The article “Congress politics and the economy” ( Business Line, June 27) reads very well and provides ample food for thought. Political calculations decide the person and appointment for the top post. This decision is regardless of whether reform policies are pursued or not.
The economy has reached a benchmark level of performance based on previous reforms initiated and carried out two decades ago. There are certain unknown strengths in India which keep the economy going and parties and persons do not really matter much.
It is in the parties' and politicians' interests to remain in power and not necessarily for the public, as the recent plethora of scams, black money and increasing corruption have shown.
T. V. Gopalakrishnan
(This article was published in the Business Line print edition dated June 29, 2011)
Wednesday, June 29, 2011
Friday, June 24, 2011
Is black money issue insurmountable?
This refers to the article' Our Black Money is here, not in Switzerland'( Sunday times Dt, June,19,2011). The author while giving out the details of black money in India rather than in Switzerland has highlighted the deficiencies in our tax administration. The income tax Department should do an introspection and satisfy themselves with the number of people paying tax in India is okay. It is widely reported that only 31 million people or 2.5 percent of the population is paying tax is itself a mockery and put the department into shame.
Millions of people are operating in the share market on a day to day basis. The number of transactions in bullion market, real estate, other commodities market and the amount involved would be of very high magnitude and indicate that tax evasion is rather convenient and permissible. Most of these transactions are in cash and generally receipts are not issued. Credibility of this market is very high among the customers and failures are seldom reported or not known. These are not secret transactions and there are specialised markets in almost all cities and towns.
The very basic approach to tackle black money and track the transactions would be to insist on issue of receipts witha copy to tax autorities for all types of transactions irrespective of the amount. Pan numbers and insistence of plastic cards, cheques above a cut off point would give a signal to market and black money can be minimised over a period of time. Information Technology needs to be properly put into optimum use. It is against all ethics and values that only 31 million pay income tax in India.
T.V.Gopalakrishnan
Millions of people are operating in the share market on a day to day basis. The number of transactions in bullion market, real estate, other commodities market and the amount involved would be of very high magnitude and indicate that tax evasion is rather convenient and permissible. Most of these transactions are in cash and generally receipts are not issued. Credibility of this market is very high among the customers and failures are seldom reported or not known. These are not secret transactions and there are specialised markets in almost all cities and towns.
The very basic approach to tackle black money and track the transactions would be to insist on issue of receipts witha copy to tax autorities for all types of transactions irrespective of the amount. Pan numbers and insistence of plastic cards, cheques above a cut off point would give a signal to market and black money can be minimised over a period of time. Information Technology needs to be properly put into optimum use. It is against all ethics and values that only 31 million pay income tax in India.
T.V.Gopalakrishnan
Sunday, June 19, 2011
Needed, an ombudsman for the housing sector
The economy has been hit by a variety of scams. Corruption is rampant. And the line differentiating black and white money is getting thinner by the day. One of the major sources of black money is the real estate business, with housing projects accounting for a significant share.
Tax evasion in real estate deals, involving builders, brokers, bankers and land owners, has been in existence for long. And the measures to curb black money generation have either been non-existent or seldom adhered to.
Liberalisation
The opening up of the economy in the early 1990s, the emergence of India as an IT powerhouse and financial liberalisation measures have led to GDP growth picking up, employment generation improving, and purchasing power of the people rising, especially with retail/consumer loans being granted liberally.
These developments resulted in a boom in the housing sector, and corporates and multinational companies began entering the sector in a big way to exploit the newfound opportunity to make huge profit.
The companies enter into agreements with landowners and banks to develop housing projects.
These are generally not vetted/approved by the authorities either at the State or Central level. Thus, neither the buyer's nor the Government's interests are protected.
The terms and conditions of the builders are generally in their favour and even if consumer interests are protected, the clauses are drafted so vaguely that they are seldom enforceable.
Individual owners of houses and apartments are invariably at the mercy of the developers and are duped in several ways. Cost escalation, delays in the execution of projects, pricing for built-up and carpet areas, among others, are areas where the prospective buyers are taken for a ride.
For instance, there are super built-up, built-up and carpet areas. The price quoted is for super built-up area, which is 30-40 per cent more than for the carpet area.
The standards for fixing the super built-up and carpet areas vary from city to city and within the same city it varies from builder to builder. The terms and conditions included in the sale agreement are not very exhaustive and verification of these in the sale deed is seldom done or attempted.
Having paid margin money and some of the instalments, the escape route is often sealed and the buyers are at the mercy of the builders/developers.
The country lacks a comprehensive/exclusive law to take care of the transactions and the related disputes under real estate, particularly in the housing segment in large cities and sub-urban centres.
Several laws
The transactions are governed by several laws which are incomprehensible even to the well-read. There are several Central and State laws applicable to real-estate-related transactions and it is practically impossible for ordinary people to have a clear understanding of the legal issues that need to be taken care of while undertaking a real estate deal.
Frauds are common, especially in the metros, involving banks, developers and buyers. Though the prospective buyers get legal opinions, the reliability and validity these are often questionable. And the accountability on the lawyers giving such legal opinions is virtually absent.
There are no adequate checks and balances to ensure that the deals by the developers and corporates are as per the rules and regulations, if any, and they stand scrutiny of the highest standards.
Systems are not in place to ensure full compliance with the laws of the land relating to land acquisition, laying of roads, provision of public parks, taxation, accounting standards and whether all the parties involved in various deals adhere to the prudential norms expected of them.
Generation of black money, corruption, misrepresentation of facts, irregularities before and after the deals are common allegations leading to total lack of credibility. The pricing is not subjected to any broad guidelines and is driven by corruption and greed.
In the process, along with the buyers, the economy suffers, as erosion in ethics and values with regard to land acquisition, developing housing projects, pricing pattern, accountability, and so on, affects all segments of society and the general credibility of the whole system is at stake.
The corporate giants in the field, being in the private sector, are not covered under the RTI Act and their accounting standards are not free from lapses and deficiencies.
They collect huge funds in different forms — such as corpus funds for maintenance of flats, common areas, clubhouse, gardens and security cover.
They promise parks and proper connectivity to main roads, markets, and so on. They charge for car park on ownership/lease basis, and the amount collected is generally exorbitant. The details of the money collected, the investments made from that, and so on, are not made transparent.
Maintenance costs
And, this apart, the builders collect amounts towards maintenance in lump-sum or monthly basis which often get revised upwards in the name of general escalation of costs.
In the case of large projects, the construction work is often never competed on time. And as they do not provide details of money collected from occupants and non-occupants, flats sold and unsold, and so on, it is not known who bears the maintenance charges for the entire project.
Presumably the entire maintenance is passed on to the occupants, although many flats remain unsold or sold to developers themselves and are not occupied.
By and large, the accounts in respects of projects completed and fully allotted are not made available to the welfare associations, if any, formed in the housing projects.
Lack of clarity
The developers do not care to answer genuine queries of the associations. They do not make clear the entitlements of the occupants regarding the undivided share of the premises (although the sale deeds indicate entitlement) and often have the intention of making money with such land at the cost of the occupants' welfare, convenience and rights.
If questioned, they quote some local laws and get away with it. If referred to the courts, the matter takes years to get settled and the corporates treat the occupants indifferently during the interregnum. The position with regard to insurance of the flats also varies depending on the builder, banker and prospective buyer.
A study of giant corporate housing projects reveal that with regard to dealings with the occupants, accounting standards, accountability to the local authorities and occupants there is need for some sort of regulation and grievances redress mechanism, particularly for the buyers.
A necessity
A national housing ombudsman would, therefore, be a necessity not only for prospective buyers but also for occupants and the authorities.
Consumer forums and the Consumer Protection Act cannot take on these types of cases as they are already flooded with several other cases and the complexities of housing-related cases differ in content and scope.
The need for some sort of checks and balances exclusively for housing projects would be welcome to ensure that all concerned conduct themselves appropriately and there is some semblance of order, uniformity in the maintenance of accounts and transparency in all these types of transactions.
T.V.Gopalakrishnan
This article appeared in The Hindu Business Line dated 20th June 2011
--------------------------------------------------------------------------------
Tax evasion in real estate deals, involving builders, brokers, bankers and land owners, has been in existence for long. And the measures to curb black money generation have either been non-existent or seldom adhered to.
Liberalisation
The opening up of the economy in the early 1990s, the emergence of India as an IT powerhouse and financial liberalisation measures have led to GDP growth picking up, employment generation improving, and purchasing power of the people rising, especially with retail/consumer loans being granted liberally.
These developments resulted in a boom in the housing sector, and corporates and multinational companies began entering the sector in a big way to exploit the newfound opportunity to make huge profit.
The companies enter into agreements with landowners and banks to develop housing projects.
These are generally not vetted/approved by the authorities either at the State or Central level. Thus, neither the buyer's nor the Government's interests are protected.
The terms and conditions of the builders are generally in their favour and even if consumer interests are protected, the clauses are drafted so vaguely that they are seldom enforceable.
Individual owners of houses and apartments are invariably at the mercy of the developers and are duped in several ways. Cost escalation, delays in the execution of projects, pricing for built-up and carpet areas, among others, are areas where the prospective buyers are taken for a ride.
For instance, there are super built-up, built-up and carpet areas. The price quoted is for super built-up area, which is 30-40 per cent more than for the carpet area.
The standards for fixing the super built-up and carpet areas vary from city to city and within the same city it varies from builder to builder. The terms and conditions included in the sale agreement are not very exhaustive and verification of these in the sale deed is seldom done or attempted.
Having paid margin money and some of the instalments, the escape route is often sealed and the buyers are at the mercy of the builders/developers.
The country lacks a comprehensive/exclusive law to take care of the transactions and the related disputes under real estate, particularly in the housing segment in large cities and sub-urban centres.
Several laws
The transactions are governed by several laws which are incomprehensible even to the well-read. There are several Central and State laws applicable to real-estate-related transactions and it is practically impossible for ordinary people to have a clear understanding of the legal issues that need to be taken care of while undertaking a real estate deal.
Frauds are common, especially in the metros, involving banks, developers and buyers. Though the prospective buyers get legal opinions, the reliability and validity these are often questionable. And the accountability on the lawyers giving such legal opinions is virtually absent.
There are no adequate checks and balances to ensure that the deals by the developers and corporates are as per the rules and regulations, if any, and they stand scrutiny of the highest standards.
Systems are not in place to ensure full compliance with the laws of the land relating to land acquisition, laying of roads, provision of public parks, taxation, accounting standards and whether all the parties involved in various deals adhere to the prudential norms expected of them.
Generation of black money, corruption, misrepresentation of facts, irregularities before and after the deals are common allegations leading to total lack of credibility. The pricing is not subjected to any broad guidelines and is driven by corruption and greed.
In the process, along with the buyers, the economy suffers, as erosion in ethics and values with regard to land acquisition, developing housing projects, pricing pattern, accountability, and so on, affects all segments of society and the general credibility of the whole system is at stake.
The corporate giants in the field, being in the private sector, are not covered under the RTI Act and their accounting standards are not free from lapses and deficiencies.
They collect huge funds in different forms — such as corpus funds for maintenance of flats, common areas, clubhouse, gardens and security cover.
They promise parks and proper connectivity to main roads, markets, and so on. They charge for car park on ownership/lease basis, and the amount collected is generally exorbitant. The details of the money collected, the investments made from that, and so on, are not made transparent.
Maintenance costs
And, this apart, the builders collect amounts towards maintenance in lump-sum or monthly basis which often get revised upwards in the name of general escalation of costs.
In the case of large projects, the construction work is often never competed on time. And as they do not provide details of money collected from occupants and non-occupants, flats sold and unsold, and so on, it is not known who bears the maintenance charges for the entire project.
Presumably the entire maintenance is passed on to the occupants, although many flats remain unsold or sold to developers themselves and are not occupied.
By and large, the accounts in respects of projects completed and fully allotted are not made available to the welfare associations, if any, formed in the housing projects.
Lack of clarity
The developers do not care to answer genuine queries of the associations. They do not make clear the entitlements of the occupants regarding the undivided share of the premises (although the sale deeds indicate entitlement) and often have the intention of making money with such land at the cost of the occupants' welfare, convenience and rights.
If questioned, they quote some local laws and get away with it. If referred to the courts, the matter takes years to get settled and the corporates treat the occupants indifferently during the interregnum. The position with regard to insurance of the flats also varies depending on the builder, banker and prospective buyer.
A study of giant corporate housing projects reveal that with regard to dealings with the occupants, accounting standards, accountability to the local authorities and occupants there is need for some sort of regulation and grievances redress mechanism, particularly for the buyers.
A necessity
A national housing ombudsman would, therefore, be a necessity not only for prospective buyers but also for occupants and the authorities.
Consumer forums and the Consumer Protection Act cannot take on these types of cases as they are already flooded with several other cases and the complexities of housing-related cases differ in content and scope.
The need for some sort of checks and balances exclusively for housing projects would be welcome to ensure that all concerned conduct themselves appropriately and there is some semblance of order, uniformity in the maintenance of accounts and transparency in all these types of transactions.
T.V.Gopalakrishnan
This article appeared in The Hindu Business Line dated 20th June 2011
--------------------------------------------------------------------------------
Friday, June 17, 2011
Inflation
June 17 , 2011 ,13:51 IST
The hike of 25 basis poins effected by the Reserve Bank in REPO, Reverse Repo in its policy announcement is a clear indication that Inflation needs to be contained at any cost even at the cost of growth.Though the needed support from the Government through its fiscal and other administrative policies to contain inflation has not been forthcoming,the Reserve Bank seems to have decided to fight the battle lonely and the measures taken are appropriate. The signal is clear and it is for the users of credit to minimise their cost of production without necessarily passing on the additional burden to consumers.The editorial is very apt and provides the message.
This comment appeared in e-business standard on 17th June 2011
T.V.Gopalakrishnan
The hike of 25 basis poins effected by the Reserve Bank in REPO, Reverse Repo in its policy announcement is a clear indication that Inflation needs to be contained at any cost even at the cost of growth.Though the needed support from the Government through its fiscal and other administrative policies to contain inflation has not been forthcoming,the Reserve Bank seems to have decided to fight the battle lonely and the measures taken are appropriate. The signal is clear and it is for the users of credit to minimise their cost of production without necessarily passing on the additional burden to consumers.The editorial is very apt and provides the message.
This comment appeared in e-business standard on 17th June 2011
T.V.Gopalakrishnan
Fighting inflation
The editorial “Strong diagnosis, weak prescription” (Business Line, June 17) has rightly pointed out that it is the failure of New Delhi to give a helping hand to the RBI in containing inflation. Of late, the Government has not been able to focus on managing the economy as it is faced with various other problems such as corruption, black money and the multitude of scams. Ministers are found busy sorting out issues with Baba Ramdev and the civil society and do not seem to be concerned with issues such as inflation, GDP growth, and so on.
The damage caused to the economy is high and it is time the Government spends quality time with the RBI and comes out with some convincing solution to check inflation.
T. V. Gopalakrishnan
This letter appeared in The Hindu Businessline dated 18th June 2011
The damage caused to the economy is high and it is time the Government spends quality time with the RBI and comes out with some convincing solution to check inflation.
T. V. Gopalakrishnan
This letter appeared in The Hindu Businessline dated 18th June 2011
Tuesday, June 14, 2011
RBI and Banks' NIM
This refers to the article' RBI must not dictate Bank Margins ( Et, Dt, June 9, 2011). The Reserve Bank has been harping for quite some time to bring down the Net Interest Margin of banks from the present level of around 3 percent and the author has argued aginst it citing a number of reasons. The net interest margin though , is a key driver of profitability of banks, it does not mean that banks have to keep a very high margin between deposit rates and interest rates on loans to maintain their profitability There are umpteen ways for banks to reduce their cost of funds and reduce the interest rates on advances. The non performing advances of banks and the cost of operations of Indian banks are very high compared to international standards and the productivity is also not of comparable levels.
The banks, public sector banks in particular have to increase their volume of business, improve productivity, reduce cost of funds, churn out the assets and liabilities optimally to minimise cost and maximise profit. They have also to review their nomenclature of loans portfolio which is at variance with international standrads. Financial inclusion should be viewd as an opportunity to raise funds at minimum cost and expand loans portfolio appropriately. Making profit through high NIM presently followed by Indian banks needs to be curbed and the Reseve Bank's approach only sounds healthy and worth pursuing seriously.
T.V. Gopalakrishnan
The banks, public sector banks in particular have to increase their volume of business, improve productivity, reduce cost of funds, churn out the assets and liabilities optimally to minimise cost and maximise profit. They have also to review their nomenclature of loans portfolio which is at variance with international standrads. Financial inclusion should be viewd as an opportunity to raise funds at minimum cost and expand loans portfolio appropriately. Making profit through high NIM presently followed by Indian banks needs to be curbed and the Reseve Bank's approach only sounds healthy and worth pursuing seriously.
T.V. Gopalakrishnan
Monday, June 13, 2011
Policy of pusillanimity -Editorial -The Hindu-Business Line
Very well thought out editorial.The fact remains that both the Government and the Reserve Bank have failed to take appropriate measures to contain inflation and the masses suffer. Economy also suffers.
The blame game between the Government and the Reserve Bank is only to confuse the masses. The failure of administration and fiscal management are the major factors contributing for price instability and for that the Government has to be blamed. It is time to assess how much fiscal policy contribues for inflation in terms of number so that responsibility can be properly fixed.
from: T.V.Gopalakrishnan
Posted on: Jun 13, 2011 at 07:24 IST
The blame game between the Government and the Reserve Bank is only to confuse the masses. The failure of administration and fiscal management are the major factors contributing for price instability and for that the Government has to be blamed. It is time to assess how much fiscal policy contribues for inflation in terms of number so that responsibility can be properly fixed.
from: T.V.Gopalakrishnan
Posted on: Jun 13, 2011 at 07:24 IST
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