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Articles for Policy

Learning to Regulate

India is perhaps one of the few major economies in the world, where economic policies are formulated by ‘Empowered Committees’ of politicians and bureaucrats. The Empowered Committee of State Finance Ministers is a case in point. This Committee has been closely involved in preparing the Goods and Services Tax (GST) framework along with the Central Government. There is little doubt that there are few subjects less political than those that impact the revenue collections of State Governments. Equally, there are few subjects less well understood by State Governments than the impacts of the proposed tax reform, despite a representative committee. This merits some introspection.   Does the country need to look towards a fresh set of policy formulation processes for regulating the economy? Given the emergent need for regulating new, technologically intensive sectors such as ecommerce, a case can be made for reimagining regulations in the days ahead.  Most bureaucrats are inherently defensive about the gaps in the government’s capacity to regulate the economy.  When confronted with the inadequacy of extant policies, such as the absence of objective and transparent principles for auctioning natural resources, a common response is that policies should be critiqued keeping in mindthe temporal context within which they were formed. Indeed policies tend to respond to static questions rather than future scenarios – think bank nationalisation or Agricultural Produce Market Committees.  To hedge for the unknown future, there seems there is no policy making tool more useful than the thesaurus – Indian policymakers have seldom felt the need for definitional certainties. This is a challenge for the ecommerce sector, which is poised to cross US$ 6 billion in revenues (ex. Tourism and Ticketing) in by 2015. As yet, there is no government department which has taken on the onus of proposing comprehensive policies for the sector. Instead authorities are simply relying on synonyms for circumscribing ecommerce. This sector is hampered by the lack of a nodal authority such as the Civil Aviation Ministry for the airline industry, which by its very existence is purposed to regulate the sector.  At a stakeholder consultation meeting hosted by the Department of Consumer Affairs in September 2014, a proposition was placed on the table that “entirely new subjects of ecommerce and direct selling” should be brought under the purview of the Consumer Protection Act, 1986. The minutes of the meeting are publicly available, and indicate that ecommerce is not well understood. Similar discussions have been initiated by tax departments of various State Governments, currently mulling how best to extract revenues from the sector. Given that the sector occupies a large share of advertising, and has managed to appropriate precious media reporting space, tax departments are keenly observing developments in the sector.  The Department of Industrial Policy and Promotion has played an inadvertently critical role in the evolution of existing ecommerce business models, through a preventive FDI policy. Earlier this year, the Department of Consumer Affairs tried to suggest that nine nodal authorities take charge of regulating the sector. Where else in the world would such a fragmented regulatory framework be proposed? It is the equivalent of suggesting that the ubiquitous kirana stores, on account of having bank accounts, telephone lines and home delivery options, should be regulated by the Central Bank, the Department of Telecommunications and the Ministry of Home Affairs.  What is admittedly daunting about ecommerce is that it will force authorities to think deeply about some hardquestions. What really is consumer protection – can it be defined objectively? Does the consumer protection policy framework dilute competitiveness concerns of SMEs? Can consumption grow in an economy which does not create new jobs through innovation? Does the lack of clarity in existing regulations, aid discretion of enforcement officials? How can businesses be protected from regulatory harassment? Are the existing means to recourse available to them – primarily through the complex judicial system, viable? What principles of ease of business does the country have to strive towards – do these necessarily entail a slew of compliance procedures that penalise businesses that do not have the capacity for paying legal and tax teams?  It is unlikely that any Empowered Committee will be able to answer the above. Even if successful in doing so, a number of domain specific issues will remain unaddressed unless stakeholders are consulted continuously (and not just by soliciting comments on draft policies through online portals). A good example is a recent stakeholder consultation in Bangalore, hosted by the Retailers Association of India, in the run up to formulation of additional rules for packaged commodities. In this robust discussion between legal metrology officials andthe private sector, it was pointed out that certain Food Safety and Standards Authority of India’s regulations overlap with regulations under the Legal Metrology (packaged Commodities) Rules, 2011.  As a result, dealers of packaged food items, some of them ecommerce companies, are not sure which rules to follow, which flying squads of enforcement officials to pay obeisance to. Such concerns of regulatory overlaps and consequent confusion are not uncommon – and cannot be addressed by a single government department alone.A systemic recalibration of how this country regulates is required – across all departments. The departments not only need to talk to the private sector, they need to talk to each other! In the absence of defining regulations for the ecommerce sector, the government must use the inherent technological capacities of ecommerce companies for mutual benefit. For instance, ecommerce companies acting as online marketplaces aggregating buyers and sellers – can easily give detailed reports on the sellers on their platforms to tax, metrology and other officials. Indeed ecommerce companies should themselves realise that ease of administration can be facilitated through inexpensive technological solutions. Given that existing regulations such as Value Added Tax Rules are not black and white with respect to ecommerce,businesses must hedge against hurdles by volunteering all relevant supply chain details, to various concerned authorities.  In an increasingly integrated global supply chain paradigm, technology should become a friend to regulators rather than remain a foe.  It is incumbent upon the private sector, to use incremental technological innovations at justifiable marginal costs to enable this. And the government should play its part in embracing and harnessing the positives of technological change, rather than burying its head in the sand and pretending its the 20th century. The suthor, Vivan Sharan, is Partner, Koan Advisory Group 

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New Income-Tax Return Forms To Be Far More Simplified: Arun Jaitley

The controversial new income tax return forms, which had been put on hold, will be "far more simplified", Finance Minister Arun Jaitley said today, but kept the suspense on if the requirement of disclosing all bank accounts and foreign travels will be retained.  He said after having public consultations, he has asked the income tax department to come up with the simplest form, which is available.  "They (CBDT) are coming out with a proposal. Now that I am free from Parliament, they will put up before me," he told in an interview when asked whether the number of pages of the forms will be cut down from thirteen and a half.  Asked whether the queries on foreign travel and bank accounts, considered by many as intrusive, would be dropped in the revised form, the Minister said: "You wait, but I can only tell you it will be far more simplified".  He seemed to suggest that the questions about foreign travel and all bank accounts would be limited to a section of tax assessees.  "... As far as 8 or 9 out of 10 tax payers are involved, their form has to be very simple...There are various kinds of details, which are to be filled up may be absolutely redundant for them," Jaitley said in reply to a question on the queries in the forms that triggered a controversy. (PTI)

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Petrol Price Hiked By Rs 3.13 A Litre, Diesel Rs 2.71/L

The hike, which comes on the back of Rs 3.96 per litre increase in petrol and Rs 2.37 a litre raise in diesel from May 1, will be effective from midnight tonight. Prices of petrol in Delhi will be Rs 66.29 a litre from tomorrow as against the current Rs 63.16; while diesel will cost Rs 52.28 per litre as against Rs 49.57, Indian Oil Corp (IOC), the nation's largest oil company, said.The two consecutive hikes have wiped away more than one-third of the gains that had accrued to consumers when global rates began to fall in August last year. "Since last price change (effective May 1), there has been a steep increase in international prices of both petrol and diesel. Rupee-US dollar exchange rate has also depreciated quite significantly during this period. "Combined impact of both these factors warrant an upward revision in prices, the impact of which is being passed on to consumers with this price increase," IOC said in a statement. State-owned fuel retailers IOC, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) revise petrol and diesel prices on 1st and 16th of every month based on average imported cost and rupee-dollar exchange rate in the previous fortnight. Petrol prices had been cumulatively cut by Rs 17.11 a litre in 10 reductions between August and February and diesel by Rs 12.96 a litre in 6 cuts between October and February. After two rates hikes (0.82 a litre in petrol and Rs 0.61 per litre in diesel on February 16, and Rs 3.18 per litre in petrol and Rs 3.09 a litre in diesel on March 1) rates were again cut on April 2 (49 paisa a litre in petrol and Rs 1.21 in diesel) and on April 16 (80 paise per litre on petrol and Rs 1.30 a litre on diesel). "The movement of prices in international oil market and rupee-USD exchange rate shall continue to be closely monitored and developing trends of the market will be reflected in future price changes," IOC said. (PTI) 

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Modi Announces E-Visas For Chinese Nationals

In a confidence building measure, Prime Minister Narendra Modi on Friday announced that India will grant e-visas to Chinese tourists. “We have decided to extend electronic tourist visas to Chinese nationals,” Modi said addressing students and faculty at the prestigious Tsinghua University here. Hours before the Prime Minister’s announcement, Foreign Secretary S Jaishankar had said “no decision has been taken yet” on granting e-visas to Chinese tourists. When asked about extending the e-visa facility to Chinese tourists, Jaishankar said this morning: “We are expanding it bit-by-bit. With regard to China, no decision has been taken yet.” Addressing the gathering at the university, Modi said: “About 33 per cent of the world’s population is either Indian or Chinese. Yet, our people know very little of each other.’’ “We must seek inspiration from the pilgrims of the ancient times, who braved the unknown in search of knowledge, and enriched us both,” he said. “So, we have decided to extend electronic tourist visas to Chinese nationals. We are celebrating the Year of India in China in 2015,” he added. Surprisingly Modi chose to announce this significant initiative which Chinese officials have been calling for in his address to the university not during his joint appearance for the press with Premier Li Keqiang. The announcement came in the teeth of strong opposition from the Home Ministry and security agencies over security concerns of its misuse, while the External Affairs Ministry and Ministry of Tourism pressed for it. Ahead of his China visit which began yesterday, the decision to grant e-visas was left to Modi to decide. ‘Visit India Year’ India this year has announced ‘Visit India Year’ in China to attract more tourists in order to boost tourism revenues. While less than two lakh Chinese visit India, more Chinese travellers are visiting Nepal, Sri Lanka and Maldives enhancing their tourism revenues. Last year 1.4 lakh Chinese had visited Nepal, an increase of 70 per cent, while over four lakh Chinese visited Maldives, 1.3 lakh visited Sri Lanka, and increase of 130 per cent. India is organising Visit India Year this year to entice a chunk of about 100 million Chinese tourists who visited abroad last year spending billions of dollars on shopping. China has proposed Buddhist circuit connecting China, Nepal and Sri Lanka to attract more tourists. China has large Buddhist population. They are keen to visit Buddhist sites in India like Nalanda. (PTI) 

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Can Modi Do For Teaching What Narasimha Rao Did For IT Industry?

December 25th2014, I heard our Prime Minister Narendra Modi say: “The richest of the rich and the poorest of the poor wants good education for his child. The world today needs good teachers and India, with its immense youth power, can export teachers to the world”. Export teachers to the world. Did I hear that right? And did I hear that from a politician.  Most people possibly ignored this vision, but there was a ring of nostalgia around it for me.  It took me back to 1990, 25 years ago, when I joined a fledgling IT company called Infosys. Infosys was less than 100 people, and maybe a few thousand people made a living off computers those days.  In one generation, this industry has grown to revenues of more than $100 billion, employs more than 3 million people and has a 55% Global sourcing share. Cities like Bangalore, Hyderabad and Gurgaon have been built around this proposition. I see the same potential in this idea mooted by our Prime Minister. To give you a perspective of the size of the market, the World has 900 million students currently in K-12 grades.  With a student to teacher ratio of 1:25, this adds up to a global requirement of 36million pre-primary and primary teachers. At an average global wage of 20,000USD pa, teachers earn $720 billion annually. Can India aspire for a 10 per cent of the global market? Can we provide additional employment to 3.6 million Indians (the IT industry hires only 3.1 million people currently) and contribute $72 billion to GDP.   There are 3 reasons why India can quickly become successful as a teaching super power - Firstly, the teaching industry in India is very mature. India has adopted many novel teaching methods from Montessori to International Baccalaureate. We also have our own home spun schooling systems like CBSE and ICSE systems that have been successful in creating generations of successful students and managers. These systems have tremendous credibility amongst Indians globally and are also gaining traction amongst people of other nationalities. Whereas, the IT industry had no domestic market, and had to build all its skills internationally. This made it significantly difficult for them in the initial years. Secondly, India is a hot bed of educational innovation. Innovations like Hey Math are being used as a standard in Singapore, while Planet Read’s ground breaking work on same language subtitling to improve literacy skills won Brij Kothari the Schwab Social Entrepreneur of the Year award in 2009. We have companies like EduSports that are pioneering sports education. There are numerous stories of Innovation in education in India that have the potential to change the world. Our innovation maturity is very high.  Thirdly, success of initiatives like TEACH for INDIA demonstrates that young people in India are intrigued by education and looking for careers in primary education.  The establishment and success of the Azim Premji University, a university focusing purely on primary education, is another indicator of the trend amongst the young and educated to work in education. Our youth are ready for the teaching revolution. To make India the Teaching Capital of the world, I have the following recommendations – The Government will need to ensure that they do not relegate teacher education to a degree and limit teaching to people who have the degree. The current approach to introduce a 5 year program after 12th or such experiments assumes that people with degrees are the only ones who are capable of teaching. If everybody hired by an IT company needed to have a computer science degree, our growth would have been much slower.To ensure quality of teachers, they will need to introduce standard Teacher Eligibility Tests. Performance in TETs should be the criteria for a person to become a teacher. The TETs can be developed on the model of the GATE or the IAS exams with subject specializations being tested for. The TETs should also be fungible across states, just like the AIEEE examinations.We need to encourage English language training and adopt a global standard as a measure of quality in English teaching. All teachers teaching in English schools need to be certified in this test.The National Skill Development programme of the Government should support organisations that skill people to pass the English tests and the TET exams creating a larger pool of capable teachers in India.              I believe that implementation of these 4 recommendations earnestly and rapidly am essential to change the teaching landscape, create more competent teachers and enable us to teach the world within a decade. The author, Umesh Malhotra, is Founder CEO, Hippocampus Learning Centres 

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Too Many Loopholes In Child Labour Law?

The Child Labour law has been revamped, and major changes have been cleared. The age restrictions for working, the penalties for violations and the industries deemed fit for working have all been overhauled.  According to the Union Cabinet which was chaired by the Prime Minister, these changes have been made considering the social fabric of the country. The definition of adolescence has also been changed to incorporate the age group of 14 to 18.  The child activists and many NGOs working for the development of children and eradication of child labour in the country are not very happy with the changes that have been proposed. Critics are very vocal in pointing out that enough loopholes have been left in the current provisions that can exploited and will impede the eradication of child labour.  Activists who are working at the grassroot level and are closely associated with the menace believe that these exceptions will only push children to work in industries that are not deemed ‘hazardous’, like carpet manufacturing, or working in paper mill, and which in turn will slow down the entire process of eradication of child labour. Also the clause of  ‘Business run by the family’ has enough soft points to be taken undue advantage of, as in almost all the cases of violations previously, the children who were employed had the consent of their family, and there is no hesitation in the employer to address the parents as his family, or the business as a ‘family enterprise’ and in many occasions due to lack of any identity proof, the rampant violations do take place.  According to the recent proposal the children can work during vacations, or after their school or classes, and many child activities question how such a clause will be regulated, and that this will only lead to an increase in drop-outs. However, the punishments for violations have been made more stringent, ranging from hefty fines to even jail terms, but the question of regulation of all the above statements is a primary issue that needs serious attention, if the evils of Child Labour is to eliminated from the society.

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10 Key Takeaways of Budget Session

The Budget session of Parliament concluded on Wednesday with passage of record official business in recent years but the National Democratic Alliance (NDA) government failed to ensure passage of the controversial Land Acquisition Bill as also key reform measure of GST amid stiff resistance from opposition. However, the Budget Session has proved to be most productive during the last decade with the Lok Sabha working 117 per cent of the scheduled working hours and the Rajya Sabha reported a productivity of 101 per cent, the government said. In terms of the number of sittings also, this session scored high. The Lok Sabha held 35 sittings, the highest in the last five years.  Rajya Sabha held 32 sittings, next only to that of 34 in 2012. 1) Insurance & Land Boundary BillThe Modi-led government has been successful in securing Parliament’s nod for the land boundary constitutional amendment bill—which takes India’s relations with Bangladesh to a whole new level—and increasing foreign investment in insurance, but its inability to get parliamentary approval for GST and land bills far outweigh those positives. 2) Amendment to President’s SpeechThe government also faced the embarrassment of having to amend the motion of thanks to the President for his address to the joint sitting of the two Houses of Parliament. CPM leader Sitaram Yechury pressed for the amendment to register regret on the lack of action by the government to curb corruption and black money. 3) Private Members’ BillHistory repeated itself after 36 years in the Rajya Sabha which passed a private members’ bill seeking equal opportunities to transgenders moved by Tiruchi Siva of the DMK. 4) Rahul Gandhi as parliamentarianThe most valuable takeaway for the Congress party from the session was Rahul Gandhi's perceived transformation into an effective parliamentarian. The gain has been more than a windfall for the party, which had in the past requested him to speak in important debates, only to be refused. A member of the Lok Sabha for 10 years, he had never asked a question or made an intervention during zero hour. He had spoken only thrice in the decade. 5)Session In A Nutshell123 per cent Lok Sabha worked for 123 per cent of its scheduled time101 per cent Rajya Sabha worked for 101 per cent of its scheduled time 6) HitsInsurance act amendment bill, pending since 2008, passedFive out of six ordinances approvedCoal allocation, mines and minerals bills passedThe land boundary agreement bill passed 7) MissesFailed to bring the Opposition on board on land bill, GST billReal Estate bill, GST bill referred to select committeeLand bill sent to joint committee of parliamentKey NDA allies like Shiv Sena, SAD refused to back the governmentAfter 14 years, Opposition forces amendment to President’s speech in Rajya SabhaFirst time since 1970, a private member bill passed in Rajya Sabha 8) Opposition Unity The session also saw the revival of a splintered opposition which cornered the government on a host of issues, including the CAG strictures on Nitin Gadkari-linked Purti Group and the release of Kashmiri separatist leader Masarat Alam Bhat. 9) Disruptions and InterruptionsOn account of disruptions and interruptions, Lok Sabha lost 6 hours 54 minutes but made up for the lost time by giving up lunch hours and working beyond scheduled time for 42 hours 41 minutes. Similarly, Rajya Sabha has lost 18 hours 28 minutes but gained 20 hours. 10) Unsavory BehaviourCountering Rahul Gandhi on land bill, Agriculture minister Birender Singh ended up saying Madhavrao Scindia also wore expensive suits. He was forced to apologise for his statement.Twelve BJP MPs voted against GST bill. Speaker Sumitra Mahajan pulled up MoS parliamentary affairs minister Rajiv Pratap Rudy. 

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After Social Security, Govt Offers Skill Devt For Poor

As Modi completes one year in power, he has been on an announcement spree to fulfill his promises after coming to power. After Prime Minister Narendra Modi announced three flagship social security schemes on Saturday (9 May), including an insurance cover for less than Re 1 per day, on Sunday (10 May), the government announced that about 14 lakh households, which have completed 100 days of work under the rural job flagship scheme MGNREGA in the last financial year and have workers under 35 years of age will be imparted skill development training to help them find urban employment opportunities. Also, the government will soon launch a mega programme to expeditiously provide PAN card to all. The project, named Livelihoods in Full Employment (LIFE), has identified 14 lakh households which have completed 100 days work in 2014-15 and have workers under 35 years of age, the ministry said in a communique. Government has proposed that workers from such households may be skilled in line with the National Rural Livelihood Mission (NRLM) and Deen Dayal Upadhyaya Skill Development Yojana programmes of the Rural Development Ministry. The project aims at strengthening the livelihoods of the poorest households dependent on MGNREGA work for their sustenance, the communique said. This would be done by imparting skills required for migrating to urban areas using the apprenticeship or the DDU-SKY skill training and later placing them in jobs in urban areas. The programme will also strive to group workers into labour cooperatives, training and equipping them so that they seek contract work with construction/road laying firms, it said. It will also organise workers into groups, skill and equip them with essential machinery to take up agricultural operations efficiently and at competitive market rates. According to government officials, this will not only help in giving sustainable incomes to the workers but would resolve the problem of labour shortage in agriculture. The 'LIFE-MGNREGA' is likely to be implemented in July and states have been asked to prepare their plans. PAN For All?After the success of Jan Dhan Yojana, the government will soon launch a mega programme to expeditiously provide PAN card to all. The government in the Budget had announced that quoting of PAN ((Permanent Account Number) will be mandatory for any purchase or sale exceeding Rs 1 lakh. But, concerns were raised about complying with this condition since everyone, particularly in rural areas, does not possess a PAN card. Besides, special camps will be organised throughout the country, including rural areas, to help people get PAN cards. There are about 24-25 crore families in the country and about 21 crore PAN cards have been issued so far. Of these, 7.5 lakh are with corporates. Minister of State for Finance Jayant Sinha had accepted recently that many people do not have PAN cards. "We are going to make it as easy as possible to be able to get the PAN cards. If we can sign up everybody with the Pradhan Mantri Jan Dhan Yojana, you can be sure that we can sign up people for PAN cards also," he had said. PAN is a 10-digit alphanumeric number, issued in the form of a laminated card by the Income Tax Department .

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