Tag: Views

RBI’s talk will be more important than the MPC’s walk

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a few hours, Governor Shaktikanta Das will unveil the Reserve Bank of India’s (RBI) monetary policy, and this once the suspense in the market is not about what the Monetary Policy Committee votes on, but what the central bank signals in its tone.

Following will be the five big questions to which the market will look for answers:

1> Is the RBI still ultra-worried about inflation? The November and the December consumer price index (CPI) readings may come close to 6% and will this keep the RBI hawkish in its tone? More important will they raise their CPI forecasts?

2> How does the RBI approach the higher-than-expected Q2 gross domestic product (GDP) growth reading? Does it temper it down recognising the impact of single deflation, the magic of low input prices, and the base effect? Or does it worry that growing faster than potential can lead to overheating at some point? Again will they raise their GDP forecasts?

3> What will RBI say about liquidity? Will it raise the pitch for more tightness? Or will they hint that they can allow the call rate to come towards 6.5% from the 6.75% that has been the norm for the past two months? Will they reiterate that Open Market Operation (sale of bonds) is very much on the table or soft-pedal the threat?

Also Read: RBI monetary policy announcement tomorrow: CNBC-TV18 Poll anticipates unchanged repo rates

4> What will RBI say about unsecured loans and dangers to financial stability? Will they increase risk weights on the same sectors – personal loans, credit cards, NBFC loans? Will they find new areas of worry like say microfinance, where they have already hinted that they find the rates usurious?

5> And finally, what’s the overall tone of the policy? Will they at all give the first hints of moving from a “withdrawal of accommodation” stance to a “neutral” stance? Or will they lean on the other side and spring an unexpected hawkish surprise like – god help us – a Cash Reserve Ratio (CRR) hike?

There is a group of doves who believe that with crude lower, US yields crashing by nearly 100 basis points from October highs, and with the global central banks more or less signaling the end of rate hikes, the RBI can move ahead of the curve and edge towards a dovish pause, thus preparing the market for a “neutral” tone.

Also Read: RBI unlikely to make changes to repo rate, yet experts anticipate ‘hawkish’ measures

And there is the other camp of hawks that believes that with growth and inflation much higher than expected, a CRR hike or an upward adjustment to the standing deposit facility (SDF) rate is warranted. The broad majority is in the idle expecting an absolutely middle-of-the-road tone. Yours truly votes with this last group, but last time we were wrong. RBI was more hawkish than expected. Will it be an action replay? We will know in a few hours.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Stock market set to surge even as slowdown looms over the economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The markets are on fire after India’s scorching second-quarter GDP number of 7.6% and the reassurance from the ballot box that the nation is mostly assured of political continuity, stability and certainty even after the 2024 polls.    While equity experts are right to note that there is still valuation comfort on the indices and on many large-cap names, on the political economy front, we need to be cautious of too much exuberance on growth.

Here’s why:

1. The enthusiasm over the second-quarter GDP coming in at 7.6%  needs to be a tad tempered. As many an economist has pointed out, the 13.9% manufacturing growth, which yanked up the Q2 GDP numbers, had a huge base effect. Q2 of 2022-23 saw the manufacturing sector contract by 3.8%.

2. There is additional scepticism over the way the GDP components are deflated, which exaggerates growth in a year of falling input prices. The National Statistical Organisation (NSO) doesn’t deflate the input and output prices separately to arrive at the real GVA, but only deflates the net value added; this method exaggerates growth at a time when raw material prices falling. Chances are, therefore, that last year’s GDP was understated, while this year’s is overstated. This means last year’s full-year GDP was a shade higher than 7.2%, and this year’s GDP, if properly deflated, would be a shade lower than the projected 6.5% growth. This points to the fact that growth is actually slowing.

3. The bigger worry about the GDP internals is that the two labour-intensive sectors -agri and services- have shown sub-par growth in Q2. Agriculture & allied activities grew just 1.2% while “trade, hotels, transport & communication” – a hugely labour-intensive services sector category, has grown only 4.3%. Services as a whole grew only 5.8%. This points to an extremely skewed or inequitous growth pattern.

4. Even though November auto sales and the festive-season home and jewellery sales are being touted as huge, the Q2 numbers show that private consumption has grown by only 3.1%. It’s government consumption, at 12.4%, and capital formation at 11% that are growing well. And the capital formation by the private sector, which appeared to pick up in Q4FY23, has dwindled sharply in Q2, CMIE data shows.

Again, this is not to doubt earnings growth or the price surge in equity markets. Corporate earnings have seen upgrades after the second quarter results. As per Motilal Oswal Financial Securities, the Nifty EPS will likely be at ₹996 by FY24-end, marking a year-on-year growth of 24%. MOFSL sees a 14% rise in Nifty EPS for FY25 to ₹1,135. While Nifty P/E trades at nearly 21x  if one took FY24 earnings, on FY25 earnings, the valuation falls to 18.4x, below the last 10-year average Nifty-traded valuation of 19.5x

Stocks Not Overvalued Yet

The worry is concerning over-exuberance on the general economy, not stock valuations. On the economy front, despite the higher-than-expected second-quarter GDP growth of 7.6%, on a four-year basis starting from the pre-COVID year of FY20, the GDP is growing at a four-year compounded annual rate (CAGR) of less than 4% versus the 6% CAGR in the decade leading to FY19.

FY25 Set To Be A Tougher Year For Economy

The widespread expectation is that with the return of a strong government in 2024, following the election, the Centre will be able to take tougher steps to buoy growth. However, as of now, the chances of a marked slowdown in economic growth in FY25 look more likely.

Let’s look at why that might be the case.

Firstly, the current year’s likely 6.5%-plus GDP growth is built on a large fiscal deficit of nearly 9% (5.9% central deficit, plus 3% states’ deficit). Hence, this year’s GDP is more akin to growth from the intake of steroids. This deficit will have to come down sharply in FY25 and that can take its toll on growth since private capex has yet to take off.

Secondly, the advantage of falling YoY commodity prices won’t be available next year. This is obvious in the Nifty EPS forecasts for next year, which range around 12-15% versus 24-25% this year.- This will have a concomitant impact on the national gross value add.

Thirdly, the consensus estimates for global growth next year are sharply lower than this year. The Bloomberg consensus estimates for 2024 stand at 2.1% versus 2.7% for this year, although a Reuters poll puts 2024 growth at 2.6% as against 2.9% this year. Either way, the bet is for slower growth.

Also read: India set to become the third-largest economy by 2030: S&P Global Ratings

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View | DRI — A celebration of professionalism

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Directorate of Revenue Intelligence (DRI) is never far away from the news. The outstanding seizures and detections which the DRI makes with clockwork, and efficient regularity ensures that. Or because of orders passed by the courts (the latest being by the Gujarat High Court in late November 2023) questioning the legitimacy of the actions of DRI.

This year has, as per the press releases and details available on DRI’s website seen a mind-boggling range of goods seized. This is reflective both of the extent of smuggling and the incisive intelligence gathering leading to precise interdictions by the organisation.

Thus, there were seizures of gold, that yellow metal which fascinates us and for which there is an incessant demand. Gold smuggling is caste, creed, religion, sex, age, and nationality neutral — and the present duty structure makes gold smuggling an attractive preposition. Gold was sought to be smuggled through almost all the international airports-concealed in, clothing, machines, suitcases, and toilets of aircrafts, in bars and paste form, through land and train.

Agricultural goods like betel nuts and areca nuts, attempted to be smuggled to escape both policy restrictions and duty, were seized- all mis declared or concealed. Fauna, both live (baby peacocks, turtles) and dead (dried turtle skin) and ambergris were seized. Cigarettes another item prone to heavy smuggling-the duty structure and compulsory compliance requirements acting as the incentive, were seized in large numbers.

The latest seizure being at Mundra port in November 2023 of 80.1 lakh sticks from an import container shipped from Phnom Penh port.

The whole range of Narcotics & psychotropic substances ranging from cocaine, mephedrone, ketamine, heroin and ganja attempted to be smuggled saw the DRI thwarting the efforts of smugglers. Manufacturing facilities engaged in the illicit manufacture of psychotropic substances were dismantled. It may be recalled that the DRI had in earlier years some of the highest seizures of methaqualone, heroin, fentanyl, and the precursor, ephedrine.

The DRI’S ambit extends to commercial frauds. To paraphrase the definition as enunciated by the World Customs Organisation (WCO), commercial fraud is any offence against statutory or regulatory provisions which customs are responsible for enforcing. The DRI as the apex intelligence agency to combat customs offences is also at the forefront of curbing commercial fraud. The DRI has carried out investigations, issued notices and through specially designated officers initiated the adjudication process. All these powers have been exercised by DRI under the authority of appropriate notifications issued by the Central Board of Indirect Taxes & Customs (CBIC). These powers have been under challenge bringing DRI back in the news.

The Supreme Court had in a decision (Canon India Pvt Ltd vs Commissioner of Customs AIR 2021 SC 1699) having far-reaching implications, held that ‘in the absence of an entrustment under section 6 of the Customs Act 1962 an officer of DRI will not have jurisdiction to exercise the functions entrusted to Customs officers under the Act’. This in effect meant that notices demanding duty could be issued only by ‘the’ proper officer and not by any officer, which the officer of DRI was held to be. It may be recalled that the question of jurisdiction had first come up in another matter before the Supreme Court in Commissioner of Customs vs Sayed Ali (civil appeal nos. 4294-4295 of 2002). The apex court had held that there must be an assignment of specific functions for customs officers to act as proper officers empowering them to issue show cause notice. Considering the implications, the CBIC issued suitable notifications/ carried out suitable amendments validating all past actions of the officers concerned including that of the DRI. Contrary decisions were passed by the High Courts on the issue of the amendment—the matter is pending appeal in the Supreme Court.

Consequent to the Canon decision, the government filed a review petition in the Supreme Court while also carrying out necessary amendments to widen the scope of ‘proper officer’. The retrospective amendments in effect validated all actions carried out in the past by DRI. Despite this, High Courts have, citing the Canon decision (which has not been stayed) been passing orders—either quashing the notices or restraining the department from passing any consequential orders. The amendments are also under challenge. Thus, the appeals in the Sayed Ali matter, review of the Canon decision and challenge to the amendments carried out consequent to the Canon decision, are all pending in the Supreme Court. The revenue implications are estimated to be more than ₹50,000 crore. As the DRI celebrates its 66th founding day on December 4, these are issues which should weigh heavily on the organisation.

The work of the organisation has been recognised by the Government at the highest level as is evident from the endorsements on the last DRI day. The President in her message recognized DRI as ’an agency that consistently contributes above and beyond its Charter of guarding the economic frontiers of this nation’. The Prime Minister has appreciated the dedication and commitment of DRI and observed that ‘their indefatigable efforts have helped combat financial fraud and defend the economic interests of honest citizens and the nation’.

The Finance Minister has in her message recognised the organisation ‘as one of the premier intelligence and law enforcement agencies of the Government of India.’The DRI can be justifiably proud of its outstanding work. The DRI day on December 4 should be an occasion for the organisation to rededicate itself in the service of the nation. And pursue vigorously the issues pending in the Supreme Court and leave it to the sagacity and wisdom of the honourable court to pass appropriate orders. The DRI is too premier an organisation to be sacrificed at the altar of grammar- the officers of DRI were and have always been proper, elite, customs officers.

— Najib Shah is Chairman (Retired), Central Board of Indirect Taxes & Customs

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View | One year of ChatGPT: The Hits, the misses, and the future

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On 30 November, 2022, OpenAI launched its artificial intelligence (A() chatbot, a Generative Pre-trained Transformer (GPT) based on the Large Language Model (LLM), named ChatGPT. The bot was capable of generating responses to questions and prompts posted by humans. Soon after its launch, the chatbot became a topic of much fanfare and discussion. The attention helped it reach one million users within five days and 100 million in just a couple of months.

From solving mathematical problems to writing complex codes, people gave the AI tool varied prompts encompassing several domains. Much to their astonishment, ChatGPT was able to solve the prompts within minutes, generating near-accurate responses. Moreover, the bot has been writing stories, and essays and even helping users with their to-do lists.

According to a report published by the National Library of Medicine, the generative AI tool has over 175 billion parameters for processing a given prompt and generating a response, providing it an edge in terms of reliability over a plethora of other generative AI tools that have been launched in the market before and since its release.

In its first year, ChatGPT has catalysed transformative changes across various domains, leaving an indelible mark on how we interact with technology. Human-machine interactions have evolved as ChatGPT has set new benchmarks in natural language understanding and generation. The model has become an integral part of diverse applications, from customer support chatbots to content creation tools.

Such has been the disruption caused by ChatGPT that leading tech giants like Alphabet Inc and Meta Inc, after having initially lost advertisers due to traffic moving to the chatbot, announced their own AI chatbots to counter ChatGPT. While Alphabet’s search engine Google has already been integrated with its homegrown Bard, Meta has announced Meta AI which is set to be available on its popular networking platforms like Facebook, WhatsApp, and Instagram. However, as of now, ChatGPT continues to be more popular than other tools by virtue of having the first-mover advantage.

When it comes to its disruption beyond the tech industry, education, and content creation saw a paradigm shift as ChatGPT contributed to personalised learning experiences and assisted students in their academic pursuits. The model became a valuable resource for information retrieval and problem-solving, enhancing the way people access and process knowledge. Educators and educational institutions across the world are now considering the integration of ChatGPT into their learning processes as well as academic research.

In healthcare, ChatGPT has played a crucial role in facilitating communication between medical professionals and patients, streamlining information exchange, and improving the overall patient experience. Its ability to comprehend and generate human-like text has elevated the quality of interactions in critical scenarios. Medical report generation and health advice are now at their fingertips — all thanks to ChatGPT.

Meanwhile, its ability to generate human-like responses has had far-reaching implications across sectors, with people using it to generate formal communication of a repetitive nature. The tool is also being integrated with customer assistance and customer care services across businesses.

However, the chatbot has also generated ethical concerns among academicians and authors alike. Both communities have expressed scepticism regarding its misuse and the possibility of plagiarism of their original work. Students are said to have already started using ChatGPT to complete their assignments, prompting some schools and universities to strictly ban its use for academic purposes. Others have integrated it into their curricula with strict riders on how to use it ethically. Mainly, its ability to provide human-like responses makes it difficult for educators to distinguish between what is written, and which is AI-generated.

ChatGPT, despite its limitations, has certainly shown promise over the past year. The tool has forced the tech world to look at AI and natural language processing tools from a different perspective. The success of ChatGPT has fuelled the advancement of more frequent human-machine interactions and collaborations.

— The author, Dr Siddhartha Ghosh, is the director of Narsee Monjee Institute of Management Studies (NMIMS), Hyderabad campus.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The Railway Men review: Lest we forget

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The railway station of Madhya Pradesh’s capital becomes the nucleus of mayhem and rescue as one of the worst industrial disasters to have occurred in human history chokes the city to death one night. Amid shocking government apathy and infuriating systemic negligence rise a few unlikely men scrambling to save whatever, whoever they can.

Directed by Shiv Rawail, The Railway Men opens on December 2, 1984, 16 hours before the catastrophic gas leak that killed over 15,000 people in Bhopal. We are immediately introduced to the key characters—Iftekaar Siddiqui (Kay Kay Menon), Bhopal Junction’s upright, conscientious station master, Imaad Riyaz (Babil Khan), a former worker of the Union Carbide Factory (the site and the cause of the calamity) who joins the railways on the fateful day, and Express Bandit (Divyenndu), a thug infamous for looting trains and stations. It is these three men, who didn’t know each other a day earlier, that come together to do everything they can and more until help arrives.

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Whatever the promotions may have you believe, this Netflix limited series is a Kay Kay Menon spectacle. He was stellar in the 1999 film Bhopal Express, another movie based on the gas leak but here, he is transcendental. Though the entire cast is commendable, however, Menon brings an irrepressible ache, a haunting awareness to his performance as the duty-bound stationmaster whose moral compass is so steadfast, that it becomes the lone guiding light on a night of abject misery and hopelessness. Kay Kay Menon is the hero we need but don’t deserve.

Divyenndu, too, is terrific as a man forced to extend largesse in crisis because he happened to be in the wrong place at the wrong time with the wrong man. The most layered and realistic character in the series, he is the only one with an uneasy conscience. Everyone else around him is either washed in all white or all black. His Baldev Yadav is a clever stand-in for the audience, faithfully mirroring our emotions, reactions, and choices that we would likely have made had we been in his shoes. He gives his dubiousness a casual agility, an easy charm. It is his track with Menon’s stationmaster that holds The Railway Men together even when a few other compartments get derailed.

Then there is Babil Khan as the young, earnest Imaad trying to do right, even when it’s the difficult thing to do. It’s heartening to see Babil choose meaty projects and work alongside his father’s contemporaries with such remarkable restraint and effortlessness. I can’t wait to see all that he goes on to do and become. Since The Railway Men is a Yash Raj Films production (their maiden streaming series), expect stars even in relatively smaller parts. R Madhavan makes an appearance only in the third episode of the four-part mini-series. As the upright, unflagging general manager of the Northern Railways, he is given painfully little to do, arriving at the scene as soon as he can but by the time he does, it is too little, too late. There are also impressive cameos by Juhi Chawla, Mandira Bedi, and Raghubir Yadav.

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I like how The Railway Men is structured. All episodes, each about an hour long, have a prologue that opens in a time different than the present, making the frequent jumps coherent, easy to follow, and allowing a 360-degree view of the characters, ensuring no thread is left loose. I also like how Aayush Gupta’s story and screenplay establish the inflammable socio-political context of the time. The Bhopal gas leak disaster happened barely a month after Indira Gandhi’s assassination when the backlash against the Sikh community was at its most incendiary. The story treats the mindless hatemongering and bloodthirstiness for them almost as a parallel arc.

The creative decision to use one of the key men as the narrator also favors the story. Much like in the fantastic 12th Fail, it furthers the narrative from the perspective of someone who has stakes involved but not enough to be blinded by it. If it was a close friend of the protagonist in the Vidhu Vinod Chopra film, here it is a local reporter (Sunny Hinduja) who had been investigating the suspicious ways of working of the Union Carbide Factory and saw it coming much before anyone else.

What doesn’t work is the cinematography. DOP Rubais’s lens is too dewy, too framed, too proper. It is never able to fully establish the urgency, the extremity of the havoc that a catastrophe of this scale must have wreaked. He uses graphic imagery instead to make up for the lack of subtext in his storytelling—close-ups of doctors taking out infected lungs from a dead body, an infant sucking on his mother’s bare bosom as she dies foaming at the mouth, blood washing down the drain. There is no dearth of stock characters too—an ambitious bride with a promising future ahead of her, a heavily pregnant woman, and two young urchin brothers who sing for a living at the railway platform.

Towards the end of the final episode is a wide shot of dead bodies being cremated—Hindus being burned on pyres, Muslims being returned to the earth. The methyl isocyanate in the gas, that leaked from the pesticide plant which had no business of being in the middle of a heavily populated city, killed everyone in its wake bulldozing over manmade divisions of class, caste, and religion. It begs a crucial question—has much changed in the last 40 years since the travesty in Bhopal? Are we sure something similar won’t happen ever again? As important as it is to remember the courage of everyday heroes, we must also not forget that it could have been prevented, that we have learned little from it, or that several cities are tethering dangerously close to collapse.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

The GCCEM: A welcome initiative to fight cross-border crimes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Enforcement is an important aspect of all customs administrations. As economist Joel Slemrod has written, a tax system can be defined as a set of rules, regulations, and procedures with three essential elements. The event that triggers tax liability, on whom and how much is the liability, and finally, the procedures for ensuring compliance and the consequences of violation.

Tax evasion results in money that can otherwise be used for government and social projects not being available; it reduces equity and efficiency. As the World Customs Organization (WCO) points out, the effectiveness of an administration’s compliance efforts impacts the economic and social well-being of a country. Hence, we cannot have a set of rules and be helpless spectators to somebody flouting them with impunity.

So, while specialised agencies like the Directorate of Revenue Intelligence (DRI) tasked with the ‘detection and curbing of smuggling’ as well as ‘combating commercial frauds relating to international trade and evasion of customs duty’ keep a diligent eye, coordination, collaboration, and cooperation between agencies is critical. This is because of the extent of the problem and the devious methods adopted by criminal elements.

Unfortunately, enforcement agencies the world over tend to work in silos; invariably, there is a serious trust deficit, and sharing of intelligence becomes a casualty.

Against this background, the recently held three-day-long First Global Conference on Cooperation in Enforcement Matters (GCCEM) is a welcome step. The Conference resolved to reinforce cooperation among customs administrations, international organisations, and law enforcement agencies in the fight against cross-border crimes.

As per the PIB press release, technical sessions in the Conference covered issues faced the world over, with a focus on the post-COVID-19 pandemic smuggling landscape and emerging trends. It may be recalled that the trend of smuggling changed significantly during the pandemic; medical equipment and medicines (on most occasions, spurious) were smuggled to meet demand.

Dedicated sessions held on combating narcotics-related cross-border crimes drew attention to new technologies, innovative means, and evolving sourcing and distribution methods adopted by smuggling syndicates. India, by virtue of its geographical location, faces the challenge of having to combat drug smuggling from both the north-western and north-eastern borders. While the Indian enforcement agencies, including the DRI, have had some humongous seizures, the problem continues.

The press release mentions other technical sessions that, inter alia, covered best practices for combating tobacco smuggling.  Given the fact that globally the tax structure for tobacco products is high and demand is unabated, there is a huge incentive for tobacco smuggling. Here again, India has done exceedingly well. As per a FICCI CASCADE study, 18 crore illicitly traded cigarette sticks were seized between March 2022 and March 2023.

The sessions also discussed ways to counter the smuggling of the flora, fauna, and heritage of regions and countries. It may be recalled that India had initiated a global operation named Sesha to counter the illicit trade in Red Sanders, a CITES-protected timber. The challenge of handling the rising volumes of e-commerce and postal/express consignments due to the unique nature of e-commerce and anonymity with a very low-cost and low-risk alternative to smugglers was also said to have been discussed.

Discussions were also said to have been held on the phenomenon of the smuggling of precious metals and gems. Given the cultural ethos and obsession with the yellow metal, this is an issue unique to India and other South-Asian countries. Indian enforcement agencies have had outstanding success in detecting and curbing the smuggling of gold.

The conference is said to have also focused on establishing linkages between money laundering and cross-border smuggling of such contrabands; every act of smuggling involves money laundering, and it is hoped that the discussions in the conference were not restricted only to such linkages with precious metals. Incidentally, a Financial Action Team Force (FATF) team is currently in India reviewing the effectiveness of the required legal framework against money laundering.

The need for capacity building, augmenting resources, and building inter-agency cooperation within countries and outside, all essential to effectively counter illicit trade, were also discussed. These are the weakest parts of the enforcement machinery.

Capacity building suffers since administrations are too busy countering threats to have the luxury of sending officers for training; enforcement agencies often tend to get neglected with regard to resource enhancement both in terms of men and equipment. Cooperation, as mentioned earlier, is less than desired; there is perhaps greater trust and cooperation between criminals across borders than between enforcement agencies.

The WCO has put in place technological mechanisms for seeking international cooperation in pursuing transnational and organised crimes. The Conference is said to have highlighted the need to use these more effectively. Several global enforcement operations with a specific focus on particular commodities have shown that where there is a commonality of purpose, successful cooperation is possible.

The Central Board of Indirect Taxes and Customs (CBIC) has customs cooperation agreements with several administrations. While these agreements have their limitations, we would need to use them more often—if not for any other reason than to test their effectiveness.

The Finance Minister who inaugurated the conference stressed the need to ‘disrupt illicit trade, catch hold of the masterminds, and break the syndicates, with an emphasis on increased coordination and cooperation among agencies’.

The GCCEM will hopefully result in increased coordination, collaboration, and cooperation—the first step to effectively thwart the growing threat of illicit trade.

— Najib Shah is Chairman (retired) of the Central Board of Indirect Taxes & Customs. Views expressed are personal

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mr PRS Oberoi – A tribute to a legend and a gentleman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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An incredibly kind and deeply compassionate human being and a visionary hotelier, whose relentless pursuit of excellence and expectations of a similarly high standard from others are now legendary.

Mr. Oberoi’s often quoted mantra, ‘The devil is in the details’, extended to every aspect of his work and life. He was a stickler for accuracy, brevity, and clarity of communication. We laboured over revisions after revisions, much like Winston Churchill was famously known to do. In fact, while interviewing me, Mr. Oberoi asked if I had read ‘A History of the English-Speaking Peoples’, one of Churchill’s most magnificent literary works. I remedied the wrong by sourcing the four volumes after considerable effort (this was before Amazon and Kindle, etc.).

For Mr. Oberoi, no detail was too small. Until he could, he would visit The Group’s hotels and resorts frequently. He maintained the only way to improve service and the overall offering was to experience the hotels. A hotel used to offer an elaborate high-tea buffet. On an occasion, Mr. Oberoi served himself and called for the General Manager. With the exception of a few morsels, Mr. Oberoi’s buffet plate was a large empty expanse. The General Manager explained guests liked a larger plate, as they could help themselves to more. Mr. Oberoi insisted that an empty plate with few items and an overfilled plate weren’t pleasant sights for guests. Smaller, dessert, plates were to replace the buffet plates, as guests could always return for more.

ALSO READ | PRS Oberoi, who put India’s first five star hotel on the global luxury map, passes away

New seating had been placed in the lounge bar of a hotel. Mr. Oberoi invited the General Manager to sit with him on the new sofa. The General Manager realised, in the absence of cushions to better support the back, it wasn’t comfortable. There are innumerable such anecdotes as Mr. Oberoi was obsessed with intuitive service and the overall guest experience. It is no surprise that The Oberoi Group’s hotels and resorts are constantly at the top of listings of the best in the world, and Oberoi Hotels & Resorts has topped the customer satisfaction score in Market Metrix Hospitality Index, a leading customer feedback survey, ahead of competitors like the Four Seasons, Peninsula Hotels and Waldorf Astoria.

Mr. Oberoi’s deep compassion extended to animals. On reading a complimentary article narrating a guest’s stay at The Oberoi Rajvilas, Jaipur, Mr. Oberoi called the General Manager. The article stated that the elephant refused to budge, for the customary elephant ride, despite the mahout’s every effort. Mr. Oberoi was very upset his directions weren’t being followed. He dictated that an elephant must never be coerced against its wishes. The situation must be explained to the guests and an alternate elephant arranged at the earliest.

ALSO READ | Today, I bid farewell to PRS Oberoi

Mr. Oberoi was a very private person and extremely occupied with business. Time for meetings with journalists was scarce. After a rare appearance at a press conference, Mr. Oberoi was surrounded by a swarm of camera-wielding photographers. Noticeably embarrassed, Mr. Oberoi said, “I’m no rock star!”

A rock star, he was, in igniting a light in each one of us, whose life he touched—a drive to deliver to the best of our abilities and derive deep contentment from continuously learning, growing, … being the best version of ourselves. Those who carry this light (and there are many) will be torchbearers for Mr. Oberoi until the end of time.

Rest in peace, Mr. Oberoi. Long live your legacy.

—The author, Ketaki Narain, formerly led communications for The Oberoi Group and its hotels and resorts in India and overseas. The views expressed are personal

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Rupee hits a new low as RBI ends jinx of 83.30; Refinitiv gets a rap

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It was an eventful Friday for the forex markets. Entirely out of the blue, the rupee broke the one-year-old support level of 83.30 and traded close to 83.40 for the better part of the day before strengthening to close at 83.34, a new all-time closing low. We will get to the mid-day drama of panic when the electronic trading system froze in a bit.

Market reporters struggled to find a reason for the rupee’s fall today because crude is a good 20% below its October highs and the dollar index is 2% off its October highs. Yet the Indian currency has remained in a tight range of 83.05 to 83.30 for almost 30 trading sessions from September 26 to November 9.

In these seven weeks, US yields have climbed from 4.3% to 5% on October 19 and back again to 4.6%. The dollar index swayed from 105.5 to 107 (on October 3) and back to 105.9 today. Brent crude went to a high of $97 per barrel on September 26 and tumbled to a low of 79.20 on November 9. All these are seminal to the dollar-rupee, and the currency should have bounced in an 8–10% range.

But no, the rupee remained in a tight 0.2% range of 83.05 to 83.29 thanks to heavy intervention by the RBI, mostly in the NDF (or non-deliverable forwards), which is an offshore market in countries like Hong Kong and Dubai where hedge funds punt on the currency.

The strong intervention by the RBI in these markets nullified any speculative attack on the rupee in late September when crude held around $95 per barrel for nearly a week. This intervention also nullified rupee shorts when US 10-year treasury yields surged to 5% in mid-October.

But the RBI’s intervention in the NDF markets only nullifies the speculators, a dealer at a large private bank explained. The inherent demand for dollars from FPIs pulling out their equity investments in India and from Indian oil companies remains.

Today, the RBI apparently chose to let go. It had to, at some point, end the bogey of protecting the 83.30 level, and it probably chose a day when crude and the dollar index were calm. So the fall today wasn’t swift or speculative, but backed by genuine buyers.

However, there were 13 long moments of madness around noon when the rupee, which was holding around 83.38/39, suddenly fell to 83.45. The reason was an outage on Refinitiv, the electronic FX trading platform. FX traders couldn’t log in, and a brief panic gripped the market. But by 12.15, calm was restored as the platform started working again.

Clearly, the RBI was not amused. Refinitiv has been asked to explain the circumstances that led to the outage and if the standard operating procedures relating to business continuity were in place and were followed. It has also asked Refinitiv if it was a technical outage or a human error. The central bank is right to be concerned since such outages can cause uncertainty and even panic in the markets and lead to large losses.

But aside from the brief drama, today will be remembered by FX market watchers as the one when the RBI unloaded the yoke of 83.30. It’s unclear why RBI has chosen this level and stuck to it for so many turbulent weeks. For traders, it is the hereafter that matters more. Most see 83.50/$ as the next support for the rupee, while some think a decline towards 84 can’t be ruled out by the end of the fiscal year.

The RBI likes a gently depreciating rupee to adjust to the inflation differential, as dealers have explained in the past. Also, selling dollars closer to 84 can help the RBI post some profit and declare a handsome dividend to the government this year.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

View | Vigilance Awareness Week — combating corruption, fostering integrity for national development

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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It is that time of the year when the nation, across government departments and public sector undertakings (PSUs), are directed to observe the Vigilance Awareness Week beginning October 31, which is the birth anniversary of Sardar Vallabhbhai Patel.

It is a sad reflection that we must observe a week to be made aware that corruption is bad and needs to be weeded out. Corruption, unfortunately, is an ugly reality of life in India. Nothing exemplifies this more than the candid statement in the very first line of the mandatory pledge prescribed by the Central Vigilance Commission (CVC) — “I believe that corruption has been one of the major obstacles to the economic, political and social progress of our country”. This year’s theme for the week is, “Say NO to corruption; Commit to the Nation”.

Corruption hurts the country. It eats into its vitals. As per the United Nations Office for Drug Control (UNODC), corruption, bribery, theft, and tax evasion, and other illicit financial flows cost developing countries $1.26 trillion per year. Professor Arun Kumar, who has written extensively about black money in India, has suggested that the extent of the black economy in India is estimated to be 62% of the GDP — generating (ay 2016-17 levels) about Rs 93 lakh crores. This is nothing but a reflection of a lack of integrity and corruption at its most basic level. Thus, it hurts development. A developed country by definition has a high quality of life, a developed economy, high gross domestic product per capita, industrialisation, and advanced technological infrastructure. Another measure of development is the Human Development Index (HDI), which combines both economic and social measures. This criterion defines developed countries as those with a very high HDI rating. 

That is the measure used in  the June 23, 2000, letter issued by the then Chief Vigilance Commissioner, when the concept of a Vigilance Awareness Week was first mooted. The letter mentions the UNDP Report on Human Development, 1999, on South Asia, which states that if the corruption level in India goes down to that of Scandinavian countries, the GDP will grow by 1.5% and FDI will go up by 12%. The letter goes on to say that corruption is anti-national, anti-poor and anti-economic development and that India has been ranked 73 out of 99 countries in the Corruption Perception Index.

It would appear that very little has changed. As per the HDI Report for 2023, India is ranked at 132 out of 191 countries. And as regards the Corruption Perception Index we have fallen to 85, with a score lower than the global average.

It is against this backdrop that we need to frame the theme of this year’s Vigilance Awareness Week. How do we commit ourselves to the nation and weave it with the vexatious question of how we fight corruption? The theme “Say No to corruption”, has built into it the assumption that you can do so because you have integrity. Integrity the dictionary will tell you is adherence to moral and ethical principles. It will tell you it is a state of being whole, entire, undiminished. Every time you do an unethical act you reduce yoursel—-you are lesser than what you were.

How, then, do you develop integrity—in yourself and in others? Education with an emphasis on values is a key requirement. On a larger, macro level, transparency and democracy are vital antidotes to corruption. The preamble to the Right to Information Act, a major weapon against corruption, puts it succinctly, highlighting the need for an informed citizenry and transparency of information as being vital to the functioning of democracy and holding governments and their instruments accountable to the governed. We also should also actively encourage the citizenry to use the Whistleblowers Protection Act. Neither of these are panaceas, but they can make being corrupt a little bit difficult. 

It is imperative that laws are clear and unambiguous. Compliance requirements and procedures should be simplified. The tendency of policymakers to stipulate procedures with conditions which even the law does not envisage has to be curbed. And laws are meaningless unless effectively and uniformly enforced.

Every organisation should assess corruption risks. Risk management with an emphasis on technology, which also facilitates citizens to interact with the management is essential. This presupposes that technology is simple, can be accessed by the ordinary citizen and works. Preventive vigilance, whereby checks are carried out regularly to identify a lack of integrity in processes or individuals, should be the norm.

The road to becoming a corruption-free country is going to be long. And for this to happen, it is important that we do not become cynical and accept a lack of integrity as a given. The goal of development can best be achieved only if we all commit ourselves to the highest standards of integrity. Not just for a week, but all year round in all activities. As the President, in her message to the nation,  said, “The fight against corruption is the collective duty and responsibility of all the citizens of this great nation.” 

— Najib Shah is Chairman (retired) of Central Board of Indirect Taxes & Customs.

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View: The importance of remittances

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund (IMF) has, in a September 2023 paper ‘Resilient Remittances ‘authored by Dilip Ratha, the World Bank lead economist, highlighted the critical role that remittances play in developing economies.

Migrant workers send money back home; this provides vital income to millions of families, and their contribution is often overlooked. As per the paper, 2022 saw global remittances reach a record $647 billion and very significantly three times the official development assistance (ODA) from multilateral agencies.

Remittances, as has been observed, are stable, even when there is a crisis in the source or receiving country. For instance, during COVID-19 in 2020, while global income fell by 3%, remittances fell by just 1.1%.

India is the world’s largest recipient of inward remittances. In 2022, it became the first country to receive more than $100 billion. The World Bank’s latest Migration and Development Brief pegs the figure at $111 billion, growing at a rate of more than 12%.

This has substantially helped boost the foreign exchange reserves, which today stand in the region of $586 billion. The contribution of inward remittances from the large Indian diaspora constitutes, in effect, more than 18% of the country’s foreign exchange reserve. Remittances account for nearly 3% of India’s GDP. They certainly act as a buffer for our external sector, especially when the trade deficit increases which today stands at $19.37 billion.

The USA (and not the UAE, as is popularly believed) is the major source country for India’s remittances. Nearly 23% of the total remittances come from the USA, reflecting the profile of Indians working in the USA, all or most of whom are highly educated, well-placed professionals. This is in sharp contrast to the profile of the Indian community in the Gulf countries: less educated, low-skilled, and informally employed.

Section 3 of the Foreign Exchange Management Act (FEMA) prohibits receiving ‘otherwise through an authorised person, any payment by order or on behalf of any resident outside India in any manner’ — in other words, all inward remittances must be received only through authorised channels.

How much inward remittances are we losing to informal channels, or more popularly known as hawala? The exact quantum will always be only an informed estimate. The White Paper on Black Money laid before Parliament in 2012, while presenting different facets of black money, made mention of the estimates as per various studies conducted in the past. It suggested that, as per these studies, it could range from 5% to 14.4% to 20.7% of the GDP. This is huge. This covers all aspects of black money, not just money received through hawala channels.

The frequent seizures made by the Directorate of Revenue Intelligence (DRI) and the customs formations that are indicative of gold smuggling have increased alarmingly. With Diwali around the corner, smuggling is only bound to increase. A collateral impact of gold or any smuggling is that all accounts are settled largely through hawala. What this suggests is that correspondingly and consequently, there is a loss of foreign exchange. According to the details available on the website of the Enforcement Directorate, more than 32,000 investigations have been initiated under FEMA in 2022–23 (till January 23). Newspaper reports highlight raids across the country on Hawala operators and illegal forex dealers. The investigations initiated also mention the ‘detection of suspected laundering of undisclosed income running into thousands of crores’.

This raises the larger question: why hawala continues to be a popular mode of sending remittances despite the dramatic growth and easy availability of banking channels? The immediate answer is that illicit channels are easier, faster, more flexible, promise delivery of cash to your residence, and are less expensive. Even though, in most cases, the money being remitted is money earned by migrants from legal sources, illegal means are used to remit the money to their homes. This is unfortunate and reflects poorly on banking channels. Banks must compete not only with each other but with illicit channels that are freely available. They must ensure better service than these informal channels.

An issue often cited is that licit channels have too many regulatory requirements to fulfill, and consequently, even genuine customers shy away from using them. Every remittance transaction is treated with great suspicion. Banks should follow a risk-based approach to allow for less cumbersome legal requirements. The rate of exchange is another factor. Banks undoubtedly have less control over this. However, the fact remains that every migrant keenly watches this and would like to get as good a rate as possible—licitly, failing which—illicitly. The growing reach and popularity of digital wallets via smartphones is one answer. It is possible to access your digital wallet held in India from abroad and transfer money from your account locally; however, if digital wallet facilities are available abroad for you to transfer money from there to India, it will help reduce the menace of hawala.

Migration is only going to increase. The Indian diaspora spread between various categories as per the Ministry of External Affairs, as non-resident Indians, persons of Indian origin and overseas Indians will increase from the 210 countries they are currently residing in. Remittances will also increase. It will be in the government’s interest to make remittances through licit channels more convenient. It will substantially add to our foreign exchange reserves and reduce black money within the country.

—The author, Najib Shah, is former Chairman, Central Board of Indirect Taxes & Customs. The views expressed are personal.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow