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18  THE ECONOMIC TIMES The Edit Page THE ECONOMIC TIMES | BENGALURU | WEDNESDAY | 4 OCTOBER 2017

Banks: Regulation, CURSOR Defining Indianness is the main political challenge and it must be confronted squarely

Not State Ownership

Common good is eroded by state ownership
Markets regulator Sebi has postponed its rule that requi-
The Pursuit of Indianness would stoutly deny the proposition if
it is put to them. They acquired their
res companies to report all payment defaults to stock ex- proficiency in English by being edu-
changes, worried that it could expose the banks lack of
health. That is sad. The way to economic health is through
cated in the English medium, mean-
ing that they have broken their orga- Transform
nic link with their own mother tong-
swift and transparent dissemination of information on
corporate delinquency and enhanced capitalisation and
ue and the cultural universe it medi-
ates. One problem with the defend-
& Motivate
ants of liberal democracy in India is
regulation of banks to help them weather missed paymen- T K Arun that many of them do battle in Eng-
J KRISHNAMURTI
ts. The performance of public sector banks (PSBs) rema-

A
lish, inviting association with those How am I to transform? I see the
ins fragile compared to their peers in the private sector. radio jockey contrasts the who peddle supercilious disregard truth at least, I see somethi-
So, instead of hiding news of blows to financial health, the Indianness of Shankar-Jai- for Indias culture. ng in it that a change, a trans-
kishan with the modernity India is a complex civilisation, formation, must begin at a level
focus must be on raising their ability to absorb the punch- of R D Burman. The Uttar whose colonial experience has left it that the mind, as the conscious
es. If necessary, by privatising them. Pradesh government omits bruised. The intelligentsia that took or the unconscious, cannot rea-
The government has vowed to recapitalise loss-making the Taj Mahal from a list of the states charge of Independent India and ch, because my consciousness
tourist attractions and its chief min- framed a liberal democratic Consti- as a whole is conditioned. So,
state-owned banks and also merge some of the weaker ister says that the Taj Mahal does not tution faced the task of pushing and what am I to do? Can my mind,
banks with sound ones. However, mergers will not fix the represent India. It is not easy to spot prodding a deeply hierarchical, un- the conscious as well as the un-
the common link between that piece equal and divided society to change conscious, be free of society?

systemic problems that plague PSBs. Lowering the gov-
ernments equity stake will enable PSBs to overcome the
restrictions imposed by state ownership, such as low pay,
short tenures, political and bureau-
cratic meddling and the fear of falling
foul of audit and investigation agenci-
es that do not understand banking.
Their performance remains weak
gross bad loans of PSBs are expected
to jump to 14.2% in March 2018 from
10.1% in September 2017 compared
to their peers in the private sector. That must change. The
need is for deeper reforms for the government to dilute its
stake and let banks raise capital from the market. Taxpay-
ers will then be spared of the bailout bill. There must also
be intense competition among more new banks of differ-
ent sizes that includes payment and small banks to
achieve financial inclusion.
Non-state ownership should be accompanied by an ov-
erhaul of the incentive structure of senior bankers. Com-
pensation must rise significantly, but a large slice of the-
ir remuneration must be deferred, linked to long-term
performance and subject to clawback. This incentive to
perform must be complemented by autonomy to functi-
on efficiently. Rigorous regulation will serve the public
purpose. State ownership does not.
FILE PHOTO
of chatter on FM radio and the Uttar into the constitutional ideal. society being all the educa-
Pradesh governments profession of Some resisted change because it tion, culture, the norm, values
cultural nationalism. took away their privilege. Others re- and standards. Because if it is
But a link exists. Both are perver- sisted it because they thought it me- The idea of India not free, whatever change it tri-
se manifestations of loss of cultural ant loss of cultural authenticity and esto bring about within that con-
confidence and implicit assumpti- subjugation to foreign ideology. cows carcass or otherwise, showing plundered and ravaged the land, but ditioned state, is still limited
ons of what constitutes being Indi- They challenged the constitution- defiance to their superiors, when not others stayed put and governed the and, therefore, no change at all.
an. That question is central to the po- al ideal itself, on the ground that equ- choking to death in sewers. land and its people, adding to the So, can I look without any mo-
litical discourse in the country right ality and democracy meant inability richness of collective human experi- tive? Can my mind exist with-
now. Economic mismanagement is to assert the supremacy of the faith Glorifying Tradition ence and achievement. out any incentive, without any
easy to target and forge coalitions and culture of the majority Hindus. Nor can women find much comfort What helped them in this process motive to change or not to chan-
against, but does not define the core Yogi Adityanaths allergy to celebra- in a tradition that holds that they, is a combination of polytheism ge? Because any motive is the
of what democratic India confronts ting the Taj Mahal articulates the vi- along with the lowest castes, animals Hindus worshipped so many gods outcome of the reaction of a
today and has to defeat. ew that Indian authenticity can only and the drum, are qualified to be be- that addition of a few more hardly particular culture, is born out
be represented by Hindu icons and aten, and whose underlying value of mattered and the philosophy of of a particular background.
Indian vs Modern? that non-Hindu symbols reek of the subordination is elevated to high ca- non-duality, which posited the ulti- So, can my mind be free from
When Indianness is juxtaposed aga- subordination of Hindus by Muslim non by Manusmritis decree that wo- mate unity of the creator and the cre- the given culture in which I
inst modernity, the assumption is invaders and European colonialists men, protected at different stages of ated and, thus, deemed all difference have been brought up? Because
that to be Indian is to be pre-modern. for centuries. their life by father, husband and son, between things and individuals, and if the mind is not free from the
The radio jockey clearly believes The task clearly is to delineate do not deserve freedom. therefore of faiths and peoples as the culture in which it has been re-
that to be modern is to be western. what is Indian and to be retained in But does such inequality and in- delusion of the unenlightened. With- ared and nurtured, surely, the
The notion that western modernity the democratic reconfiguration of justice in Indias tradition make a ca- out such a framework of local thou- individual can never be at pea-
is just one form of modernity among traditional Indian society. se for its wholesale rejection? That ght, outsiders could not have made ce, can never have freedom. His
many possible forms of modernity, What does that pre-Sultanate auth- would be as ridiculous as rejecting themselves at home and flourished. gods and his myths, his symbols
or that it is possible to be simultan- enticity mean for those in the lower the Pythagoras theorem on the gro- Just as caste oppression and wom- and all his endeavours are limi-
eously both modern and Indian, is rungs of the social hierarchy into und that the Greek culture that pro- ens subordination were part of Indi- ted, for they are still within the
firmly outside his worldview. He is which Hindu society has been organ- duced it was built on slavery of the an culture and must be rejected from field of the conditioned mind.
not alone. ised? Even today, those from lowest majority. what modern India carries into the Whatever efforts he makes, or
future, awareness of Indias cultural
This view of the world is shared by rungs can be beaten to death for wat- Ancient India produced advances does not make, within that limi-
a large segment of those who can ching a garba, growing a moustache, in philosophy and mathematics, ast- achievements over the centuries ted field, are really futile in the
prattle along in English, even if they skinning a cow, refusing to remove a ronomy and medicine, in poetry, art must inform the project of building a deepest sense of that word. Th-
and architecture. To recognise this democratic India. ere may be a better decoration
and to take pride in this heritage of The success of project democracy of the prison more light,
human advance is not to acknowled- in India depends on inclusive Indian- more windows, better food
Democratic India needs a whole new concept of what ge the cruelty and oppression of the ness being placed at its core, reject- but it is still the prison of a par-
it means to be Indian, rejecting past inequality and caste system. But Indian history do- ing atavistic sectarianism. ticular culture.
es not stop with the advent of Mus-
incorporating the good and wholesome in tradition

PMs Welcome Warning

lim rulers. They invaded, yes, some tk.arun@timesgroup.com

Chat Room

on Swachh Bharat ATM Access

MEMES THE WORD
Spend, to Raise
Pvt Investment
It is welcome that Prime Minister Narendra Modi has declar- In sub-Saharan Africa, there were on average five times fewer bank
ed that only popular ownership can make a success of the branches and ATMs per adult than in the rest of the world, according Apropos How Down & Out
to IMFs latest annual Financial Access Survey. In contrast, Asia Are We? by Omkar Goswami
Swachh Bharat campaign, the rebranded and galvanised av- recorded a substantial growth. Heres a snapshot (Oct 3), the slowdown in
atar of the sedate, decade-old Nirmal Gaon Yojana in which growth may be attributed to
Automatic teller machines availability, 2016
the PM invested much-needed political capital. It is a warning Rather fail Top 10, by number 10 countries with worst access
factors such as sluggish in-
vestment, demonetisation,
to all those chief ministers who want to please the prime mini-
ster by reporting signal advance of the scheme in their states with honour Number (per 100,000 adults)

China 924,176 (81.5)

Per 100,000 adults (Number)

South Sudan 0.8 (54)

slide in manufacturing output
due to GST glitches, spiralling
and use all sorts of coercive measures to register that advance. than succeed US 425,010 (173.9) Afghanistan 1.1 (209) bad debt and stalled infrast-
With . 100 crore of taxpayer money spent on advertising by ructure projects. Floods,
2015, states are in a rush to trumpet their achievements: the he- by fraud. India 201,913 (21.2) Chad 1.4 (107) droughts and natural calami-
Russia 201,396 (168.7) Niger 1.5 (158) ties in recent past are respon-
avy hand of coercion now tries to enforce Swachh Bharat. Sophocles sible too. Four steps by the
Brazil 175,947 (108.8) Guinea 2.2 (160)
In Jharkhand, municipal authorities have a scheme called Playwright government increasing
Halla Bol, Lungi Khol, publicly strip- Japan 141,301 (127.8) Madagascar 2.6 (373) infrastructure spending,
ping people defecating in the open. On Oc- Indonesia 103,419 (54.7) Myanmar 2.7 (1,026) extending sops to revive the
MSME sector, cutting interest
tober 1, Maharashtra chief minister De- UK 70,020 (129.5) Burkina Faso 3.7 (376)
rates on retail and housing
vendra Fadnavis announced the ODF Canada 67,992 (222.9) Uganda 4.4 (942) loans, and resolving bad loans
Source: IMF

Watch that would force people to use toi- Thailand 64,115 (113.1) Mali 4.7 (440)
will help raise private
investment.
lets, or risk public shame. A scheme call- US data for 2009
ed Dabba Dol, where the containers of SANJAY TIWARI
people performing their ablutions are Hisar
snatched by vigilantes, operates in Madhya Pradesh, where a
policeman recently attempted suicide after being forced to cle-
NOTIONAL RENT TAX ON SECOND PROPERTY Citings Less GST Slabs,
an toilets. The Madhya Pradesh government has banned non-
More Growth

Its Never on the House

toilet users from contesting panchayat elections. In Chhattis-
garh, those not building toilets are denied access to subsidised
food. In Uttar Pradesh, vigilantes force villagers to clean their
On Private This refers to the Edit, Go for
a Single Rate of About 14%
(Oct 3). Though the FM has
own faeces by hand. In Rajasthan, civic officials attempt to Equity Deals hinted at convergence of GST
slabs over time, it is increa-
shame people defecating in the open by taking their photogra-
phs led to scuffles and one death. tion for the interest on a housing loan even if the actual rent received is less singly becoming a necessity.
PAMELA FUNG
taken to buy the second house is than fair rental value, it is the actual Confusion over categories,
The only way to make Swachh Bharat a success, and not turn allowed as a deduction from the fair rent that is considered for tax purpo- In terms of looking for a good classifications and slabs has
it into an instrument of oppression, is through voluntary com- rental value. And the balance is sub- ses, unless the income-tax authorities private equity fund, you look affected business sentiments
pliance. Once people realise the benefits of Swachh Bharat, ject to tax. prove that the transaction is shady. obviously at the managers across the
they will need no coercion to follow its principles. If you dig deeper, you will find that the An individual who has not been able past track record. Are the ret- nation, pul-
concept of levying income tax on the to let out his second house at all, has to urns good? Are they mediocre ling down
Lubna Kably fair rental value dates back to 1922, the go to great lengths to prove that he tried or not performing very well? GDP in H1. A
date of the original Income-Tax Act. to give this house on rent. Only by sh- However, we believe its not reduction in
The government in that era perhaps eer luck, and that too if he deals with just about strong performan- the tax slabs
Having adopted the goods and services did not wish to encourage taxpayers to an understanding income-tax officer, ce. When selecting a fund, we will bring
We should team up to ensure four staples tax, a major indirect tax reform, the accumulate wealth by owing multiple will the annual value of the second ho- look to understand the teams more taxpay-
are always affordable and available government is likely to turn its atten- houses. Surely, we have moved on use be accepted as nil. Or there may managing the fund, and their ers under the
tion to direct tax laws (a.k.a. the Inco- since then. be owners who do not wish to let out th- strategy and performance. GST net. That has been the

Tomato Trouble for

me-Tax Act, 1961, covering both corpo- An individual who owns a second eir second residential property at all We believe these qualitative experience in other countries.
rate and personal tax). house, which has not been let out at all as they are wary of doing so. Their ob- factors are an integral part of Another issue of importance
When its time to rewrite the income- during a financial year, has not earned jective could be to simply reap the ben- the decision-making process. is to bring petroleum products
tax laws, legislators should remember any income from the property. More efit of capital appreciation. If you look at a lot of the Asian under GST. The government

Pakistans Curries
Our subcontinent can occasionally do without the four esta-
tes of democracy but not those of curry: onion, garlic, ging-
er and tomato. So, the brave move by Pakistans social media
activists to boycott the fourth estate tomatoes or at least
those who control it, must be especially commended. It is not
easy to do without something that has become a habit, but tak-
ing on the tomato mafia on the issue of exorbitant prices is
obviously a righteous one. A similar boycott there of unexp-
ectedly expensive fruit during Ramzan has evidently inspir-
ed the current tomato abstention move. Unfortunately, Pak-
istans political class has not helped matters by deciding that
Indias tomatoes are not wanted even at the cost of curries
losing their tang and colour. Use yoghurt instead has app-
arently been the stern official rejoinder, but that is not always
a natural or feasible alternative.
The schadenfreude inherent in the Pakistani official stance
is evident: prices have fallen across the Radcliffe Line as Ind-
ian tomato farmers have been deprived of a lucrative season-
alexport income. But curries across Pakistan continue to suf-
that what should be taxed is income.
Ironically, our income-tax laws conta-
in provisions that tax a notional sum
that has not been earned at all. This
hurts many taxpayers who own a se-
cond house.
Many factors such as easier availabi-
lity of housing loans (replete with tax
benefits on payment of interest and the
principal sum), falling interest rates
on savings and lack of risk appetite re-
quired to dabble in the stock markets
make many turn towards real estate.
Having a second house is not uncom-
mon these days.
When it comes to residential property,
the income-tax levy should kick in only
when there is rental income or when
there is a sale of a property, which res-
ults in a capital gain. After all, income
tax is a levy on income.
However, if an individual has two res-
idential properties, only one can be
treated as self-occupied and exempt
from the clutches of the concept of no-
tional income and an income-tax levy
thereon. The other residential proper-
ty (second house), if vacant through-
out a financial year, is charged to tax
important, by not giving his house on
rent, he is not seeking to evade any tax-
es. Yet, merely because he is the owner
of a second residential property, he is
assumed to have earned rent and inco-
me tax is levied on the fair rental value.
But if this second house has been let
out even for just one month, the con-
cept of paying income tax on notional
income does not kick in. In such cases,
FILE PHOTO
There are innumerable cases in tax
tribunals relating to income-tax levy
on a second house that has been vaca-
nt all through the year. Unfortunately,
grey areas do exist in the tax land, and
if the income-tax levy is based on an
income that has not been earned at all,
it just assumes a darker shade of grey.
Incidentally, questions have been rais-
ed on the constitutional validity of the
income-tax levy. Decades ago, Bhagwan
Dass had petitioned before the Madhya
Pradesh High Court that inclusion of
notional rent in his taxable income was
unconstitutional as there was no acc-
rual of income in the true sense of the
term. His petition was rejected. Later,
in 1981, the Supreme Court that heard
the same matter observed that anythi-
ng that can be converted into income
can be reasonably regarded as giving
rise to income. Thus, the power to levy
income tax on notional rent was not
unconstitutional.
The legislature has in the past over-
turned many judicial decisions, inc-
luding those of the apex court. Given
the scenario today, where owing a sec-
ond home is not uncommon, perhaps
funds, Asia private equity is
pretty cyclical. In the pre-2005
era, many funds did very well.
Then the industry became
crowded and, I think, returns
have reverted to the norm.
Something I should menti-
on is how Asia differs from
the US and Europe. In particu-
lar, there are a lot of differen-
ces in sector specialisation. In
the US, youll find a lot of pri-
vate equity firms specialising
in one sector only. For examp-
le, weve invested with a group
that only focuses on helping
companies with their brand-
ing in the consumer space.
We view Europe as halfway
between the US and Asia, whe-
re specialisation is still emer-
ging. In Asia, youll see funds
focused on healthcare, a lot of
them consumer-focused. But
there arent a lot of true speci-
alists that you get in the US.
Theres already a lot of private
equity money in China, and
valuations are high compared
has to adopt a bold approach.
BHOLEY BHARDWAJ
Mumbai
They Just Need
Familial Warmth
Apropos At Least 58 Dead, 500
Injured in Las Vegas Attack
(Oct 3), the root cause of mass
shoot-outs in the US commit-
ted by juveniles can be traced
to a collapse of their families.
A high rate of divorce means
no parent at home to look after
the children, and they are left
with no one to guide them in
their formative years. As a
result, its easy for them to fall
prey to anti-social elements
and take to crime. It is now for
the social scientists to take a
serious note of such develop-
ments and plan steps to cor-
rect the anomaly.
ARUN MALANKAR

fer as they await consignments from Balochistan and Sindh.

based on a notional annual value it is time to abolish income-tax levy on to the rest of the region. Mumbai
It is time to consider specific subcontinental Curry Trade
(which is the fair rental value set by notional rent.
Agreements (CTAs) to guard against price rise and seasonal the municipal authorities). From How Private Equity in
Letters to the editor may be addressed to

fluctuations of availability. The only saving grace is that a deduc- Do pay our rent lubna.kably@timesgroup.com Asia is Changing editet@timesgroup.com