Indian Economy: News and Discussion (June 8 2008)

[Muppalla]

With such a generous federal tax structure, it opens up a space for states to levy their own income taxes for any services they'd like to provide. What is the constitutional situation in India with respect to states levying they own income taxes?

States cannot levy income taxes. However, they get the share from the taxes collected by centre.

[Suraj]

The modified tax structure will have a beneficial effect on savings/GDP, which in turn will spur investment. Some articles on the subject:
Pranab releases new tax code to replace 1961 IT Act

Releasing the Direct Taxes Code that will ultimately replace the over four-decades old Income Tax Act and bring all other direct taxes like wealth tax under its purview, Finance Minister Pranab Mukherjee today said if reasonable level of discussion happens on the code, a Bill could be placed in the winter session of Parliament.

New tax code, greater incentives for savings
STT will be replaced by a LTCG tax:
STT removal finds favour with mkt players

The radical tax reforms proposed include an abolition of the controversial STT and reintroduction of tax on long term capital gains on securities trading.

Heavy disbursals push up bank credit

“Loans sanctioned earlier are getting disbursed now. Corporates have been waiting for the interest rates to come down, but with the Reserve Bank of India (RBI) forecasting positive inflation, they have realised that interest rates may not decline further and are availing the available facilities,” said Bank of India Executive Director M Narendra.

According to the latest RBI data, outstanding bank credit stood at Rs 28,07,033 crore (~$590 billion) at the end of July 31, 2009. During the previous fortnight, loans from banks had dropped by Rs 21,185 crore as companies were accessing funds through short-term instruments at a lower cost.

On a year-on-year basis, bank credit grew by 15.74 per cent at the end of July 31, 2009, as against 25.8 per cent in the corresponding period last year. In absolute terms, advances grew by Rs 19,732 crore in the corresponding fortnight last year.

[Chinmayanand]

RBI panel for note checking at ATMs

[Neshant]

India should go after the Swiss thieves for the same deal.

---

US, Swiss keep deal on secret accounts under wraps

By JESSICA GRESKO, Associated Press Writer Jessica Gresko, Associated Press Writer – Wed Aug 12, 1:40 pm ET

MIAMI – The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy. But they kept all details under wraps, including how many of the 52,000 names sought by the IRS from banking giant UBS AG will be revealed.

http://finance.yahoo.com/news/US-Swiss- ... ?x=0&.v=16

[Singha]

the real sting is in the tail making PF as EET compared to EEE now.

beware of politicians bearing gifts.

at end of working life suppose your PF has grown to 4.5 crore. would you like to just
hand over 1.5 crore ?

[Dileep]

This move will bring more money into WHITE. This is going to reflect in all other tax collection as well, since more transaction will be done in white.

Good. I like it!

[Vipul]

Foreign investment up 5-fold to $15 bn in April-June.

Signs of India's economic recovery appear to have lifted confidence among foreign investors as the flow of foreign investment has surged five times in the April-June quarter to $15 billion.

As against the flow of nearly $3 billion in the preceding quarter of Jan-March, the direct and portfolio investments flow together rose sharply to $15 billion during April-June quarter this year, data released by RBI revealed.

Of the total investment flows during the quarter, portfolio investments accounted for $8.270 billion, while direct inflows contributed $7.016 billion to the total flows, Reserve Bank data showed.

In the three months ended March, 2009, total inflow into the domestic market was a mere $3.589 billion.

Foreign fund inflows had sharply declined in FY'09 after the global financial turmoil triggered panic among foreign institutional investors, prompting them to pull out money from emerging markets.

While the country received a total investment of $61.633 billion in 2007-08, for the full financial year ended March 31, 2009, total investments dropped to $21.313 billion.

Of the total fund flows that reached the country in 2008-09, direct investment contributed $35.168 billion while portfolio investments posted a negative flow of $13.855 billion.

[Suraj]

Wholesale prices fall most in three decades

The benchmark wholesale-price index declined 1.74 percent in the week to Aug. 1 from a year earlier after falling 1.58 percent in the previous week, the government said today. That was the biggest retreat since June 1978, when prices dropped 1.9 percent, according to the central bank’s monthly data.

Prime Minister Manmohan Singh on Aug. 8 said below-average monsoon rains are likely to reduce crop output and may have an inflationary impact “in the coming months.” India relies on the seasonal monsoon to produce food for its 1.2 billion people, as half the nation’s arable land isn’t irrigated.

“Food inflation, which is already pressurized, will face further pressure due to poor rainfall,” said Dharmakirti Joshi, an economist at Mumbai-based Crisil Ltd., the local unit of Standard & Poor’s. “An erratic monsoon so far and a severe deficiency in the first week of August have raised the specter of drought in India.”

The India Meteorological Department on Aug. 10 lowered its monsoon forecast for a second time this season, saying showers in the June-September season will be 13 percent below average, compared with a 7 percent shortfall estimated in June.

[Chinmayanand]

Secret Indian currency template compromised: CBI


NEW DELHI: The secret template India uses to print currency notes has been "compromised" and that is possibly why fake but real-looking Indian currency notes are being pumped in to subvert the country's economy, says the Central Bureau of Investigation.

The CBI, the nodal agency for checking fake notes, has now formed a special team comprising its sleuths and officials from the Directorate of Revenue Intelligence, the Reserve Bank of India and the Central Forensic Science Laboratory to find out how and at what level the design got "compromised".

"Our investigations have revealed that the 2005 secret security template which was introduced as part of the new design adopted then has been compromised," CBI Director Ashwini Kumar said.

Asked, if the country was still using the security template, he said, "yes".

By using the word "compromised" the CBI means that the counterfeiters have deep knowledge about the kind of special ink, paper and other ingredients that go into the making of notes.

Giving details of the investigation team, CBI spokesperson Harsh Bhal said "a special team has been formed which consist of officers from CBI, DRI, RBI and CFSL."

"The team will investigate how and at what level the security template has been compromised," he said.

Sources said the ink and paper that go into the making of currency notes are currently being imported from foreign countries, which is a "matter of concern."

Cabinet Secretary K M Chandrasekhar had earlier this month chaired a high-level meeting on the issue of fake Indian currency notes (FICN) that was attended by representatives from the RBI, IB, DRI, ED, CBI, CEIB, the Customs and the paramilitary forces, among others.

It was decided at the meeting to take up the issue of FICN with the European countries, including Britain, which are exporting ink and currency paper to Pakistan from where most of the counterfeits originate.

Media reports suggest that FICN even bore authentic series codes indicating the deep knowledge of anti-national elements about the security features.

The CBI is also creating a national data bank of fake currencies, sources said, which they believe will help trace the origin of the fake notes and the areas in which it has been circulated.

The government is also indigenizing the production of a special paper to print Rs 500 notes, the most frequently counterfeited currency in the country.

The Security Paper Mill at Hoshangabad in Madhya Pradesh, which is responsible for manufacturing currency papers for lower denomination and non-judicial stamp papers, has received the nod from the Ministry of Finance to produce papers on which Rs 500 notes could be printed

[putnanja]

Preferential status for double tax avoidance treaties may go

New Delhi, Aug. 13 The Government proposes to unilaterally adopt a controversial concept whereby non-residents would lose the right to opt for either the provisions of double taxation avoidance treaty or domestic tax law, whichever was beneficial to them.

This could virtually minimise opportunities for treaty shopping, raising tax cost for non-residents with either portfolio investments or direct investments here, say tax experts.
...
...
Although the proposed move may have implications on all the 75 DTAAs that the country has entered into till date, it will particularly be significant in the context of the agreement with Mauritius.

The Indian Government has been unsuccessful in its attempts to renegotiate the DTAA with Mauritius.

Some of the high-value transactions have not been subjected to tax due to the Indo-Mauritius DTAA, tax experts pointed out.

Mr Hitesh Gajaria, Executive Director, KPMG India, said that the proposed move, which he described as an unilateral treaty over-ride, may appear fair in the context of treaty shopping.
Royalty payments

However, it will have unintended consequences in areas such as technology purchases from abroad, he pointed out.
...

[putnanja]

The unprecedented monetary-fiscal expansion of the recent period points to strengthening of inflationary pressures over the next 12-18 months.

[Suraj]

India-ASEAN FTA signed. $50 billion trade expected in 2010

Under the pact, which forms a part of the Comprehensive Economic Cooperation Agreement, tariffs on most of the trade between India and Asean will be cancelled by 2016, while duties on 489 “very sensitive” products will be retained. The agreement would come into force from January 2010.

Trade between India and Asean has grown at a compounded annual growth rate of 27 per cent since 2000. The pact will give a further impetus to the bilateral trade and investment linkages, the government said.

The agreement, which was inked after six years of negotiations, calls for gradual elimination of duties on items which account for 75 per cent of the trade between India and Asean. These include electronics, textile, machine and chemical goods.

The overall trade turnover between India and Asean was over $40 billion in 2007-08, making the bloc the fourth-largest trading partner for the country.

S&P upgrades growth forecast to 6.3%

Rating agency Standard and Poor’s (S&P’s) today raised its India’s growth rate forecast by 30 basis points to 6.3 per cent for the current fiscal on the back of improving global and domestic economic scenario.

Strong domestic demand, which has stood the shocks of economic downturn, has also contributed to S&P’s upward revision of India’s GDP.

The revised figure, however, does not take into account the weak monsoon, which is expected to adversely affect the agricultural growth. Finance Minister Pranab Mukherjee had earlier this week expressed confidence that the country would be able to record more than 6 per cent growth despite drought.

“Though it is premature to gauge the impact of monsoon, I don’t think it will have an adverse effect on the level (of growth) that people are anticipating,” said S&P’s Chief Economist Subir Gokarn at a teleconference. “The reason is that most of the areas that have suffered deficient rains have irrigation possibilities and so the monsoons may not affect overall economic growth,” he added.

Moreover, he said the steep growth of 7.8 per cent in the industrial output in June signalled that credit offtake might rise at a much faster rate than thought and surplus liquidity might be absorbed at a much faster pace.

[AnimeshP]

A vote bank called NREGS

From being an employment guarantee programme NREGS is being mutated into a vast official set-up with its own permanent staff and “mini secretariats” at the village assembly level. In addition, the nature of work allowed under NREGS is being changed: From being a public programme where the rural landless poor work on the creation of public assets, the government now plans to permit work on private sites, such as farms of small and marginal farmers as NREGS work.

The original instigators of NREGS, Jean Dreze, Aruna Roy and others, have decried the move. They should have known better: In India “welfare” schemes often meet this fate. But their ignorance is another story.

The plan, at the moment, is to recruit a permanent cadre of local officials called lok sewaks who will “safeguard” NREGS workers. It is anybody’s guess whether these officials will safeguard these workers or ensure that no one gets any work.

Trust our netas to ****** everything up in their greed ....

[a_bharat]

A vote bank called NREGS

From being an employment guarantee programme NREGS is being mutated into a vast official set-up with its own permanent staff and “mini secretariats” at the village assembly level. In addition, the nature of work allowed under NREGS is being changed: From being a public programme where the rural landless poor work on the creation of public assets, the government now plans to permit work on private sites, such as farms of small and marginal farmers as NREGS work.

The NREGS as it exists today is disastrous to the Indian agriculture sector. While this scheme helps money-flow to the bottom-most layer, it is being used for creating votebanks only and very little productive work is being done. The result is that the workers hardly put in an hour's worth of honest work per day and pocket easy money. The labour cost for agriculture shot up to Rs 250 from Rs 100 some 2-3 years back.

If working on private sites means private supervision, it could be a good thing -- money gets paid to do productive work -- private or public.

[Katare]

And how do you know all that Bharat?

[amit]

And how do you know all that Bharat?

Katare ji,

Please don't ask such embarrassing questions to jingos!

[a_bharat]

And how do you know all that Bharat?

First hand experience.

[Chinmayanand]

'India biz climate better than China'

[Suraj]

NREGS does act as a minimum wage tier in places where a lower farm income level competes with it. That is normal economic dynamics, where the prevailing wage and supply of labour makes it possible for the farmer to pay just that much, until there is competition from NREGS for both labour supply and minimum wage. This was mentioned in an article in Business Standard posted here within the last month as well.

About the monsoons and rural incomes, I've been reading about the topic a bit. Back in March or so, a formal survey of rural incomes recorded that over 50% of rural economy is now non-farm output, primarily rural services, and to a lesser extent, rural industry. This doesn't mean the majority of the employment base is also non-farm related, just that output is. There was no data on how much of the employment base was split between farming, industry and services, but I would not be surprised if industry+services employment is close to farm employment. Further, those engaged in farming may also have side employment in other secondary or tertiary sector jobs.

The fact that there's a thriving services+industry sector in rural areas also means that the effect of monsoons upon rural incomes is not so pronounced, because agriculture is not an overwhelmingly dominant source of income to most rural residents anymore.

Another factoid reported during the last couple of weeks is that a significant part of the regions with deficient rainfall have standard irrigational facilities, as opposed to purely rain-fed ones. A related question - does anyone know the breakdown in farm output from the kharif and rabi seasons ?

Also, if GoI wants to combat the short term rural income shortfall from the deficit rain, a possibility would be to temporarily recalibrate NREGS to focus on those parts of the country with deficient rainfall this year, increasing spending on asset creation and employment there.

[a_bharat]

NREGS does act as a minimum wage tier in places where a lower farm income level competes with it. That is normal economic dynamics, where the prevailing wage and supply of labour makes it possible for the farmer to pay just that much, until there is competition from NREGS for both labour supply and minimum wage.

In practice though (at least in AP), NREGS wage is not competing with lower farm income level, but with the amount of work per day. On the farm, the workers are expected to put in at least 5-6 hours of work per day, where as they can get away with very little work under NREGS. If the farmers want to hire workers, they would have to pay much more. The solution for the farmers is to rely a lot more on machines than on workers and this is happening -- slowly.

Another issue with NREGS is that it is often being used for non-productive work (e.g: digging, re-digging canals where there is no hope of getting any water, leveling and re-leveling grounds just for the sake of it).

[Muppalla]

In practice though (at least in AP), NREGS wage is not competing with lower farm income level, but with the amount of work per day. On the farm, the workers are expected to put in at least 5-6 hours of work per day, where as they can get away with very little work under NREGS. If the farmers want to hire workers, they would have to pay much more. The solution for the farmers is to rely a lot more on machines than on workers and this is happening -- slowly.

Another issue with NREGS is that it is often being used for non-productive work (e.g: digging, re-digging canals where there is no hope of getting any water, leveling and re-leveling grounds just for the sake of it).

If what you are saying is true, this reminds me of two similar programs during Rajiv Gandhi government. Jawaharlal Nehru Rojghar yojna which is supposed to create atleast 90 days of employment to rural unemployed. They used to dig un-necessary pits and canals. Total misuse of money those days.

I am not so knowledged about NREGS these days and hence I don't prefer to comment of the actual implementation.

[harbans]

X Posted from Water Issues thread:

Do the math. 200 million-plus people are engaged in a high-risk economic activity where the average size of the business is tiny, where output per head (what economists call productivity) is stagnant or decreasing, where marketing opportunities are limited and where god and government largely determine income outcomes. This is a recipe for keeping 200 million-plus people in a state of permanent, acute vulnerability. Especially the 100 million-odd who are not just workers but have some capital. In the first decade of the 21st century, in a democracy that’s called a major economy, is this normal? Tolerable? Socially, economically and politically acceptable? Put like this, the answers are “no” in every case. Put in the context of India’s political economy, and recognising that we are talking about Indian agriculture, the answer seems to be “yes”.

As the Indian Meteorological Department (IMD) and the government abandon their month and a half long fantasy that monsoon will be normal, as drought management meetings begin in earnest, ..

http://www.indianexpress.com/news/capit ... an/501511/

[vera_k]

Why does the government insist on people doing some work under NREGS? Wouldn't it be cheaper to just hand over money to the poor? Would probably be more productive as well since the poor could also earn some more money doing any other work they could find.

[ShauryaT]

Having LTCG tax + a tax on just for holding wealth (even if above Rs 50 Cr) does not sound fair. Thoughts on the issue?

[ShauryaT]

Why does the government insist on people doing some work under NREGS? Wouldn't it be cheaper to just hand over money to the poor? Would probably be more productive as well since the poor could also earn some more money doing any other work they could find.

There is actually a whole study on this issue of how giving straight cash would be far more effective. Had posted it here quite some time back.

[vera_k]

Having LTCG tax + a tax on just for holding wealth (even if above Rs 50 Cr) does not sound fair. Thoughts on the issue?

Depends on the rationale for this tax. A tax that strips dynasties of assets to make every new generation work on rebuilding them is not a bad idea.

[ShauryaT]

Having LTCG tax + a tax on just for holding wealth (even if above Rs 50 Cr) does not sound fair. Thoughts on the issue?

Depends on the rationale for this tax. A tax that strips dynasties of assets to make every new generation work on rebuilding them is not a bad idea.

what is the issue with a dynasty. Do not all parents endeavor to leave behind a dynasty for their families. Are we saying that the age old adage that a successful man is someone, who has left enough for seven generations wrong in itself? The death tax would be an appropriate way to tax wealth moving from one generation to the next. Even a death tax, assumes a society that revolves around an individual to be the only unit of governance. Not the case in Indian society, where an individual is tightly bound to his family. Even if you do assume this, the rationale of a death tax still violates the principle of not taxing the same money two times. Moreover, if it truly a wealth or an asset tax, the wealth may grow, decline or stay the same, but a tax one would still have to pay! It will be Rs 100, becoming Rs. 99, just for sitting there.

Does this new tax code do anything for local municipal governments and nagarpalikas to raise taxes for local services?

[Rahul Mehta]

Why does the government insist on people doing some work under NREGS? Wouldn't it be cheaper to just hand over money to the poor? Would probably be more productive as well since the poor could also earn some more money doing any other work they could find.

Direct payments involve much less corruption and siphoning out, and so Nbjprie and NGOs hate direct payments, and support schemes. Now one issue in direct payments is : what should be the source to get the money to make payments? Taxing A to pay B is unethical and so taxes should not be used as source to give money in direct payments. AFAIT, the only ethical source to fund direct payments is rents from minerals ores and GoI plots, not taxes. I have described this in detail at http://rahulmehta.com/mrcm_demand_02.htm .

--------------

Having LTCG tax + a tax on just for holding wealth (even if above Rs 50 Cr) does not sound fair. Thoughts on the issue?

Which tax is less "unfair" than wealth tax? Wealth tax is fair because police, Military and courts are needed to protect wealth and so wealth tax must be collected to fund these agencies. The wealth tax should be 2% of mkt on land above 25sqmt/person NA land . In addition, we should also have 35% inheritance tax. Wealth tax is easy to administer compared to VAT, as in VAT one has to record each transaction and so book keeping is much larger. If wealth tax money is not used for police, courts and Military and activities needed to support them, then it is unethical. But as long as wealth tax is used for police, courts, Military etc. it is 100% "fair".

Are we saying that the age old adage that a successful man is someone, who has left enough for seven generations wrong in itself? The death tax would be an appropriate way to tax wealth moving from one generation to the next. Even a death tax, assumes a society that revolves around an individual to be the only unit of governance. Not the case in Indian society, where an individual is tightly bound to his family. Even if you do assume this, the rationale of a death tax still violates the principle of not taxing the same money two times. Moreover, if it truly a wealth or an asset tax, the wealth may grow, decline or stay the same, but a tax one would still have to pay! It will be Rs 100, becoming Rs. 99, just for sitting there.

There is no double taxation. Money is needed for Military, Police and Courts. The wealth tax should be say 4% and instead it is divided as (2% wealth tax plus 35% inheritance tax). IOW, inheritance tax is merely splitting the wealth tax, not double taxation.

[neel]

Any taxation of wealth transfer (including wealth holding, which is the trivial wealth transfer) is double taxation because the wealth in question was already taxed once when it was first created (i.e., was earned as income). Assets received from friends and relations are not given as payment for value addition; there is no economic activity (i.e., wealth creation) involved in transfering the asset (unless there is an intermediary for the transaction, who creates wealth that is valued when he charges a fee).

If you give your son a roti, it was not because he created a roti's worth of wealth and opted to take his pay in roti instead of rupees; it was because you wanted him to have it. Taxing the transfer of roti from parent to child is taxing the wealth created by the parent first, when the parent earns income, and then taxing the transfer of 1 roti's, with of it again when the child is fed.

[Singha]

seems to be a new eco channel backed by ET. and andy mukerjee probably the bloombery finance guy who used to write out of singapore seems to be the anchor in mumbai now.

[nelson]

is it conceivably true even in part, that the past two budgets have been tweaked to support "growth" of certain sections of business communities as is mentioned in the article?
if yes who were the likely beneficiaries? And how many of us would consider fair enough? Economics Gurulog, please share some thoughts.

http://beta.thehindu.com/opinion/lead/a ... epage=true

[Rahul Mehta]

Any taxation of wealth transfer (including wealth holding, which is the trivial wealth transfer) is double taxation because the wealth in question was already taxed once when it was first created (i.e., was earned as income). Assets received from friends and relations are not given as payment for value addition; there is no economic activity (i.e., wealth creation) involved in transfering the asset (unless there is an intermediary for the transaction, who creates wealth that is valued when he charges a fee).

Income was generated because policemen, soldiers and courts protected you and your factories and your employees. So income tax is necessary to have income to begin with. Now from that income, say you bought flat for say Rs 20,00,000. Next month, society charges you say Rs 1000 for guard, water etc. This Rs 1000 is not asking you to pay for the flat twice. You are paying for the services you consume. Likewise, the wealth tax Govt (should in my proposal) collect is the service for protecting that flat from Pakistani, US, UK etc using Military. And to protect your flat from thieves using Police, Courts etc. So the money charged to cover expenses of Military, Police Court is not "double" tax. Likewise, say wealth tax is 4%. Now if that wealth tax is split as 2% now and 2% after death, that is only splitting the tax, not taxing twice. IOW, inheritance tax is deferred wealth tax, not a double or tripple tax. Do you expect policemen, soldiers, court staff and Jurors to provide you protection for free? Well, that is pinkism, and I despise pinkism no matter what color it has.

If you give your son a roti, it was not because he created a roti's worth of wealth and opted to take his pay in roti instead of rupees; it was because you wanted him to have it. Taxing the transfer of roti from parent to child is taxing the wealth created by the parent first, when the parent earns income, and then taxing the transfer of 1 roti's, with of it again when the child is fed.

There is no wealth or inheritance tax on food inside home. The wealth/inheritance tax is mostly on lands, buildings, gold and shares. Most wealth/inheritance tax laws, including one I propose, have exemption limits that would cover all food inside home. So there will NO tax on Roti.

[Chinmayanand]

Hiring goes up, employees ebullient

[Chinmayanand]

Black money falling flat

[Katare]

And how do you know all that Bharat?

First hand experience.

First hand experience in what capacity?

I don't think you would have availed benefits of the scheme so I am assuming you must have seen/heard some cases in certain village in certain state. Those are anecdotal evidences, I think they could be very useful and informative but one had to be careful in stating them as conclusive evidences. Extrapolating them to entire nation based on such a small sample is neither wise nor scientific.

We do not debate economic return/waste of defense spending because it's not an economic issue. NERGA is sociopolitical scheme not an economic development scheme. Like all other govt schemes of these natures it also is largely a waste of precious capital. Although for a sociopolitical subsidy scheme it is reasonably well designed.

The money is not free but is given for a hard days manual labor (doesn't promote sit at home and earn handouts from govt/taxpayers)
It's gives employment at the lowest minimum wage rate (Protects labor from exploitation by putting a minimum wage floor but doesn't actively compete for ilabor from private sector)
Its demand base, the money is spent only if there is demand (there are no takers for it in some parts of richer states like Haryana/Punjab)
For all that subsidy it at least creates some rural infra in the most backward part of the country. (these little pieces of infra may not make good Jpegs for internet jingos but could make some positive impact on those peoples life)
Small environment friendly projects (water, soil protection, tanks recharge, forestry etc) at village level dotted all over the country will eventually have long term impacts

Above all it prevents further naxalism and Maoism in rural/tribal areas (which costs a lot more in econmic terms than NERGA does)

[Katare]

Experts see early signs of recovery in exports

“While exports growth compared to corresponding month in previous year continues to be negative for the ninth month in a row, exports growth in June 2009 over May 2009 is positive at 16.4%. This is in continuation of the positive month over month trend in May 2009 (of 2.4%),”

[ShauryaT]

NERGA is sociopolitical scheme not an economic development scheme.

Is not all of governmental economics linked to politics, in a manner that it is truly impossible to separate them completely? Is that not why any economic policy by a government is called a "political economy". Not commenting on your reply and/or the need to minimize politics on this thread.

[a_bharat]

First hand experience in what capacity?

I don't think you would have availed benefits of the scheme so I am assuming you must have seen/heard some cases in certain village in certain state. Those are anecdotal evidences, I think they could be very useful and informative but one had to be careful in stating them as conclusive evidences. Extrapolating them to entire nation based on such a small sample is neither wise nor scientific.

We do not debate economic return/waste of defense spending because it's not an economic issue. NERGA is sociopolitical scheme not an economic development scheme. Like all other govt schemes of these natures it also is largely a waste of precious capital. Although for a sociopolitical subsidy scheme it is reasonably well designed.

The money is not free but is given for a hard days manual labor (doesn't promote sit at home and earn handouts from govt/taxpayers)
It's gives employment at the lowest minimum wage rate (Protects labor from exploitation by putting a minimum wage floor but doesn't actively compete for ilabor from private sector)
Its demand base, the money is spent only if there is demand (there are no takers for it in some parts of richer states like Haryana/Punjab)
For all that subsidy it at least creates some rural infra in the most backward part of the country. (these little pieces of infra may not make good Jpegs for internet jingos but could make some positive impact on those peoples life)
Small environment friendly projects (water, soil protection, tanks recharge, forestry etc) at village level dotted all over the country will eventually have long term impacts

Above all it prevents further naxalism and Maoism in rural/tribal areas (which costs a lot more in econmic terms than NERGA does)

My experience is with hiring labour for my farm and the wage-inflation and labour-shortage caused by NREGS. The wages for agricultural workers were already higher than NREGS wages. You would imagine the workers would go for the higher wage for farm-work -- but many would prefer the NREGS work because they don't have to work hard.

I don't have an issue with what you said, except for the statement that "The money is not free but is given for a hard days manual labor". This is not true from what I have seen and if you have a different experience, let us know. I would be glad to know that NREGS is helping create useful assets.

[ashish raval]

China, Germany, France and Japan are out of recession because they reduced the price of the export commodity by half to secure bulk orders. This bulk order flooding the supermarkets and stores with cheaper goods helped them stir out. USA and UK problems are deeper with financial turmoil coupled with collapse of housing market which was not the case with other countries. GoI dont seem to have a clue on it. We will have improvement in export but IT industry will not rise as high as people have predicted due to its main dependency on financial service sector.

[SwamyG]

If you got suckered into one of those "teaser" rates of 8% or so from SBI and others, ok, good luck, but you are in for trouble.

SBI seems to be better than the other scheming banks. It is tough to get loans with SBI, but once you break and enter they do less con job than others - at least better than the yucky a.k.a ICICI bank - that jacks up the rate to Mount Kailash.