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When Prudence is made Subservient to Populism - The Rupee Problem
- Published on 14 July 2022
(Image Courtesy: taxindiaonline.com)
“The depreciation of the rupee, measured in terms of exchange or price of gold or sovereign, ranged somewhere between 25 to 30 per cent. So great was the depreciation that it redoubled the difficulties confronting the Government when the rupee was not fixed to gold”, wrote B.R. Ambedkar, in his 1923 book - The Problem Of The Rupee: Its Origin And Its Solution.
The solution to the plummeting value of rupee is more elusive today than what it was under the British Raj. It had constituted few committees to fix the problem of currency and finance.
The issue of both external and internal value of Rupee was vigorously debated in Council of States and Legislative Assembly during the Raj era. After Independence, the debates spilled over to the Constituent Assembly of India (Legislative) and the Provisional Parliament. Nothing could, however, stop the Rupee from tumbling.
Fifteen years after Dr. Ambedkar’s seminal work, F.E. James, European Member from Madras, spoke against devaluation in Legislative Assembly on 18th December 1938.
Participating in debate on RBI Bill, Mr. James stated: “I would like to say that we do not think that rupee devaluation will solve any of the ills from which the country is at present suffering”.
He added: “My whole purpose is to claim that devaluation of the rupee today will take us nowhere. It must be considered along with the other great forces which are going to make for disorganisation in the economic and financial spheres”.
What Mr. James stated about devaluation applies equally well to depreciation in the external and internal values of Rupee (twin values) that has occurred over the decades. The depreciation of Rupee against hard currencies has been more frequent since the launch of market-determined exchange rates in 1993.
Russia-Ukraine War Rocks Taxation Domain Across The World
- Published on 28 June 2022
(Image Courtesy: The United Nations)
The lengthening Russia-Ukraine War (RUW) is churning fiscal dynamics across the world. RUW has thus put all stakeholders in the risks-ball gazing mode.
Tax administrations are worried over the fall in revenue and changing revenue-mix due to RUW flux. Simultaneously, they have started levying new taxes such as windfall profit tax on energy companies in certain European countries. Others are toying with idea of new taxes such as a tax on Russian crude exports to give teeth to Western sanctions.
As put by OECD Economic Outlook dated 8th June 2022, “Over the medium and long term, the conflict in Ukraine is raising new fiscal priorities and thus reinforcing the need to change the composition of the public finances. In Europe, many countries are planning to increase expenditure on defence”.
It observes: “In addition, the goal of reducing reliance on fossil fuel supplies from Russia has lent new urgency to investments in clean energy and energy efficiency”.
According to a recent policy paper authored by two experts from Belgium-based think-tank, Bruegel, “For Europe, the war in Ukraine is a first-order economic shock”. Apart from the expenditure on welfare of refugees, Europe is also chipping in military aid to Ukraine. It also has to cope with inflation and its impact on national income.
Discussing tax versus debt as means for managing economic challenges, Bruegel Paper says: “On political economy grounds, the notion of a war tax – a ‘Putin tax’, as President Biden has called it in the United States, although he was referring to the decrease in real income rather than an explicit tax – may be less unpopular than in other circumstances and underscore the point that contrary to current perceptions in Western Europe a war, even an economic war, is not free”.
Sedition Law Stalemate- A tip of Policy Paralysis (PP) Iceberg
- Published on 24 May 2022
The Supreme Court’s order to suspend sedition provision of Indian Penal Code (IPC) is invaluable. This is because it offers the Nation an opportunity to spot and end policy paralysis (PP) across all domains during Amrit Kaal.
The ubiquitous PP would become as clear as sunlight when we consider specific instances in several areas later in this column.
Both NDA Government and its predecessor UPA failed to fulfil their ostensible intent to amend Section 124A of IPC. The duo has thus frittered away a decade of new opportunity beginning 2012 to revise this Section to facilitate rational criticism of misgovernance.
Section 124A is popularly known as sedition law (SL). It was incorporated into IPC, 1860 by British rulers in 1870 to terrorise freedom fighters.
After the Independence, SL has served as a handy tool for the ruling parties at the Centre and the States to rein in criticism against them. Accountability-seekers now-a-days perceive Section 124A as Damocles sword on their heads.
“Anybody who speaks against the Government established by the law can be booked under the sedition law,” admitted Mr. Kiren Rijiju, as Minister of State for Home Affairs, in Rajya Sabha on 16th March 2016. He was replying to supplementary queries emanating from starred question on ‘Review of Sedition Law.’
Mr. Rijiju deserves applaud for his courage to acknowledge that the sedition charge is often “found to be violative of the provisions of Article 19(1)(a) (of the Constitution), that is, the Freedom of Speech and Expression”.
World Needs Marshall Plan V.2 to ward off Catastrophe
- Published on 04 May 2022
Levy Innovative Global Taxes to fund the Plan
Marshall Plan. cartoon Image Courtesy: loc.gov
The world is fighting multiple wars with third world war (WW-III) looming on the horizon. The major battle fronts are 1) galloping debt & resulting risk of sovereign defaults and hike in interest rates; 2) alarming rise in global inflation and risk of socio-political turmoil as exemplified by Sri Lanka and Pakistan, 3) soaring poverty & hunger since the arrival of Covid-19 virus.
According to the World Bank's latest poverty estimates, the combined impact of Covid, inflation & Ukraine crises “will lead to an additional 75 million to 95 million people living in extreme poverty in 2022, compared to pre-pandemic projections”.
As put by a team of WB’s economists in a blog, “If the more pessimistic scenario plays out, 2022 could be the second-worst year in terms of progress made in reducing extreme poverty this century—behind only 2020, when there was an actual increase in global poverty”.