India Insight

(Any opinions expressed here are those of the author and not necessarily of Thomson Reuters)

Finance Minister P. Chidambaram’s drive to shore up government coffers is not just giving businessmen sleepless nights.

Just when reporters were taking a breather after filing stories based on inflation data on Thursday, the finance ministry sent them text messages about a press briefing. The recipients were supposed to rush to Chidambaram’s office in 15 minutes to cover what appeared to be a major policy announcement. After all, the finance minister doesn’t call on such short notice for chitchat.

As they raced through Delhi traffic and crossed the security cordon, many journalists were already thinking of the headlines they would write after the press briefing. With barely two weeks to go before the financial year ends, Chidambaram is racing to meet fiscal targets that will affect the country’s deficit, debt rating and more. Any slip would dent his credibility – and he is determined to collect every penny.

Thousands of tax notices are dispatched every week to scores of defaulters in a country of 1.2 billion people in which less than 3 percent of the population pays tax. Chidambaram estimates 73,388 taxpayers have defaulted on such payments, costing the government nearly 39 billion rupees ($719 million) in the current financial year.

(Any opinions expressed here are those of the author and not of Reuters)

The countdown to Budget 2013 has begun, and Finance Minister P. Chidambaram must try to keep India’s fiscal deficit from gaining weight.

One idea we’re hearing a lot lately is turning to India’s super-rich citizens to boost tax revenue and improve the tax-to-GDP ratio. In a television interview aired in January, Chidambaram’s comments on the subject didn’t reveal much, but led to media speculation over higher taxes for the well heeled.

It’s a step that may lead the Harvard-educated lawyer down a path that John Morton took more than 500 years ago. The 15th-century lord chancellor in the court of the English King Henry VII, not to mention former archbishop of Canterbury, is traditionally credited with “Morton’s fork”, a taxation principle that ensnares the rich and poor alike.

Days before Finance Minister P. Chidambaram unveils India’s budget for the next financial year, the online team at Reuters India conducted an informal survey of more than 200 people to learn what they expect from the 2013 budget.

In a poll conducted between Feb. 8 and Feb. 20, we asked 10 questions on issues ranging from India’s fiscal deficit to income taxes. At the time of publication, 205 respondents had shared their thoughts about India’s biggest business and economic event of the year.

Not everyone is confident that Chidambaram, already credited with saving the country from economic ruin once, will deliver. Forty-four percent of the respondents said that the budget will be geared toward pleasing voters, while 17 percent thought that it would contain harsh measures to help fix the nation’s economic problems. Thirty-nine percent thought that Chidambaram would find a balance.

(Any opinions expressed here are those of the author, and not necessarily those of Thomson Reuters)

Finance Minister P. Chidambaram is not the only one walking alone.

Duvvuri Subbarao, the Reserve Bank of India (RBI) chief, also seems to be on a solitary, and one hopes, contemplative walk.

It's not just the government putting pressure on the central bank to act and cut rates.

Finance Minister P. Chidambaram usually does not talk to the throng of news-hungry reporters and cameramen gathered outside the gates of the red sandstone colonial building which houses the finance ministry. A ‘no comment’ or ‘I don’t have anything to say’ suffices on an ordinary day. Tuesday, however, was not an ordinary day.

Some two hours after the Reserve Bank of India announced it would leave the repo rate unchanged, and said that battling inflation was a more important priority than backing growth, the assertive finance minister arrived in the ministry. He got out of his car and walked up to the voice recorders, microphones and camera-toting journalists waiting in the driveway.

He signalled them to quieten down, all the while having a look of contemplation on his face, as if weighing the words he was about to say very carefully. What happened next gave the clearest indication yet of a widening policy rift between the government and the Reserve Bank of India.

The usually crisp and precise P. Chidambaram was uncharacteristically vague on Monday while announcing the government’s fiscal consolidation plan. While pledging to bring the fiscal deficit down to 3 percent in 2016-17 from around 5.3 this fiscal, the Harvard-educated minister gave no details on how the government would achieve this feat.

Perhaps the finance minister should remember that uncertainty and lack of clarity can spook markets and investors. We saw that when the government took months to clarify the controversial GAAR norms which made foreign investors jittery.

Chidambaram’s announcement is unlikely to impress investors, rating agencies and lenders like the IMF, who want the government to slash subsidies and cut spending.

Hours after Maoist rebels detonated a landmine under a bus in central India on Monday, killing about 35 people including policemen, Home Minister Palaniappan Chidambaram was unapologetic in his criticism of civil society organisations that he said were getting in the way of the state’s efforts to contain the rebels.

It is “almost fashionable” to be sympathetic to the Maoist cause, Chidambaram said in an interview to NDTV news channel.

In defending the rebels and questioning the motives of the government — and not of the rebels — they were weakening the apparatus of the state, he said.

The killing of 76 police by Maoist rebels earlier this month in central India did not come as a big surprise to experts who know most of the forces that are deployed in the dense jungles are hardly trained in jungle warfare.

Most of them undergo a short training course before engaging the rebels in inhospitable terrain is thrust upon their shoulders.

More than 1,000 fighters, armed with sophisticated weapons, ambushed the central police in insurgency-hit Chhattisgarh state, exposing a lack of intelligence and planning by forces who were totally unfamiliar with the rebel territory.

The United Progressive Alliance at the centre has set in motion the process of carving out a separate Telangana state from Andhra Pradesh, a move that is likely to give impetus to other statehood demands.

Home Minister Palaniappan Chidambaram’s statement on Wednesday about initiating the process of forming the new state was prompted by Telangana Rashtra Samiti (TRS) party chief K. Chandrasekhara Rao’s resolve to fast unto death and violent protests in state capital Hyderabad, home to 1000 IT companies.

As jubilant TRS supporters danced on the streets of Hyderabad and shouted slogans, the Congress-led ruling alliance’s capitulation raises several questions about the likely impact of such a momentous decision.

While travelling to work in an auto rickshaw, the driver asked me, “Madam aap TV dekhte ho kya?” (Madam, do you watch TV?)Wondering what would come next, I replied with a nod.“Hamare desh mein agle saal khel hone vale hain, mehmaan ayenge magar mehmaano ke liye humne kya kiya? (We are going to have games in our country next year, guests will come but what have we done for our guests?),” he asked. With a very miserable expression he further said, “Padhe-likhe log bhi sadak pe kachra aur thook fekte hain.” (Even educated people spit and litter the streets) The auto driver is not the only one concerned about this issue.Home Minister Palaniappan Chidambaram remarked recently that people should learn to behave like citizens of an international city.“We want to encourage people to change their mindset,” he said. The Indian Olympic Association has expressed its concern over the logistical preparations for the event, but who is going to check on how the people behave?Beggars in the national capital are also looking forward to the Games. A large number of tourists would be a windfall and beggars are leaving no stone unturned to be prepared.An informal academy has been set up in New Delhi’s Rohini area where children are taught to beg in different foreign languages.Countries like Germany and China had taken the initiative to train their citizens to behave properly when they hosted the football World Cup and the Olympics. Should India also start a similar training program or is it too late?The Indian Tourism’s tagline reads – ‘Atithi Devo Bhavah’. (Our guest is blessed and our visitor is God)Do you think people will adopt this tagline in the months to come? Are we really ready for a global event like the Games?