ? hardly a pleasant task.
  5. What is hardly a pleasant task for intellectuals is like kryptonite for politicians who have to work the Idea of India landscape. Any one who opens up the issue of quotas in teacher cadre risks not only drowning himself but taking his party along with him. The boat sinks.


So due to the unpleasantness of looking under the kimono of contemporary issues and always finding “Idea of India” type unapproachable issues it is better to just focus on the superficial.  Therefore groups that occupy a higher status like minorities just want out the the whole situation and carve islands of exemption for themselves.  This is not just the case in education but also in overall governance. Minorities who say “f_ this , just give us our share and we are gold” are encouraged by the UPA govt. This is how the sectarian scholarships, the MSDP public works in 25% minority districts and other schemes are headed.   This is countered by others on the Sanghi side  who want the kind-of-same-but-not-the-same thing but are not able to articulate that.  This is a dangerous situation.

The whole system is neither private nor public, neither regulated nor laissez faire, neither here no there.

And it is not even  10AM in Idea of India Stan.

Thank you Google from India

Posted in Uncategorized by realitycheck on December 11, 2011

Dear Google Sir,

Thank you for standing up for free speech in the face of severe pressure brought to bear upon you by Mr Kapil Sibal the Telecom Minister in the Congress led UPA government.  I noted with dismay that not enough people have thanked you and I dont want you to get the impression that we are a thankless nation. Hope this letter encourages you to stand your ground in the days to come.

The internet as we know it today, one which allows anonymous dissent, is the most crucial weapon we have to help this country climb out of third world hood.  In the coming days,  people might accost you and offer ideas to tweak the nature of the internet to suit “Indian communal sensibilities“.   But Sir, we dont want tweaking, we want the same internet that the free world has.

Like you Sir, any casual visitor to India from the west, once he or she gets over the visual sensory overload is left to wonder why a liberal democracy has failed so miserably and visibly.  Deep answers are’nt forthcoming and the wisecracks are never convincing.  Some things in India cannot be discussed openly.  Yet exactly those things guide us towards our destiny.  Free speech breaks this gridlock and allows us to aim for an alternate destiny which we hope is not permanent third world status. We heard that in your country, great things were accomplished by Benjamin Franklin, Hamilton and your other founding fathers by writing anonymous letters.  Thanks to your product, I was able to find a list of Mr Franklin’s pseudonyms.  We are in a similar stage of political maturity in India.  We need to have the tools to circulate ideas where they can be debated and judged solely on their merits.  If we are forced to attach our identity – which is not what they are actually looking for as I will explain – these ideas however skilfully constructed will be simply cast aside by ad hominem ascription of prejudice such as those of caste, religion, professional, or monetary.

Our government has said that they are calling a round table on December 15 with big people from all sides including the mainstream media attending. The Hindu a leading newspaper proposed an independent regulator and this idea seems to have found traction.  See this interview Sir

Karan Thapar: Could you invite the press to be party to the round table?

Kapil Sibal: I will love to have the press there.

Source : IBN

Many of us are wondering and deeply suspicious of what the Indian mainstream press is doing in this particular issue.  Believe us when we say the mainstream media does not have a dog in this fight. There are no curbs sought to be imposed on the press, yet they are raising the demons of emergency day press freedom.  It is quite bizarre that they want to inject themselves into this issue which does not concern them at all but impacts us at a most fundamental level.  If you think this is an unfair “us” vs “them” argument, you are correct.  Let me give you a recent example.

As your product “crawled” Indian news sites you might have noticed that the words “Bail and not Jail” vanished once all the politicians and business men were granted bail. Magically, lawyers who appear on TV wearing a shroud of impartiality forgot all about two government bureaucrats who are still in jail. Even a remarkable court staying of bail already granted by a lower court attracted only radio silence.  This may sound petty, but let me put it this way. Say, if  for months you have been debating on prime time TV the judicial principle of “Bail and not Jail” you would expect the debate to intensify when the highest court cancels a bail already granted.  1.93 Lakh undertrials are still in jail and two from this very case are in jail.  The coverage stops as soon as their bucket is full even if the tap is still running.  Maybe this is too much detail, apologies let me get to the point.

We are experiencing a national uprising against corruption and we arent clear which side the Indian mainstream media is on.

In defence of curbs, they may rattle out stats that only 4% of people watch English TV and of them only 10% of them care about what is written online. This is a ploy to shrink our numbers and show that some checks on 10,000 internet people should not matter considering 100M internet users who dont care enough to blog/tweet/or comment.  On closer inspection, you will find that the most passionate and aware of the English TV audience are the same ones that are online.

I am going to throw some examples on the table.  (all emphasis mine)

Ashok Malik says

“Could, say, Twitter incentivise users who tweet under verifiable names by perhaps giving them access to more services, quantitative or qualitative? The answer lies in nudging the industry towards such options, not in the Government’s sledgehammer approach.

Shashi Tharoor says

It means anyone can say literally anything and, inevitably, many do. Lies, distortions and calumny go into cyberspace unchallenged; hatred, pornography and slander are routinely aired. There is no fact-checking, no institutional reputation for reliability to defend. The anonymity permitted by social media encourages even more irresponsibility: people hidden behind pseudonyms feel free to hurl abuses they would never dare to utter to the recipients’ faces. The borderline between legitimate creative expression and “disparaging, inflammatory or defamatory content” becomes more unclear.

Rajdeep Sardesai says

Fake accounts/trolls/anonymity, when will social media grow up?


Ignoring cheap attempts at shaming the more refined journos take this line.  “How can I take you seriously if you are scared to put your real name and take accountability?”   Attached to this is an implicit consensus that if something concrete were to be done about this, it wouldn’t be all that bad.  After all it would finally place bloggers on a level playing field with them. Certainly they have a limited point in that anonymity isn’t an ideal situation.  Look outside your window, do we live in an ideal world ? But it is easy to turn the tables on them too.

Why do you care who the idea comes from ? How can I take you seriously; one who attaches so great a value to identity that it can completely render worthless in your eyes years of work, cross links, thousands of comments, and never before heard analysis of issues .   Obviously the lakhs of people who have visited this and other anonymous and pseudonymous blogs are able to comfortably engage with ideas without the encumbrance by having to own up everything. It is not just about the bloggers (thousands) but also about participants (millions).

Sir, you may hear the following argument too. “India is a free country and not a police state.  Dissent will not be punished.”  Sir, we have a scheme in India called Right To Information (RTI). In this scheme citizens transform themselves into sitting ducks by having to disclose their name and address to find out information. Information that ought to be really under mandatory disclosure and public.  A quick search of your product reveals 12 deaths this year and numerous harassment cases. This cowardly blog was the first to flag this the dangers of this act extensively while the courageous and independent media was handing out RTI awards. On issue after issue media houses place  groupthink over critical and independent analysis.

Just yesterday, the media here ran a story like this Sir.

“Congress sources say that if the home minister comes out of this case he will emerge stronger”.

The media thinks nothing to grant anonymity to their sources for such an innocuous story.  The politician making this “startling remark” probably also has top police officers and media heads on speed dial. Yet, he feared his organization would somehow take action against him for attaching his name to this precious non-story.  Journos then turn around and call little guy a coward for fearing his employer for talking about deep state issues.  Is it fair that those who hide under popularity and press protection tear to shreds a common man who cannot even name a councilors brother to save his life?   C-est-la-vie sir. Lets move on.


Obviously there can be no disagreement that what isnt legal in real life cant be legal online too. But Sir, the government does want to approach the court system to take action against online crime because it is cumbersome !  How do you think that makes the 1.93 Lakh undertrials feel Sir ? Sample this :

Kapil Sibal: You know Karan this is the procedure that will not work. By the time an FIR is filed and the investigation is done, we will have to get to know what the source of that content is and Google and Facebook refuse to provide that source to us. So who are we going to prosecute? Number two, assuming they give us the source many of them are outside our jurisdictions. So how do we prosecute? It will cost millions of dollars to prosecute.

Source : IBN


They want to remove things that might be perfectly legal to the point that it would cost millions of dollars for the prosecution to argue that it isnt legal. Have you heard anything more ironic ?

Allow me to point you to the fact by and large the Indian internet is clean.  We have demonstrated a great ability to reject the outright trash and accept humour and engage with probing questions. If an mere internet post can trigger  “catastrophic riots of a magnitude you and I cannot even imagine” a pamphlet can do the same thing.

The politicians are actually calling into question the very humanity of the Indian people and their verified media friends are too dumb to even realize it !!

So, I believe the consensus might be to somehow penalize internet content that cannot be attributed directly to an individual. Obviously, attribution requires much more than merely someone using a human sounding name or even a phone. Perhaps some kind of digital certificate issued by the Press Authority or the Independent regulator  to be discussed by big people in media on our behalf ?  See how quickly this dissolves into insanity Sir.

If I may indulge in a bit of turf protection. This blog and many like this currently hold the top search positions for over a dozen burning issues impacting this country deeply.

  • Unmonitored social justice that reaches the wrong people.
  • Adhoc benefits based purely on identity that permanently cleaves the Indian people and prevents voter consolidation around ideas.
  • A SEZ policy that promised Shenzhen and Jebel Ali but delivered solitary buildings amidst squalor.
  • A corruption scam of such brazenness that threatens to rip institutions apart.

I am erring on the side of paranoia but in the event they seek degrading our blogs on search positions,  I hope you will not agree to that.  We are not after money because there are no ads on these blogs.


Finally, reasons might be forwarded about poor troll-like quality of content on anonymous blogs and tweets.  They may say forcing people to verify accounts will result in better content. Sir, speaking for myself, if the content on this blog is poor in quality atleast when compared to authenticated blogs , I can assure you that it is because the humans writing those blogs are smarter or better educated than me. If I were to blog under my real identity the quality would be exactly the same because I am incapable to do better than this.   But I am smart enough to understand that the real motivation is to place new rules in the hope that the content itself changes.

You will be no doubt be approached by technocrats gleefully offering to “expose this person to reveal the sad little guy or girl behind a screen”. They are correct Sir, this is exactly what you will find. Sad, unremarkable,  little, but optimistic people like me peeping at a monitor. Who after a long days work, after a tiring conference call, instead of going to sleep like everyone else, write about issues they hope will make this country better.  Writing stuff mainstream media ought to be writing about. Unlike them winning for us is not collecting vain career-points or visibility. We define victory in being able to find others like us who are willing and capable to elevate themselves onto a plane, way above the trappings of identity,  onto a realm where only ideas matter. And boy have we been successful, the debates on twitter and blogs (almost all of them from unverified accounts) have completely outclassed the media. If we are to be called cowards hiding behind a mask by career journalists, debutante politicians,  and columnists – so be it. 

Speaking of masks sir, you may have seen this picture in your inflight magazine.


Let me tell you about this mask sir. It is called Kathakali, and it takes an enormous effort to put this on, hours to paint their faces, arrange pieces of the facial ornaments and to put on the costume. In India, we walk around with this mask on permanently in real life.  Except it took half a lifetime to put it on.  We are carefully prepared in school to be ashamed of who we are and accept overbearing control as punishment.  Crucial questions are never answered and communities are raised to be suspicious of each other. Life is like an orchestra where everyone is trained by instinct to look over the shoulder at each other and to crave for approval from the socialist conductor. Post liberalization, big business has merged with the socialist conductor to take over all aspects of your thought and opinion.   Differential access to leisure, to police, to law make it impossible to free your mind of the yoke of the Indian reality.   Political correctness and sidestepping contentious issues by being facetious are just grease paint we must don. We dont see the paint in others because everyone has a different version of it, but we are startled when we see anyone without the mask and paint.

Sir, when the Kathakali performance is over, the artist carefully removes his mask and uses thinner to get rid of the paint.  That is when they really speak their mind. It could be cheap or of the highest intellect – it really doesnt matter. What matters is the mask is off and finally we have the real Indian speaking.

Thank you Sir for your time,


The little guy behind the screen.

Fundamentally, stop ramming extraordinary people down our throats

Posted in Uncategorized by realitycheck on August 20, 2011

I dont know about Anna Hazare, but let me tell you who else is a media creation.

Citizen Narayana Murthy

Lt Citizen Nandan Nilekani

Well  the linear growth of the company they founded has plateaued. The ceaseless push of the market to keep doing more of the same thing – quarter after quarter can tire the best.  I welcome Mr Nilekani in public life, but here is the catch.

When these people are thrust on to prime time TV, commenting on crucial government policy, they should be scrutinized with the same microscope as Anna Hazare was. If the media wont do it, we will.

The interview of ex Infosys CEO Nilekani with Sagarika Ghosh of CNN-IBN

Anna’s protest is Naive, Simplistic, Unjustified

I continue to be astonished at the lack of depth in what these gentlemen say on public policy. It is like reading a mismash of 60% IT sales PPT + 20% leadership self help books + 19% jargon +remaining 1% – the words fundamental and extraordinary.  After listening to a long interview you invariably come off with – What did he just say ?

I watched the interview two times and I can say this:

If Arvind Kejriwal or Kiran Bedi had given an interview of this quality, TV Channels will be screaming, “Do you want these people to frame laws ?”

The entire interview was based on tearing to pieces a strawman.

The Lokpal alone is not a magic bullet

Surprise !  no one said it is.

I dont know what his brief was from the government, but he turned this interview into the weakest sales pitch ever for the UID project.

Sample this :

I am just saying that for millions of people corruption is at the point of interaction. When they are trying to get their PDS, when their are trying to get their pension, when they are trying to get their bank account open, when they move from a village to a city and nobody is willing to recognise them.

That is where corruption is.

And that is where the things we are doing like giving an Aadhar ID for every person, especially those who have no ID, (comes in).

Not about petty corruption, this is about high corruption first.

Look, I support the Aadhar project, minus the biometry wallet padding.  But how many people have experienced corruption while opening a bank account ?  How many experience corruption when getting PDS ?  When you move from village to city – you still need address proof with or without Aadhar.  I digress.  The point is the current protests led by Anna Hazare have little to do with this type of corruption.  Mr Nilekani is completely misreading the mood of the people. Sure there is petty corruption, but it is about the high corruption that people are most wired up about.  The media is already trying to paint this to be about petty corruption because then it can say that this is a selfish protest.  The truth is, for the first time in the history of India we have a protest where there are no personal benefits attached.  I had to take a break from twitter because bloggers who I have followed for years mocked the protestors in a non stop deluge of abuse and ridicule. I felt I had to respond to each of them and burnt out in the process.  Do they not see the significance these protests ?  Do you see them shouting slogans on the street on specifics of Jan Lok Pal ? 


You know, you have the IT industry, the BPO industry, the FMCG industry, the manufacturing industry, the auto industry, the financial industry which are very competitive open market kind of situations.

Oh really Sir, all the above are comfortably ensconced in their 20 to 500 acre free trade tax free havens. The policy was such that you had to move to SEZ to stay competitive. This created conditions for a large scale land grab which is at the heart of most scams today. This includes the 2G scam, where big realtors are accused by the CBI.  They lobbied the government to extend their tax holidays while there is no strategic value to the country on account of their produce.  This is not to be misconstrued as attacking them, just saying that the extra cash due to tax benefits do not materially enhance their abilities.  For instance, none of them can do what a Huawei is doing to China or a Samsung to Korea.  In contrast, IT companies make us particularly vulnerable to immigration policies of the west.  Many may not know that Infosys is currently caught up in a serious case of Visa fraud before a East Texas District Court related to alleged misuses of B1 visas.  There was a US Senate hearing about it late July which the Indian media blanked out. One could argue that,  B-1 use is an open secret why single out Infosys. If that is the case, then why are Nilekani and Co the media darlings and not other IT players.

Why protest when excellent people are already looking at it ?

Nilekani says he has developed great respect for politicians after his two years in public life. The same two years where mega  scams and coverups happened.

I am very very impressed with the quality of questions, the homework, the due diligence, the seriousness that they view these things with. And it’s very bipartisan, you can’t make out who is from which party because they all ask (questions) on the issue. So when you have such an excellent system of law-making…and you know they have asked us so many thing to clarify, they have called so many experts, they have called people who are against what we are doing to the committee.

So it’s a very comprehensive approach to law-making. So when this law is in front of the appropriate standing committee, why do we need an agitation? It escapes me why this is going on.

Well that is the point, the comprehensive law making with all due diligence has failed us for 65 years.  It will only improve if they are pushed by either voting them out or by stressing them by protests.  It has always been like that.  Why is Anna’s protest so abhorrent to you ? The issue that riles people is the excellent people you cite are making kooky arguments about stake sale vs issuing new shares.


I have major issues with the Jan Lok Pal bill.  That in no way impacts my full support to the protests who have a generalized anger on corruption. High corruption. By the current government. Not the retail version.