The Edit Page

Lower bank funding will reduce bad loans

Twenty-five years after the path-breaking reforms of
1991, the country lacks a thriving corporate bond market.
Economist Madan Sabnavis suggests (ET, July 20) that
junk bonds could serve as the launch pad for the market.
Such bonds, issued by companies with low credit rating
and offering high yields, would find takers, if three conditions are met. One, the Bankruptcy Code has to be operationalised, to swiftly redeploy assets if projects fail.
Two, credit default swaps must insure against default.
And, three, there must be a developed market for hedging
against possible risks arising from interest rate and exchange rate movements over the life of the bond. Appropriate interest and currency derivatives are a must.
In India, there is far too much reliance on bank funding
for all sorts of multi-year investment projects, when banks, with mostly short-term deposits,
ideally need to be lending for similar
periods (such as working capital) to
avoid asset-liability mismatches. A
changeover to more of bond financing
would require independent vetting of
the projects planned and attendant
bond rating, and together with vibrant secondary market trading would provide far greater
oversight than mere bank lending.
The point is that a bigger market for corporate bonds
should reduce gross non-performing assets in the banking sector, which have now risen to the double digits.
Anyway, it makes little sense to opt only for the least risky projects with triple-A and double-A credit rating. And
junk bonds can be floated to finance more risky projects.
The bond yields would need to be attractive, so as to balance high risks with high returns. The yield levels that
make junk bonds attractive to investors would be high.
This would not deter small businesses, given the difficulty they have accessing formal finance at present.

Dalit Protest Sign

of Social Progress
We welcome the widespread protests staged by Dalits in Gujarat to protest against the violent assault on four members of
their community by self-appointed cow protectors. In some
towns of Saurashtra, where the incident occurred a fortnight
ago, some protesters have made the issue of cow protection
just the spark that has lit something far bigger, louder and, in
terms of traditional caste-based inequity, more disruptive.
Protest has been sustained and widespread enough to draw in
political leaders and the national media. This marks a gain for
Indian democracy, in general, and for Dalits, in particular. It
also could mark a tipping point in Indias caste politics.
A constant dynamic of Indian politics is the imperative to
move society forward from its traditional hierarchical order
to one of democratic equality as envisioned in the Constitution. Political parties confront this tension routinely, and
buckle under, more often than not. When
a khap panchayat issues an edict that conforms to and reinforces traditional values of gender/group inequality and, at the
same time, violates basic individual rights guaranteed by the Constitution, politicians find it expedient to honour the khap
rather than defend the rights that have been violated. Thus, custom and conservative social power have
kept Dalits at the bottom of the social hierarchy in most parts
of the country, especially where their numbers are small, reducing their electoral clout. Persistence of social exclusion and
unjust treatment has bred resentment and protests, such as
conversion to other religions. The telecom revolution and the
spread of social media among low-income groups have helped
convert simmering resentment into active protest, after video
footage of four Dalits being beaten with rods went viral.
The protests will likely change the status quo permanently.
That is a welcome change even if they have come about because of age-old bigotry. Dalit resentment and assertion will
make themselves felt across the country, and probably help
the Bahujan Samaj Party in Uttar Pradesh. Regardless of the
impact on parties, it is advantage Dalits.

Office-goers may have skipped work to

catch Rajinikanths latest. But no harm done

Make Hay While the

Thalaivar Shines
We would not have dared to utter a word against many offices in South India giving their employees a holiday on Friday. But now that the opening day of the new Rajinikanthstarrer movie, Kabali, is over, the film already having been
released in about 12,000 cinemas and with many otherwise hardworking office-goers having already thronged to watch the film we can venture to ask one question: why? One
(vaguely) understands the fervour that surrounds the Tamil
superstar. The appeal that he holds for his wide and deeply
fanatical fan base outstrips that of any other contemporary
Bollywood star. But to shut shop for a day so that there is no
tenshun to catch the Thalaivar on the first day of his latest
movie, well, well risk being a bit of a grump here.
But then, with all the productivity loss, some business enterprises did show Rajinikanth-infused, well, business enterprise. Air Asia flew a special flight carrying 180 Rajinikanth fans from Bengaluru to Chennai on the first day. Luxury hotels sold tickets at `. 1,300 a pop for special screenings.
And Rajinikanth franchise material, including a designer
sari with the Masters face on it. All these raked it in faster
than revenues earned through a days job. Which just proves
that instead of being party-poopers, one should join the party economy. Rajini Sir-style.

A cap on GST rate means limiting the governments powers to levy inordinately high indirect taxes

A Spectre is Haunting India

ugh regressive indirect taxes.
Past governments have always resorted to increasing rates of indirect
taxes, rather than expand the net of
direct tax payers. The addition of the
Swachh Bharat and Krishi Kalyan
cesses and increase in excise duty on
petrol are examples of recent indirect taxes. So, Modi is right in asking
Ajit Ranade &
for a doubling of the tax base for dirPraveen Chakravarty ect taxes. It is also equally important
that the easy backdoor to tax collectiGoogle search on how not on through covert increases in indir
to pay taxes in India yields ect tax rates is firmly shut. This is
12 crore (120 million) resul- what a cap on the proposed goods and
ts, remarked Prime Minis- services tax (GST) can achieve.
In 1991, Raja Chelliah was appointter Narendra Modi sardonically, at a conference of tax adminis- ed to chair a committee on tax refortrators in April. Double the tax base ms. Indias overall tax-to-GDP ratio
and collect taxes from 10 crore (100 was 16% then. About 85% of these
million) people, he exhorted the tax tax revenues of the Centre and states
officials. The implicit message is combined came from indirect taxes
that in the land of a billion people, and 15% from direct taxes. Chelliah
only a handful of 50 million pay tax- submitted his report in 1993 that urges. Conversely, it is also true that al- ed the Indian state to collect more
taxes through direct taxes.
most every Indian pays taxes.
A quarter century on, Indias indi- A cap would make it fly
This is the great Indian tax paradox: very few pay taxes but also eve- rect-to-direct tax ratio is 65:35, down
ryone, rich or poor, pays high taxes. from the 85:15 ratio in 1991, but still a dias indirect tax structure is not regThis is because of Indias lopsided di- far cry from the average 35:65 ratio of ressive because a bulk of the goods
and services that the poor consume
rect tax (income and wealth) versus most other countries.
India has the dubious distinction are exempt from such taxes. So, iceindirect tax (goods and services) structure, where only a small minority of having one of the lowest direct creams and branded clothes in retail
pays income tax and, to compensate, tax-to-GDP ratios in the world. The stores attract service tax, but roadsialmost everyone pays high goods and GST legislation presents a golden op- de chaats and clothes dont. Such patportunity to fulfil Chelliahs dreams. ernalism to decide what the poor and
services tax.
In 1991, the peak income-tax rate rich should consume makes our tax
From Regressive
was 50%. It has been consistently re- structure even more regressive.
Direct taxes are fair and progressive duced to 30% today. But the number
since they are proportional to your of income tax payers has grown only To Progressive
income or affordability. Indirect tax- marginally. In contrast, service tax The very premise of a GST is to move
es are regressive because you pay the in 1994 was 5%. It has been increased to a cleaner, progressive and more
same amount, irrespective of your over the last 25 years to 15% now. Exc- efficient tax system. Levying taxes
income or wealth level. It is a simple ise duties on petrol that affect all equ- based on the governments classifirule of basic tax theory that a majori- ally have been increased nine times cation of luxury goods versus poor
ty of tax collection should be throu- in the last year alone. A cap on the mans goods is neither progressive
gh direct taxes. Indeed, this is the GST rate can put a stop to such indis- nor efficient.
That the countrys tax structure is
norm for most developed countries. criminate indirect taxes that affect
distorted and regressive is well accIndia is exactly the obverse, collect- the poor much more than the rich.
Some commentators argue that In- epted. That all governments in the
ing nearly two-third of its taxes throcountry adopt lazy taxation policies
by increasing indirect tax rates constantly is well documented. That it is
Today, Indias indirect-to-direct tax ratio is 65:35,
time to end this unhealthy practice is
well understood.
down from the 85:15 ratio in 1991, but still a far cry
The GST Bill presents a landmark
from the average 35:65 ratio of most other countries
opportunity to do this by limiting the

Let Go of
the Future
ANDREW COHEN

FILE PHOTO

Grow Bond Market

From the Junk End

THE ECONOMIC TIMES | BENGALURU | MONDAY | 25 JULY 2016

powers of governments to levy inordinately high indirect taxes. This

can be done by incorporating a ceiling rate of GST in the GST Bill and
not in the Constitution. Once such a
ceiling is specified in the Bill, the
GST rates can be changed at will by
the GST Council through an executive notification process rather than
through a Parliament process in adherence to that ceiling.
In the 25th year of the landmark
1991 economic reforms that helped
lift hundreds of millions of Indians
out of poverty, there is also a unique
opportunity to correct past wrongs.
One tax on all goods and services across the entire nation with no unfettered powers to raise tax rates seems
like the distant Promised Land, far
from the current maze of a regressive tax structure.
The good news is that a cap on the
GST rate specified in the GST Bill will
get us closer to that Promised Land.
Ranade is chief economist, Aditya Birla
Group, and Chakravarty is Senior Fellow
in Political Economy, IDFC Institute

Bell Curves

Chat Room

Mass shootings have been making news worldwide this year. In the
latest such incident, this time in Europe, 9 people died and 16 others
were wounded in a shooting rampage by a lone German-Iranian
gunman at a Munich shopping mall on Friday. Heres a look at
civilian firearm fatalities and rates in some select countries

Time is natures
way of keeping
everything
from happening
at once.
Woody Allen
Filmmaker

Homicide by rearm, top 15

countries, by death count

Out of Ideas on
Black Money

By death rate*
(deaths per-lakh population)
Honduras
El Salvador
Guatemala
Jamaica
Venezuela
Colombia
Puerto Rico
Brazil
Dominican Rep
Afghanistan
South Africa
Panama
Mexico
Ecuador
Philippines

Brazil 35,995
Mexico 13,314
Colombia 12,529
Venezuela 9,952
US 9,206
South Africa 7,828
Philippines 7,717
Pakistan 5,907
Guatemala 5,021
Nigeria 4,659
Honduras 4,577
Afghanistan 4,148
Thailand 3,728
India 3,693
Myanmar 3,564
*Countries with fatalities more than 365 a year

67.7
44.6
40.6
40.2
37.9
29.5
21.1
19.6
17.8
17.3
16.5
16.3
12.2
11.4
9.2

Im an atheist. But there

is a Pokmon inside the
sanctum sanctorum!

RAJINIKANTH

Citings

Thalaiva on a Discount
Sudha G Tilak
Released last Friday across some
12,000 cinemas across India to maniacal glee and celebratory fanfare to
beat all celebratory fanfares, Rajinikanths latest movie, Kabali, has been
already tut-tutted by many critics for
its lack of creative merit. As if a
Rajinikanth film requires the kind of
approval that critics seek out to give.
But just to be sure, incensed fanboys
and fangirls have hollered back that
Rajini is the granddaddy of them all
superstars, leaving little room for any
further debate.
With all this, Kabali hardly needed
any publicity push. But a little extra
push could never have been harmful.
The films publicity juggernaut belied
anything we have ever seen in India
for an actor. Kabalis producer had
announced that he had `. 200 crore in
his kitty even before the film released,
thanks to huge brand-building extravaganzas. These included selling of
silver coins embossed with Kabalis
face much like a 21st-century Indian
version of Caesars profile on a Roman coin, and an Air Asia plane flying
Rajini fans from Bengaluru to Chennai on the opening day bearing the
Thalaivas face on its fuselage. Not to
mention the merchandise.
All the money power is understandable to roll out a phenomenon like a
Rajini movie, but the over-the-top exhibition of money this time to proclaim the stars cult status is ironic.
Rajinikanths public image as well as
his role in pop culture and his films
has been that of being the against-thegrain bermensch, challenging the
class and consumerist status quo.
Cheeky and cocky in over 150 films

since his grand entry in 1975, Rajinis

famous mocking laughter ridiculed
characters puffed with power and might, jeered those who thought money
could buy love, thrashed those who
werent convinced by his verbal derision to a pulp. His rambunctious dialogues essentially called for the equality
of all men and women.
Rajinikanths charisma, chutzpah
and enduring cultural influence on
contemporary Tamil culture is indeed
something to be in awe of. With over
55,000 fan clubs he reportedly stopped them from multiplying after a
point he has a fan base that can
translate into vote bank. This has had
politicians wooing him across political parties during every election since
the 1990s and he has resisted taking
the plunge so far.
But as an actor, instead of reinventing himself as he has aged something that, say, Amitabh Bachchan has

Another bond with the masses

While most of us want to be

free, there is a part of us that is
terrified at the prospect. Is there anything that we can do to
make the part of us that wants
to be free stronger than the
part that is afraid? You have to
be willing to make a choice. So
many seekers are only waiting
for all of their fear and resistance to go away. If youre serious about this, you dont have
the time to wait. You have to
come to the point where you
dont care how difficult it is.
To find true confidence, you
must be able to bear more doubt and confusion than you ever
have in the past. Too many people only want the kind of confidence that they dont have to
struggle for, that they dont
have to make any sacrifice for.
When we are willing to abandon the future, it is then that
we have finally stopped waiting. And that means that we
realise that a better moment
will never come.
We are always waiting for the
perfect moment to let go to
be ready to respond completely, wholeheartedly and without
any hesitation. So, when that
moment actually does come,
we are not able to let go. When
we ultimately find the depth of
courage and the strength of
conviction to abandon the
future once and for all, we will
discover a context, a vast and
infinite context where we will
know beyond any doubt that
we are free.
And in that freedom we will
be detached. But that doesnt
mean that we wont care. It
means that we will care even
more, because we are not worried about ourselves any more.

R Prasad

Firearm Homicides

Source: Small Arms

THE ECONOMIC TIMES

FILE PHOTO

16

done to a point in movies like Piku and

Te3n he is frozen in the cult status
foisted upon him by his fans and in his
role as Thalaiva (chief) that he has
played for decades on end.
Like the mythical Markandeya, willed by the gods to remain forever young
and immature to fulfil a parental wish,
Rajini is dwarfed by the incredulous
demands of a maniacal fan base. They
wish to see him in the role of saviour
forever. In one of the telling last lines
in Kabali, he tells the youngsters who
have come to him to solve their problems that he doesnt have all the answers. Perhaps in real life Rajini should consider not having just one
on-screen answer.
Rajini is, and has been for years, a
crowdsourced phenomenon. With his
demigod status, he is the talisman of
the desires and energies of a couple of
generations who have mandated Rajinis cinematic output. Shrewd producers and canny directors now employ
him, pander to the wishes of his fans
to play the 65-year-old angry middleaged man and regurgitate the same
mannerisms year after year after year
even though he abandoned his famous cigarette flipping move in 2008
after the then-Union health minister
Anbumani Ramadoss requested him
in a letter not to smoke on-screen.
The hordes bottle Rajinis energy
like a drug to take swigs from, having
turned him into a veritable franchisecum-industry. He will now be the mascot of their future retail ventures, trading the qualities that first made him
a star: raw energy, an uncultivated self
and an acting style that was unique
and unlike any other as it was overthe-top honest. He has been turned
into a totem for a consumerist culture
that his socialistic on-screen characters always derided.
Which brings one to the humble conclusion: even as an icon can direct the
taste and aesthetics of a people, it is
the people the ticket-paying ones
that dictate the taste and aesthetics of
an icon.

Carbon
Solution
BERNARD DAVID

There are actually five sources of CO2 that can be used to

make into products. First, CO2
comes out of the ground and is
used in enhanced oil recovery, to get more oil out of oil
wells. It comes off of industrial sources. So, in your manufacturing, you have a very pure stream of CO2 and thats a
second source that can be used
to make products.
A third source is, before you
burn it, you can take coal and
take the carbon out of it, so
you dont have the CO2, and
you can make fuels, amongst
other things. Or you can take
it off a coal-fired power plant
as its escaping into the atmosphere, and thats actually a
good place to do it because its
highly energetic. You can capture it and use it there. And
capturing it out of the air, where its 400 parts per million,
you can also do.
The challenge with each of
those five approaches is the
cost. The least expensive is taking it out of the ground, and
then industrial sources, and it
goes all the way up to taking it
directly out of the air. Today, it
costs between $600 and $1,000 a
tonne to take it out of the air,
because its a needle-in-a-haystack problem. There are only
400 parts per million.
What can you use CO2 for?
What kind of products can
you create? Whats the size of
these markets? Weve discovered that you can actually make
25 different products out of
CO2, and in 2030, the projection is this will be an $800 billion
to $1.1trillion annual market.
From How Companies Can
Profit From Carbon Reduction

Apropos the Edit, Squeeze

Generation Of Black Money
(Jul 23), the first step that guarantees result is cleaning up
the political fund flow, which
is a chimera in India. The ruling dispensations and all those howling from the opposition benches alternately after
each election are brothers in
arms in this regard. They ensure that such a drastic action
would never happen. Its a
question of their existence.
Nor does the EC have any
special concern as long as its
not a Constitutional obligation. The new trumpeted idea of
sending millions of notices to
assessees of higher rungs and
the two disclosure schemes
with impressive nomenclatures are nothing to rave about.
The apex court has ruled against such mollycoddling of the
rich in the past in unequivocal
terms but the encore continues unabated. And there is no
word about the humungous
sums stashed in impenetrable
havens abroad either.
MUKUND KUMAR
Mumbai

Manic Crowds,
Humble Rajini
Rajini mania is sweeping
Tamil Nadu and other parts of
the country. Rarely has a film
caught so much popular imagination and attracted so much
media attention as the Rajinistarrer Kabali. The unbridled
enthusiasm seems contagious. Such deification of film stars is a cultural phenomenon starkly
observed in
Tamil Nadu.
It is incredible
that statues of
screen idols
are bathed in
milk. Fans of film stars display intense personal feelings
for their idols and become addicted to imitating their dresses, demeanour, habits and
histrionics. Perhaps this star
worship makes the followers
feel good about themselves
and raises their self-esteem.
Rajinikanth fans can be commended for their choice of the
right star to look up to, admire
and own as their own. For all
his fame and fortune, superstar Rajinikanth still epitomises humility and simplicity.
Not to forget, he has refused to
be persuaded to join the BJP
or any right-wing party.
G DAVID MILTON
Maruthancode
Letters to the editor may be addressed to

editet@timesgroup.com