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A blessing or a curse?

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Economy

 The Global Investors Meet (GIM) which concluded on Friday the 4th June 2010, has thrown up a new monitory scale of lakh crore. With the all too common inflation this is no surprise. It can expand to infinity. The Tata nano has started its production line, when there is no parking space in metros like New Delhi, Bangalore etc.  Unfortunately the space on the planet earth is limited however much we wish it is not true. There may be enough petrol to run the nanos but no safe potable water to drink. It is an open secret that future wars will be fought for drinking water. There is enough petrol for our cars and excessive global warming too!!

 

The government armed with powers to acquire land with the magical development mantra can probably arrange for the lacks of acres of land. Is there a comparison of the same with decreasing value of money with inherent inflation? Landed property does appreciate with time.

 

When the GIM was in progress, with Mr. Yediyurappa wearing a brand new suit, an agitation was on at Mahatma Gandhi park circle at Cubbon Park by the people threatened of their precious land.

 The GIM has left us wondering whether our city / state blessed or cursed.

Comments

idontspam's picture

Why & who is losing?

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 Would be good if we can take up some questions asked by AK Agarwal on some other thread on tax rates for these industries. If somebody is getting 500% margin you tax him 450 of it. But if you close him down you lose 450 and he will make his 50 elsewhere.

Now one could be a dog in the manger and say I dont want 450 but I wont let him get his 50 for the next 5 billion years till sun burns the earth down. Good. Lets see you barter this goodwill for some potatoes internationally. We can then use those potatoes to pay for our metro.

Rithesh's picture

Taxes??

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Most of the investments would be made only on the promise of tax breaks/exemptions/duty exemptions. Oh forget taxes, the state would have promised to share the cost of initial investments too (subsidized water, electricity, roads - obviously the land was anyways subsidized). It would very interesting to get the details of the MoUs (RTIs???).

A ToI report today claimed that GoK requested Kingfisher to operate flights to Mysore and it had promised to share the loses it would incur. First they waste money to enhance the capacity of an under-utilized airport and they offer subsidies to airlines to use it.

Tax them! 450%!! Yes we have a great track record - The govt makes Rs.80 per tone of iron ore that is exported and the miners - depending on the market condition anywhere between Rs.5000 to Rs.10000. Havent they ever heard of "windfall tax".

The only way the govt will ever make money is from direct taxes - over which the state govt has no direct claim.
Naveen's picture

Tax irrelevant in the short term

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I don't think tax is relevant to this issue ('blessing or curse') in the short-term. The situation with so many poor & a growing population makes it far more urgent for state govt/s to find ways to generate employment - even wealthy western govts yearn for more jobs within their states or provinces, despite the luxury of controlled populations & land availability in abundance.

The state govt will probably be losing when deals are inked since they have the difficult task of "balancing" to ensure that land taken up for industries & development & terms set out are acceptable & affordable to these industrialists who bring in more jobs whilst at the same time, the original land owners are compensated well by payment & with job guarantees, etc for effected families.

The real benefits will begin to accrue later when many will be employed in these industries. They will be paying all sorts of indirect taxes besides income tax - sales tax, vehicle tax, etc - thus, state govts also have much to gain in the long term. This aside, the demand for power, water, better commitment for protecting the environment, etc will keep growing as we develop, & though we feel that we live in terrible cities now, life is anyday better than what it was in the past when people lived in caves, hunted animals & travelled on horsebacks.

And one day, perhaps generations later, people will wonder how we managed to move about in metalic contraptions that used up so much space & polluted the fresh air so much !!

Rithesh's picture

Govt not ready to disclose MoU

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In a rather unsurprising move, the govt has decided not to make public, the MoUs signed at the GIM. Our industries minster says that "time is not right" to disclose them. Wonder when it will be.

"I don't think tax is relevant to this issue ('blessing or curse') in the short-term."
-What's short term? tax waivers might be for as long as 15-20 years. Same would be the case of subsidized power/water/etc etc. Going by the same logic - shouldnt we stop collecting all sort of taxes from all industries - over a "long" time they might invest their profits back and more ppl might get jobs and buy cars, etc etc - and in the mean time all the other welfare sectors that depend on govt funds can go to hell and people dependent on them can go get jobs with the naxals.
psaram42's picture

Equal education opportunity / level playing field

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 It is true that with growing population there are more mouths to feed. Forcibly acquiring land seemingly on public interest is fraught with danger. Allowing mining in forest area, started by SM Krishna, is one such parallel example. SM Krishna’s political ascent from his Karnataka chief minister days is all but well known. He may be blissfully unaware of the havoc that this particular policy has caused later on by his rival parties. 

The Industrial revolution followed by IT revolution the rich have grown richer and poor more likely remained poor. To be born with a silver spoon is all that you need to keep the ball rolling. The solution is free and equal education opportunity to all rich / poor children alike.

 A wishful thinking indeed!

Naveen's picture

I don't believe anyone here

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I don't believe anyone here is expert enough to make allegations or level charges against the GIM proceedings. Govt may have it's reasons for the lower level of transparency, possibly because some effected groups had already gathered in protest at the meet itself.

All developing countries or states vie for jobs within their domains, even developed countries do. Those that seem so concerned about concessions made to industries must first find out what levels of concessions are being given in other states or in other countries before claiming that our states rulers have made huge blunders - we do not even know what was offered in the first place. This is not to say that all was okay at the GIM meet - since I'm no expert either & do not know what was offered to various investors.

Suffice to say that public good will always be at the expense of some private interests or some private groups (all can never be satisfied) - this is true anywhere in the world & therefore, all govts have tricky balancing jobs to do. It's just that in India, such private interests always find ways easily to scuttle efforts or delay progress to create more jobs & so, we therefore continue to lag far behind with so many still so very poor.

As to the comment about taxes not mattering in the short-term, the state would start gaining in many ways if employment was generated - & such employment would be in place once plants are set up & become operational - I think this was amply clear.

Free education for those in need is fine, but this alone cannot guarantee jobs - jobs need to be created too.

Rithesh's picture

Just being naive

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We are just being naive to think that "all is well".

Govt is not a private organization to lower its transparency as and when it wishes too. It is the people's resources that they are selling off. In the capitalist terminology we are the stake holders, equity holders, share holders. Would any share holder tolerate if the company in which they would have invested, hides facts from them?? Why should this be any different. Moreover the govt is not the owner of anything it is just the guardian. "Some groups" that were protesting were the share holders not some foreign agents or militants.

As someone pointed out else where, how is the govt going to supply water to these mega steel industries. It has to be drawn out of the farmers' share. Wont it affect our food supplies? I hope atleast people "believe" that we cant satisfy our hunger eating steel!!!

Someday when the govt comes to acquire our own personal belongings may be then we will understand what it is that the affected people face, may be then we will stop lecturing about "public good", "short term loses", etc etc.

And yes whats the point of creating jobs when people are not literate enough/healthy enough to perform them? Oh yes may be we should be import people from Guangzhou.
Ravi_D's picture

Different philosophies....

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Such philosophical debate continues for ever. But let us look at the history of Bangalore itself. At least some decent % of  IT Companies in Bangalore came in with 10 years STPI tax holiday scheme. Did the state loose its income? Aren't some of us in a position to participate in this debate because of the general prosperity afforded by these same institutions? Those offices where most of work, and houses where most of live were pastures at one time or another.

In my mind the real issue is about transparency and accountability. I want my GOK to give away incentives to those who offer the biggest bang for the buck. We have a growing population to manage on one hand, and limited resources on the other. So, we need to ensure that the guardians of these resources make the best possible use considering all different measures (jobs, water, electricity, pollution, land, people, region.... list is quite long).

But stopping land acquisition just because land is used for agriculture may not be a sufficient argument. Of course, reforms are needed there too. We all know that the we grow far less crop per given area of land. And waste far too much water in growing what we grow. Efficiencies here can far outweigh loss of land for industrial use. But that is a different discussion altogether.

Naveen's picture

Better understanding needed

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Someday when the govt comes to acquire our own personal belongings may be then we will understand what it is that the affected people face, may be then we will stop lecturing about "public good", "short term loses", etc etc.

Maybe some that argue endlessly here have never lost their own "personal belongings", but I can say that I am one that has already been effected - read this.

Despite this, I am in support for development as it benefits people more than it would if we simply just did nothing, with claims that food & water are scarce, & without understanding or knowing the subject fully. For their information, India is producing surpluses of most food commodities, but distribution has been poor due to inefficiencies in PDS.

Nobody said "all was well" with GIM. It's just that some choose to read things repeatedly in ways that suit their positions to continue arguing.

This is perhaps one reason why our democracy remains nascent & has not been performing well - frequent interference & claims by those that draw inferences from what little is known, calling themselves stake holders, equity holders, etc., & without trying to look at the broader picture & appreciate that some parties will end up losing when common interests demand more consideration.
After all, this govt is in place through elections. Unfortunately, since people tend to protest for just about everything, most govt or govt bodies respond with insuffuicient information & low transparency.

If people are worried about water for the farmers & food supplies, they could do better by trying to research about how water allocations are going to be made with these steel industries also getting set up, instead of assuming & claiming that water will become short for farmers & for growing food.

Ravi - agree with what you said about inefficient use of land & water for agriculture. This might also improve when the economy grows & farmers use mechanized methods to till lands. Punjab farmers have become a wealthy lot, thanks to mechanized farming.

Rithesh's picture

Choose the better option

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@Ravi

We are comparing 2 different models here. The software revolution that has contributed to our progress was not at the expense of nation's natural resources. If you look at regions like Whitefield, Electronic city, on an average they translate to direct employment to 400-500 ppl per aecer and probably a few hundreds more through indirect employment. If you look at the steel industries that are being proposed - one they translate to around 2-3 jobs per aecer and two they will be destroying forests.

Isnt it surprising that tribals were initially kicked out of forests because they were thought to be a threat to the forest and animals and now that they are out, these lands are being sold of to industries - if someone sees any logic in this please explain!!

And why do we live in this false notion that only manufacturing or service sector jobs are signs of progress. Havent we seen the farmers in Punjab driving Mercedes cars? Our farmers also just need to be educated. But then this involves more hard work than to just take this land and give it off to industries and pocket a good cut in the process. 

And its surprising that people are talking of India being self sufficient in food grains - over the last 5 years we have become a net importer of wheat and sometimes sugar and lot of other grains. And the food prices dont increase because we have abundance of food grains - they are signs of shortage.

It is a complete ignorance to state that farmers dont use water efficiently. You just need to travel to regions like Kolar and Chikballapur, where farmers with limited access to water get more than 2 crops in a year. If at all the water is not being effectively used, make sure it is effectively used and distribute it to a large group of farmers. You also earn foreign exchange by selling potatoes and onions - who ever quoted the Punjab example might know better.

Why is the fascination for counting only jobs generated in manufacturing or mining - if we cant increase our agricultural growth, it doesnt mean you kill it. Unless the agriculture sector grows there can be no inclusive growth. 

I didnt know some people can never change - what ever it is, i would rather want to see forests, hills than swanky malls or bus stations in their places. 

If the govt was so sure of their dealings, why shouldnt they publish the MoU. It is completely naive and irresponsible to believe that govt has "valid" reasons to not disclose them. If they were indeed so rightful Praja wouldnt have existed!

Naveen's picture

The Realities

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food prices dont increase because we have abundance of food grains - they are signs of shortage.

Increase in food prices is not confined to India alone but a worldwide phenomenon. One of the common reasons cited is high oil price. See these links:
http://www.csmonitor.com/2007/0724/p01s01-wogi.html
http://www.finfacts.com/irelandbusinessnews/publish/article_1011078.shtml
http://www.time.com/time/world/article/0,8599,1717572,00.html

It is a complete ignorance to state that farmers dont use water efficiently

See this: http://en.wikipedia.org/wiki/Agriculture_in_India

Excerpts:
Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation —  World Bank: "India Country Overview 2008"

The low productivity in India is a result of the following factors:

According to World Bank's "India: Priorities for Agriculture and Rural Development", India's large agricultural subsidies are hampering productivity-enhancing investment. Overregulation of agriculture has increased costs, price risks and uncertainty. Government intervenes in labor, land, and credit markets. India has inadequate infrastructure and services.

World Bank also says that the allocation of water is inefficient, unsustainable and inequitable. The irrigation infrastructure is deteriorating. The overuse of water is currently being covered by over pumping aquifers, but as these are falling by foot of groundwater each year, this is a limited resource.
Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce.
Inconsistent government policy. Agricultural subsidies and taxes often changed without notice for short term political ends.
The average size of land holdings is very small (less than 20,000 m²) and is subject to fragmentation, due to land ceiling acts and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour.
Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings.
Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 2003–04, which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth. Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent. At the same time overpumping made possible by subsidized electric power is leading to an alarming drop in aquifer levels.

if we cant increase our agricultural growth, it doesnt mean you kill it. Unless the agriculture sector grows there can be no inclusive growth.

Very true, but other sectors also need to grow simultaneously to cater to future needs. For best efficiency, mining & steel plants need to be located close to one another where reserves are located.

I didnt know some people can never change

Perhaps this is an apt reflection of oneself. I am even more surprised that some can be so inclined to mock others repeatedly for an example they had cited (about witnessing better progress overseas, instead of trying to use it purely as reference information for our own use, as it had been intended).

i would rather want to see forests, hills than swanky malls or bus stations in their places.

Who wouldn't ? The prospect of concrete towers or smoke spewing chimneys replacing greens wouldn't appeal to anyone, but the reality is that we will have another 300 million people soon to provide jobs for & to feed.

If the govt was so sure of their dealings, why shouldnt they publish the MoU. It is completely naive and irresponsible to believe that govt has "valid" reasons to not disclose them. If they were indeed so rightful Praja wouldnt have existed!

I think a major role for Praja is to bridge the divide between govt & the common people. In this regard, I think we must look impartially at everyone's interest & resist the temptation to incline ourselves to one school of thought or one set of ideas.
Our role is not solely to question authorities or keep tabs on errors they make, but to provide inputs & ideas through discussions or through project efforts that can enhance the quality of governance & delivery of govt services.

While I do agree in principle that transparency is desirable for everything that the govt transacts, it is also true that the populace is highly divided with far too many divergent interests & even more varying schools of thought. Thus, protests, demonstrations & strikes have been a way of life. To limit such disturbances, the govt has tended to keep certain things under wraps fearing that their initiatives might invite backlashes from groups that are effected. We prajas see the govt's reluctance to transparency as odd & questionable since most of us who seek better transparency are educated & would not resort to such tactics, but as we know, there are many such trouble-shooters that the govt has to take cognizance of.

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