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10 ISSUES AND INSIGHTS

MUMBAI | WEDNESDAY, 7 DECEMBER 2016

>

We, the audience

Social schizophrenia, intellectual arrogance and an unwillingness to pay
for content limit our choices

MEDIA SCOPE
VANITA KOHLI-KHANDEKAR

t the NFDC Film Bazaar last

month several independent
film-makers talked disparagingly about the quality of mainstream films
being made in India. Gripes about entertainment on television are common in
columns by TV critics or at any gathering when talk turns to entertainment or

media. Doordarshan made such good

shows like Buniyaad, is a line I have
heard ad nauseum. And of course
almost everyone laments the drop in
quality of discourse on news television.
Some of this is true. The quality of
television news in India is appalling.
But a lot of popular chatter about
media and entertainment content in
India stems from three things.
One, social schizophrenia and intellectual arrogance. Going by ratings data,
more than half of all TV viewing in India
is on general entertainment channels in
Hindi, Tamil, Telugu and other Indian
languages. A bulk of their programming
is soaps and that is what Indians men
and women enjoy watching of their
own free will. On news TV, the anchors
and editors who manage to get their
guests shouting and saying intemperate
things like Arnab Goswami did on

Times Now get the largest audiences

and revenues. BBC or Rajya Sabha TV are
not the most watched.
The schizophrenic relationship
Indians have with their media shows
up in ratings, readership and other audience metrics. Like that piece of research
from the 1980s, which showed that 70
per cent of the readership of a womens
magazine, Savvy, was actually men. Or
surveys that show that people want to
watch educational programmes. Yet
Discovery and National Geographic
remain niche although they are widely
available. And re-telecast of Buniyaad
several times in the last two decades did
not rock the rating charts.
The intellectual arrogance bit comes
from TV and film critics, many of them
from a Mumbai-Delhi-Chennai or another metro and/or English background, who
look down on popular entertainment.

The second is business structures. A

dodgy cable distribution set-up and
messy price regulation mean pay revenues never took off in TV. Real prices of
cable TV have fallen in the last two
decades. Its abject dependence on
advertising means everything from
news to entertainment remains, largely,
at a lowest common denominator level
since advertisers buy eyeballs.
The only industry segment where prices
have risen, with dramatic effect, is films. In
2000, the Indian film industry was a basket
case with bad films and theatres, which did
not declare half the money they earned.
Then it corporatised and multiplexes took
off. Both transparency and higher ticket
prices helped money to come back in the
system and the quality of Indian films
improved significantly. India makes better
popular films (Piku, 3 Idiotsand Badlapur)
and more critically acclaimed ones (The
Lunchbox), too. Its films are now routinely
screened and awarded at some of the best
film festivals around the world.
Globally, too, there seems to be a positive correlation between the money
paid for content and its quality. The
Economist costs ~220 but its content is
compellingly good even if you dont

agree with its point of view.

That brings us to the third reason
why the quality and diversity of Indian
media and entertainment content will
remain a national gripe: our unwillingness as users, audiences or consumers
to pay for content. Indians pay a fraction
of what it costs to print a newspaper.
Ever since this paper went behind a paywall online, there have been so many
requests for scanned copies of some article or the other. Most of us believe that
price regulation in TV is a good thing
while holding up Game of Thrones and
Sherlock, which come from robust pay
markets, as examples of good content.
Every attempt to offer a better product
and get consumers to pay for it in India
ZeeQ and Cbeebies, Worldspace
Radio or UTV World Movies failed.
This unwillingness then is the undoing of the business. Note that given a
chance even the most well-off people
pirate movies rather than pay for them
in theatres. And 2016 was a record year
for film piracy in India. Now studios are
scaling back or shutting down. Wait for
a fresh round of griping.

> CHINESE

Twitter: @vanitakohlik

Failure to read the difference

WHISPERS

Wallet boss as selfie celebrity

With cashless becoming the new
buzzword and mobile wallets the new
mode of transaction, bosses of
companies such as FreeCharge, Oxigen,
MobiKwik and Paytm are fast gaining
celebrity status. When the founder of a
wallet company went to meet top
officials at the finance ministry, several
junior officers walked up to take selfies
with him. Some volunteered to take
him on a guided tour of the offices of
the ministry.

Often, when laws are made in India, the merits of the objective sought to be achieved from them are conflated and projected
as the legitimately anticipated outcome

WITHOUT CONTEMPT
SOMASEKHAR SUNDARESAN

ever before has the National

Anthem been debated so much.
Indian society is abuzz with
arguments for and against the Supreme
Court ruling that the National Anthem
must be played in every movie hall, with
the doors of the hall being shut to avoid
insult to the forced rendition of the
anthem. But this column will not add to
the verbiage on the merits (or the lack of
it) of the judgment.
Instead, the anthem judgment
brings to the fore the human propensity to assume human reaction to legislative instruments. Every arm of the state
the legislature, the executive and the
judiciary is guilty of blundering with
misreading outcomes. The merits of the
objective sought to be achieved are often
conflated and projected as the legitimately anticipated outcome.
The legislature (Parliament and state
Assemblies that make law) as well as
the executive (central and state governments that use delegated powers to
make law) routinely misread potential
outcomes when making law. Specificity
in defining the objective is itself a tall
ask. They rely primarily on intuition.
The near-absence of pre-legislative consultation makes matters worse. The
measurement of intended outcomes is

made difficult right from the time the

law is written.
However, the judiciary, which legislates, particularly when dealing with
public interest litigation, too, makes
the same mistakes, although limited
pre-legislative consultation takes place.
Any member of society can call upon
the judiciary to write law, often citing
the reluctance or failure of the legislature and the executive to work on solutions. Despite growing reluctance, several laws get written in this space. The
parties before the court air their views
about the measures the court must
adopt, and eventually un-elected
judges make policy choices. The consultation may be only with those before
the court, who are interested in defining the problem and the solution, yet,
severe capacity constraints make it
hard for judges to take measures that
deliver intended outcomes.
To write law, one would need to hone
the capacity to think through a defined
problem statement, and then choose
from competing policy choices to structure a solution. The comparison of competing potential legislative measures and
weighing it against the potential benefits
of each measure, is not a matter of judicial
skill or training. It is a matter of administrative training and policy choice skill.
However, in this department, all three
arms of the Indian state can display quite
a serious degree of inadequacy. Worse,
without articulation of intended outcomes, the measurement of the efficacy
of the law becomes suspect.
Take the example of the environmental entry charge imposed on vehicles entering the National Capital
Region comprising Delhi and its surroundings. The stated objective of the
law was to curb air pollution in Delhi. It
was believed that a substantial chunk of

Mother-in-law of invention

CAUGHT IN A HAZE No one wondered how the law imposing a charge on entry of vehicles into Delhi, fundamentally
driven by the intended (if not promised) outcome of curbing air pollution, had not met its stated objective
the pollution came from vehicles. It was
felt that imposing a charge on entry of
vehicles into Delhi would create disincentives to ply via Delhi and thereby
curb pollution. This was a fully judgemade law that later came to be adopted
by the executive formally. This year,
Delhi has faced its worst air pollution
crisis. The thick haze is attributed to
multiple factors this time newer factors are being guessed ranging from
burning of farmland waste to fireworks
after the Diwali festival. No one wondered how the law imposing a charge on
entry of vehicles into Delhi, fundamentally driven by the intended (if not
promised) outcome of curbing air pollution, had not met its stated objective.
The death penalty is an easy example of legislature-made law failing to
deliver promised outcomes. When the
Nirbhaya assault case occurred in

Amazon promotes a grab-and-go experience

Customers can pluck items and walk out without having to wait in a checkout line
NICK WINGFIELD

Amazon employees outside the Amazon Go brick-and-mortar grocery store

PHOTO: REUTERS
without lines or checkout counters in Seattle
expansion plans were for Amazon
Go. If they are anything like what the
company has done with its other
bricks-and-mortar stores, new
locations will open elsewhere slowly
over time as Amazon learns how
customers use the first one.
Amazon opened its first physical
bookstore just over a year ago in a
Seattle shopping mall. It has added
others in the San Diego and
Portland, Oregon, areas and has said
it will open new bookstores in
Chicago and Boston.
It is also working on another
grocery store concept that would
allow customers to order food items
online and then pick them up
quickly by pulling into parking
stalls. Two such stores are under
construction in Seattle, according to
documents filed with the citys
planning department and people
with knowledge of the effort who
asked for anonymity because the
plans were confidential.

ineffective measure, there would be no

need to debate the measure. If the need
for spirit of patriotism were lofty
enough, the lawmaker would hope that
there need be no debate on whether the
measure is successful. Whether singing
the anthem before a movie starts would
achieve the outpouring of love for the
nation would then become secondary.
Whether black money would actually
be curtailed by demonetisation would
become secondary. So long as it is
intended to hurt black money, supporters of the measure would not want a
debate on the efficacy of the measure. In
much the same way, the efficacy of an
entry charge on vehicles plying into
Delhi, would ostensibly curtail air pollution in Delhi.
The author is an independent legal counsel.
He tweets at @SomasekharS

The various colours of revoution

There was generous use of the saffron
colour in the decor and brochures
of Petrotech 2016 in Delhi. The summit, in
its 12th year, introduced a new
term for the expected growth in Indias
energy sector. In line with Indias
white and green revolutions in the past,
the organisers said the country was
on the threshold of a saffron
revolution. Saffron is the colour of
energy, they said. The ruling party at the
Centre, the Bharatiya Janata Party also
uses the colour saffron in all partyrelated symbolism.

> LETTERS

BUSINESS LIFE

There is almost no aspect of retail

that Amazon has not upended with
online shopping. Now, the company
is trying to computerise the
experience of buying sandwiches
and soda from the corner
convenience store.
In the latest in its expanding set
of experiments involving bricksand-mortar retail stores, Amazon
has created a small grocery store in
Seattle that will allow customers to
pluck drinks, prepared meals and
other items off shelves and walk out
without having to wait in a checkout
line, the company said.
Amazon said on its website that a
smartphone app and various other
types of technology in the store had
eliminated the usual bottleneck of
cashiers and registers that typically
stand between shoppers and the
store exit.
For now, only Amazon
employees can shop in the
1,800-square-foot store, which is on
the ground floor of one of the
companys new office towers in
downtown Seattle. The company
said that it planned to open the store
to the public early next year and that
it would offer chef-made meal kits
with ingredients for quickly
preparing dinners at home.
Four years ago, we started to
wonder: What would shopping look
like if you could walk into a store,
grab what you want and just go? a
narrator says in a video about the
store concept, called Amazon Go,
which the company posted online
on Monday.
Amazon did not say what its

December 2012, people took to the

streets demanding action. As is wont,
instead of looking at how to better
enforce existing laws, we ended up writing a new law partly as a measure of
placating the mob, with the demand for
law being satisfied and to ensure that
the demand for bloodshed was made
redundant. Definitions of sexual assault
were changed. Punishment was
bumped up to bring in the death penalty. In August 2013, the Shakti Mills sexual assault took place. No one wondered
how the new law, fundamentally driven
by the outcome of the crime, had not
met its stated objective.
On the executive side, demonetisation is the live and classic example of the
stated objective being conflated with
the potential outcome. If the seriousness of the purpose for which a law is
proposed were adequate to justify any

One-liners flew thick and fast at a

session moderated by Vijay Mahajan
(pictured) of BASIX group during the
Inclusive Finance India Summit. A
member of the audience asked how
new-age digital payment players such
as Paytm, which had access to user
data, ensured that such data were not
misused to mis-sell financial products
to the poor. Paytm Chief Financial
Officer Madhur Deora said all these
products were regulated closely and
that would ensure there was no
misuse. To this, Mahajan said:
Someone said necessity is the mother
of invention. But regulation is the
mother-in-law of invention. It is
usually behind the curve, but
eventually catches up.

Pia Arthur, an Amazon

spokeswoman, declined to comment
on the grocery pick-up locations.
In the grand scheme of Amazons
business, analysts consider the retail
stores to be an infinitesimal portion
of the more than $135 billion in sales
expected from the company this year.
But the plans reflect a growing
recognition by the company that
certain categories of shopping are
unlikely to move completely online.
In some cases, it is simply more
convenient to buy items in a store or
more attractive to browse for them
on physical shelves.
The way we think about it is the
size of online retail is going to
continue to grow dramatically but
there will always be an offline
option, said Gene Munster, an
analyst at Piper Jaffray. Theyre
trying to streamline and capture a
portion of that offline experience.
2016 New York Times News Service

Decadent approach
With reference to the editorial, Not profitable (December 2), I wholeheartedly
support the view of this newspaper that
the anti-profiteering provision in the
proposed goods and services tax (GST)
law would be against the interest of trade
and industry. I would add that the proposal to make an anti-profiteering
authority would be a great hurdle in promoting ease of doing business. It would
be nothing short of a debacle.
On enquiry, I learnt that 18 per cent
profit was tentatively suggested to be the
limit above which it would be taken as
profiteering. This has not been finalised
but even considering this line shows how
decadent the thinking can be.
First, such a provision would take
away from a company all desire to reduce
cost and become efficient and profitable.
Second, companies such as SAIL, TISCO,
which make profit and loss at different
times depending on international
demand for steel, would get eliminated if
they are not allowed to make profit of
any amount when the opportunity
arrives. Third, it would throttle innovation. No company will invest in research
and innovation if they cannot make a
profit. How will they finance research, if
they do not make sufficiently high profit? Fourth, a company cannot grow and so
also the country if high investment is not
made by either private or government
companies. And last, all start-up companies would be ruined as they make no
income for long and when they invent
something they make a one-time large
profit, that too, if they succeed at all.
If a company pays all taxes properly
and abides by all laws, how can the government stop it from making any amount
of profit?
No other country except one has this
kind of law. Not the USA, UK, countries in
Europe, Japan, China or Russia. Only
Malaysia has it. The Empowered
Committee noted this. Since when has
Malaysia become the leader of thoughts

in economics to our GST Council?

Let me also point out that the unjust
enrichment law framed in 1989 still exists
and has not been given a quiet burial, as
the editorial states.
Sukumar Mukhopadhyay New Delhi

Orphaned by Jaya death

Apropos the report by T E Narasimhan
and Gireesh Babu, Jayalalithaa dead at
68: How Komalavalli became the Iron
Lady of Tamil Nadu (December 6), the
film-star-turned-politician was a reluctant entrant to both fields.
In an interview she had said: I hate
cinema, but my mother forced me into
film; I hate politics, but MGR forced me
into politics. Still I hate politics. But she

> HAMBONE

proved her merit in both the fields.

Especially in politics, she proved to be a
natural leader and controlled the
AIADMK with an iron hand.
Her political life was full of turmoil.
She was nominated to the Rajya Sabha in
1984. She was kicked and pulled down
from the gun-carriage carrying MGRs
mortal remains by actor Deepan, the son
of the younger brother of Janaki
Ramachandran. But Jayalalithaa put up
a courageous fight and proved that in a
democracy a successor to a political legacy is decided by the people not heredity.
She became Tamil Nadus youngest chief
minister in 1991.
Jayalalithaa passed through her most
traumatic phase when she first went to
jail in December 1996. She decided to quit
politics. But her indomitable fighting
spirit did not allow her to give up.
Although she faced charges of corruption, her popularity among the people, especially women, was arguably
every politicians envy. With her 18 populist schemes her popularity touched the
sky. It would not be an exaggeration to
suggest that her death has made the people of Tamil Nadu orphans almost.
Buddhadev Nandi Bishnupur
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 E-mail: letters@bsmail.in
All letters must have a postal address and telephone
number

BY MIKE FLANAGAN

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OPINION 11

>

STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM.

Volume XXI Number 80

MUMBAI | WEDNESDAY, 7 DECEMBER 2016

ILLUSTRATION BY AJAY MOHANTY

Tamil Nadus Amma

Jayalalithaas rule and demise have lessons for other leaders

he death of J Jayalalithaa brings down the curtains on one of independent Indias most charismatic political leaders. In a remarkable political
journey, Jayalalithaa has left a huge imprint on how state governments
can use policies to not only win over the masses but also work towards
industrial growth, a feat few states have managed to emulate. Born in Karnataka to
a Tamil Iyengar family, Jayalalithaa started off as a film actor when in her teens.
Between 1965 and 1973, she delivered 28 successive hits with MG Ramachandran,
the iconic film star of his age. But, the biggest role of her life was when she followed
MGR into politics and swept aside gender biases to become the sole leader of the All
India Anna Dravida Munnetra Kazhagam (AIADMK) and the chief minister of Tamil
Nadu in 1991. In the next two-and-a-half decades, she fought with her arch-rival M
Karunanidhi of the Dravida Munnetra Kazhagam (DMK) for the chief minister (CM)s
position in the state. But, every time she came to power she became the CM on
five occasions Jayalalithaa administered the state with striking astuteness.
Her approach to governance efficient, near-authoritarian and businessfriendly set the template for chief ministers across the country, from Nitish
Kumar to Narendra Modi. She often asserted every time she came to power after a
spell of DMK rule that she had to contend with a knocked-down house and had
to rebuild the state. However, while she pushed for industrial growth, she also
came to be known as the mother of welfare schemes. Amma (or mother), as her followers called her, stressed on providing several products of essential need, from salt
to cement and from bottled water to baby care products, at subsidised prices, or even
free, to the poor in the state. This came with a cost; during her current rule, Tamil
Nadus fiscal deficit to state output ratio has steadily risen from 2.2 per cent in 201213 to 2.9 per cent in 2015-2016. But, this is still below the cap mandated by the Finance
Commission. On the flip side was her reputation of administrative efficiency that
contrasted favourably with the DMKs, and her record of propelling the state among
the best in the country across parameters. Be it health (infant mortality, fertility rate
and maternal mortality) or education (gross enrolment ratio, especially for the girl
child) or crime (against women, SCs and children) or indeed, industrial growth and
employment generation Jayalalithaa ensured that Tamil Nadu not only surged
to the top but also that it stayed there.
However, her career was not without blemishes as she faced a string of corruption charges on two occasions (2001 and 2014) she had to resign from the CMs post
after being convicted of wrongdoing, although she was eventually acquitted in both
the cases. Moreover, she seemed to approve of the cult following she enjoyed not just
among her followers but also among her cabinet colleagues. The disadvantage of this
approach is the lack of clear succession in the party. Even though her finance minister, O Panneerselvam, has been sworn in as the new chief minister, there is an uneasy
calm since there was no obvious successor in the AIADMK. Many expect Jayalalithaas
trusted aide Sasikala Natarajan to be the real power centre within the party. A battle
for control within the party in the coming days could be a serious blow not just to
Jayalalithaas legacy but also to Tamil Nadus growth record. Her death, in that
sense, could be a wake-up call for many regional parties led by dominant leaders that
do not develop a second rung to take over when the time comes.

The message from Italy

The referendum signals the rise of anti-establishment populism

he recovery of global financial markets after they digested the results of

Sundays referendum in Italy may be misleading. True, the referendum
was not an immediate vote on the European Union (EU) and the Euro
zone, as some right-wing parties have suggested. But, this is precisely
where Italy could be headed as Matteo Renzi, the centre-left prime minister of the
country and considered to be one of Europes more credible leaders, steps down
after a resounding no verdict by voters to his proposal to institute sweeping constitutional reforms to streamline the countrys parliamentary and administrative
systems. With Italy, Europes fourth-largest economy, drowning in debt at 131 per
cent of the gross domestic product and unemployment running at over 12 per cent,
Mr Renzi had instituted several reforms to spur growth. His constitutional reforms
were part of this matrix, aimed at removing some of the frustrating procedural
blocks that made speedy decision-making difficult.
Mr Renzis biggest failure, however, was his inability to solve the crisis in Italys
banks staggering under bad debts worth some $385 billion, constrained by EU rules
that limited his ability to spend his way to growth, which remained anaemic during his two years in charge. How far a caretaker government will be able to negotiate a taxpayer bailout of Italian banks remains an open question. Of equal concern is the fact that Mr Renzis defeat opens the way for the rise of the populist Five
Star Party, led by a former comedian Beppe Grillo, which scored significant successes in local elections earlier this year with its unabashed agenda of an EU exit.
Indeed, the Italian referendum, coming just months after the British exercise
to leave the EU and the election of Donald Trump in the United States, raises
broader concerns about the future of the worlds two largest economies. With elections looming within a year in the Netherlands, France and Germany, the signals
from these developments, of a shift to anti-establishment populism as represented by the Five Star Party, are disquieting. Though the far-right leader Norbert Hofer
was recently defeated in a re-run of the Austrian presidential elections by a left-leaning rival, this can scarcely be considered a trend, chiefly because the presidents role
is largely ceremonial. In the Netherlands and France, far right candidates Geert
Wilders and Marine Le Pen are drawing large crowds with their xenophobic campaigns against the EU and immigrants. In Germany, Angela Merkels open-door policy towards refugees and immigrants is under pressure from a restive opposition.
Perhaps most worrying of all is that these developments will turn Europe
inward-looking just as the bloc urgently needs to shape a united response to Mr
Trumps aversion to Americas NATO (the North Atlantic Treaty Organization) obligations and his decided partiality for Vladimir Putin. No surprise, then, that Mr
Renzis compatriot Mario Draghi, president of the European Central Bank (ECB),
has found that his job just got a lot tougher as the ECB meets to discuss whether
to extend its quantitative easing programme this Thursday, a task that would have
been easier had Italy stayed committed to Mr Renzis reform programme. With the
European project increasingly under threat, turmoil will be the only constant for
global financial markets going forward.

Books of the Year

SPEAKING VOLUMES
NILANJANA S ROY
Some of the pleasure of a Books of the
Year list is felt by the reader, but only
some. I hope I never grow so jaded as to
lose the pleasure of going over each
months reading diary, revisiting the surprise of discovery, the deeper satisfaction
of letting an author unsettle you. This is,
as always, a partial list but it might be a
useful starting point.

Books of the times

Secondhand Time Svetlana Alexievich
(Juggernaut): Told like a novel in voices,
Ms Alexievich collects oral histories of the
Soviet Union that read like warnings to all
citizens of the new, rising post-democracy
empires: For every true believer, there are
a dozen of the disillusioned, the cost of
shattered dreams of a new world paid in
the hard coin of peoples lives.
East West Street: On The Origins of
Genocide and Crimes Against Humanity
Philippe Sands (Knopf): This should be
read by all dictators and caudillos, and if
not, then at least by those they rule over.
Ms Sands traces the concepts of enormous crimes through the two men who
fought to bring justice to a bloodied
world; one of the most powerful reads of
this decade.
Homo Deus: A Brief History Of Tomorrow
Yuval Harari (Harvill Secker)
Whats more valuable intelligence or
consciousness? For a vision of the future,

Demonetisation and
the cash shortage
The liquidity crunch may extend far beyond the calendar year. A
quick way to remonetise would be to import currency notes

ormally, current and savings accounts at

commercial banks are fully and freely convertible into cash at par. Post-demonetisation, with interruption of this convertibility, from
November 10, when banks opened for business after
a days closure, the country has
suffered a cash shortage. You
cannot withdraw as much as you
want of your money from the bank
in cash. Visuals of long queues and
endless waits at banks abound
in the media. The cash shortage
has disrupted peoples lives
and economic activity. It needs to
end soon.
The suspension of the legal tender status of the pre-existing ~500
and ~1,000 notes beyond
November 8, 2016 by the govern- ASHOK K LAHIRI
ment and the Reserve Bank of
India (RBI), together with the associated cash shortage, has been a matter of intense debate. Questions
have been raised about its relative costs and economic benefits, and even its morality.
The demonetisation, according to the government, has the twin objectives of curbing the menace
of fake Indian currency notes and eliminating black
money. Interestingly, the two previous episodes of
banning high-value notes, on January 12, 1946 and
on January 16, 1978, also expressed the objective of
containing black marketing or black money.
Demonetisation as an antidote for black money
has been popular for some time. For example, in
1972, when Marudur Gopalan Ramachandran left
Dravida Munnetra Kazhagam (DMK), the socio-economic principles and objectives expounded by his

All India Anna DMK (AIADMK) was called Annaism,

named after the late C N Annadurai. Annaism
included demonetisation of hundred-rupee notes
to eliminate black money.
Examples of other countries discontinuing highvalue currency notes and of countries experiencing cash shortage
exist, but separately. Canada
stopped issuing the Canadian
$1,000 notes from September 2010,
as it was often used for money laundering and organised crime. Given
the risks associated with large-value cash transactions and high-value
notes, Singapore, in July 2014,
decided to stop printing the
S$10,000 note, one of the worlds
most valuable bank notes. The
European Central Bank, in May
2016, announced that it would stop
printing the ^500 notes from 2018. In these countries,
while the banks were advised to return the highdenomination notes to the central bank for destruction, these continued to be legal tender. This and the
introduction of a new ~2,000 note in India are the two
major differences between the stoppage of printing of
high-value notes in other countries and the recent
Indian demonetisation.
Some countries have also suffered cash shortages, but only under exceptional circumstances,
such as hyper-inflation (e.g., Austria in 1922),
dependence on another countrys currency (e.g.,
Panama under Manuel Noriega), dependence on
foreign printers and shortage of foreign currency to
pay them (e.g., Albania in mid-1992), and break-up of
a country (e.g., Yugoslavia and the former Soviet

Union). The on-going cash shortage in India is without any of these exceptional antecedents.
A large shadow economy is estimated by some at
over a fifth of gross domestic product. This, along
with the change in societal norms towards a more
accepting attitude, bordering cynicism, towards
black money, is troubling. The big painful jolt of
demonetisation creates the right psychological
milieu for the war against black money to start, some
claim. Are government steps, such as the Income
Declaration Scheme (IDS) in the Budget for 2016-17,
monitoring black money stashed abroad with the
Tax Exchange Information Agreements with several countries, the August 2016 amendment of the
Benami Transactions (Prohibition) Act of 1988, and
the Taxation Laws (Second Amendment) Bill in
November 2016, part of a concerted plan? Will it be
any different from what followed in 1946 and 1978?
Only time will tell.
In the meantime, what needs to end soon is the
cash shortage. Cash is the preferred medium of
exchange in several transactions, such as in vegetable
markets, for road transportation and even some segments of retail trade. It is the lubricant that keeps the
wheels of the economy moving. Vegetable prices,
normally low around this time of the year because of
seasonal factors, for example, have been further
affected by the cash shortage. Almost a half of the
third quarter was without any cash shortage, but if the
shortage continues, its full impact, including on real
economic activity, will be in the fourth quarter.
Of the ~16.6 trillion cash circulating on March 31,
2016, as much as over 85 per cent was circulating in
15.8 billion and 6.3 billion pieces of ~500 and ~1,000
notes, respectively. By November 8, the numbers
may have grown to 16.6 billion and 6.5 billion, respectively a total of 23.1 billion pieces demonetised.
The government claims the shortage will disappear
by end-December. Some commentators say it will
take much longer, perhaps as long as May, 2017.
How long the cash shortage persists will depend on
how many of the demonetised notes will have to be
substituted and how soon the substitute notes can be
secured and distributed. The payments system in
India may indeed be in the cusp of a revolution and its
transformation may be as fast as that of telephony in
the recent past. India may be moving towards a less
cash-intensive economy, and the demonetisation
itself may hasten the move, but this movement by
itself is unlikely to make the post-demonetisation
cash shortage disappear.
Bank notes are printed at four note presses: At
Nashik, Dewas, Mysuru and Salboni, owned by either
the government or RBI. According to the latest annual
report of RBI, the total number of notes supplied was
20.9 billion in 2013-14, 23.6 billion in 2014-15 and 21.2 billion in 2015-16, and such supply fell short of indent by
17.5 per cent, 2.3 per cent and 11.3 per cent, respectively. The maximum ~500 and ~1,000 notes supplied in the
last three years were 5 billion and 1 billion in 2014-15. The
cash shortage may take far beyond the calendar year if
the reliance is only on supply from these four presses.
A quick way to relieve the shortage is to employ the
strategy followed by Prime Minister Atal Bihari
Vajpayees government in 1998. To rapidly wipe out the
cash shortage, among other things, it decided to import
3,600 million pieces of printed notes adding up to a face
value of ~1 trillion.
The writer is a former chief economic adviser

Choosing the tax implementers well

W

ith the government

months. Indeed, 2016 has seen
announcing a new tax
four persons occupying the posiimmunity scheme in
tion of the CBDT chairperson.
the wake of demonetisation and
The tenures of CBEC chairpersimultaneously readying itself to
sons are slightly longer, though not
roll out the goods and services tax
of a desirable length by any stan(GST) regime, more attention
dard. The current chairperson,
needs to be focused on the funcNajib Shah, was appointed in July
tioning of two statutory boards of
last year, but will demit office on
the revenue department in the
superannuation by the end of
finance ministry the Central
March 2017, just before the GST is
Board of Direct Taxes (CBDT) and
due to be rolled out. Two of his
the Central Board of Excise and
immediate predecessors had a
Customs (CBEC). Expectations A K BHATTACHARYA
shorter tenure of just eight months
are running high. The CBDT is
each. And the longest tenure any
hopeful of securing a record level
CBEC chairperson has enjoyed in
of black money disclosure under the ongoing tax the last seven years is 18 months (Praveen Mahajan
immunity scheme as much as ~1.5 lakh crore, between August 2012 and January 2014). What leadmore than double the amount declared in the last ership can anyone provide to a board if the tenure on
income disclosure scheme that ended on September average ranges between eight and 18 months?
30, 2016. The CBEC, on the other hand, is working
Consider also the irony of the situation. The current
overtime to implement the GST regime by April 2017 CBEC chief, who for the last 17 months has been trying
a task that is by far the most difficult and ambi- hard to overcome the many procedural, administrative
tious indirect tax reform in this country.
and legislative hurdles coming in the way of a counYet, the two boards suffer from one major lacuna trywide GST regime, will not be there to lead the efforts
frequent changes at the top. But thats not because to ensure a smooth roll-out of the new indirect taxes
the government has been cutting short the tenure of system from April 2017. In terms of taking advantage of
those at the helm of these boards. The fact is that continuity, experience and domain expertise, the
most of those who take charge of these boards have departure of the current CBEC chief at a crucial junconly a few months left before they superannuate on ture like this would be a significant handicap. Not that
reaching the prescribed age of 60 years. Take the case the successor to Mr Shah would fail to implement the
of the current CBDT chairperson, Sushil Chandra, GST system. But there is no denying that the governwho was appointed in November this year and in the ment would lose the obvious advantages of the current
normal course will retire by May 2017. His predecessor, CBEC chairperson remaining in charge of impleRani Nair, had a tenure of four months during which menting the new tax system at least for a few more
period she rolled out the governments ambitious months during the early stage of its implementation.
income disclosure scheme that netted over ~67,000
The current structure of the CBEC also needs to be
crore of black money. Even her predecessor, Atulesh modified in tune with the launch of the GST regime
Jindal, had a tenure of just five months and several of from April 2017. There are now four members of the
his predecessors too had tenures of only a few months board one each looking after the portfolios of
in the top job, two of whom served only for two-three administration, Budget & GST, customs & legal and

NEW DELHI DIARY

shaped by technology, vastly unequal,

richly creative but ushering in a troubled
modernity, Harari is your prophet.

Mahajan (Viking): A small bomb tears

through the lives of the Khuranas, in this
unforgettable portrait of Delhi.

Fiction
Moonglow Michael Chabon
(HarperCollins): A visit to see his dying
grandfather sparked Moonglow, where a
man on his deathbed tells stories of war,
persecution, and looking up at the stars,
dreaming of spaceflight.
Commonwealth Ann Patchett
(HarperCollins): Two families, five
decades, and an author who steals their
childhood to write a bestseller that clears
his writers block Patchett in great form.
Selection DayAravind Adiga (Fourth
Estate): Mr Adiga slices through the
mythology that surrounds cricket in India
with this story of two brothers, robbed of
childhood by the game they love.
Chain of CustodyAnita Nair
(HarperCollins): A brilliant dive into the
tangled nets of Bangalore and the child
trafficking industry by a writer whos set
her imprimatur on Indian crime with the
Inspector Gowda series.
The Association of Small BombsKaran

Indian non-fiction
Three exceptional books will reboot the
way you think about India: Indias War
(Allen Lane), where Srinath Raghavan
presents a gripping and different view of
World War II; Incarnations: India in 50
Lives by Sunil Khilnani (Penguin Random
House), which restores a complex, syncretic past; and The Burning Forest
(Juggernaut) by Nandini Sundar, which
measures the state by its misrule over its
most vulnerable citizens.
Among the years best non-fiction:
Ramachandra Guhas Democrats and
Dissenters (Penguin Random House) is
useful reading for anyone who fears that
the years of illiberal democracy are upon
us; Barkha Dutts This Unquiet Land
(Aleph) is a first-hand account of some of
the countrys greatest political conflicts;
and Anubha Bhonsles sensitive, wellresearched Mother, Wheres My Country
(Speaking Tiger) tells much of Manipurs
contemporary political struggles through

central excise, service tax & information technology.

With GST expected to be in place from next April, the
portfolios of the four members need to be streamlined to achieve higher efficiency and effectiveness of
the teams. There is now a clear need for a more
expanded portfolio of GST that would subsume central excise and service tax.
But the relatively short tenure of CBEC and CBDT
chairpersons is a bigger challenge. An easy but controversial way would be to grant a minimum tenure of
at least two years for those heading them. In 2005, the
government decided to grant a minimum two-year
tenure for as many as five posts in the Union government defence secretary, home secretary, head of
research and analysis wing, director of the intelligence bureau and director of the central bureau of
investigation. Already, the cabinet secretary enjoys a
tenure of about two years. So, extending the same
privilege to those heading the CBEC and CBDT could
be an option.
Such a move, however, is likely to be controversial
and certainly resisted by officers belonging to the
Indian Administrative Services (IAS). No secretary in
the finance ministry has a fixed tenure at present,
though many IAS officers get to head a ministry for
two years as they are empanelled for secretary-level
posting at a relatively early age. In comparison, not
many Indian Revenue Service (IRS) officers have more
than a year left in service before they get considered
for the top job in the two boards.
A more practical way, therefore, would be to introduce a new criterion for appointing the chairpersons
for the CBEC and CBDT no officer with less than two
years left in service can be considered for the top job.
This might be resisted by many senior IRS officers, but
it will provide a reasonably long tenure of at least two
years at the head of these two statutory boards. If the
countrys taxation system has to be modernised and
the government does have plans to undertake many
more reforms in the coming months, it is important to
first put in place a stable team of implementers.

the stories of individuals. Shashi Tharoor

lays bare the cruelty embedded in the idea
of the Raj in An Era of Darkness: The
British Empire in India (Aleph); William
Dalrymple and Anita Anand explode
myths around the worlds most controversial diamond in The Kohinoor
(Juggernaut). Other excellent reads
Madhu Ramnaths memoir of his years
living with the Durwa peoples in Bastar,
Woodsmoke and Leafcups; Priya Sarukkai
Chhabrias remarkable and soul-restoring
Andal: The Autobiography of a Goddess
(Zubaan); and Himalaya (Speaking Tiger),
a superb anthology edited by Ruskin Bond
and Namita Gokhale.
Favourites
Hisham Matars The Return (Penguin) is
extraordinary, and incredibly moving: He
was just 19 when his father was abducted
by Libyan security forces, and Matar never
saw him again. This memoir is about his
return to Libya in 2012, in search of some
kind of release from the past.
Peter Wohllebens The Hidden Life of
Trees (Greystone Books) became a surprise bestseller last year his account of

trees as thinking, feeling beings that communicate through a root network, of

forests as living presences, will change the
way you see the world around us.
Siddhartha Mukherjees monumental
The Gene (Simon & Schuster) was inspiring, unsettling and touchingly personal;
he makes an adventure of science writing.
But in a year of worldwide turbulence,
two books stood out for their remarkable
humanity, the hope their writers offered
while facing the worst of news. Paul
Kalanithis When Breath Becomes Air
(Random House) came out posthumously;
he faced the fact of his impending mortality as a surgeon, and didnt flinch from asking the big questions about disease, death,
and also life and love.
Antoine Leiris lost his beloved wife in
the Paris attacks, and in the aftermath of
that tragedy, he made a choice: His son
would not be taught fear or hate. You Will
Not Have My Hate (Penguin Press) is a
reminder that there is always the possibility that, even through the worst sort of grief,
you can choose to believe in its opposite.
nilanjanasroy@gmail.com