Viswanathan K's Thoughts

GST. Goods and Service Tax. It replaced all indirect taxes imposed by state and center in 2017. Simply put, GST is a form of value-added tax (VAT). What does that mean? An example helps. Take a company that buys steel to make and sell pressure cookers. The idea of VAT is that each layer (mining, steel maker, pressure cooker maker) pays tax only on the value addition it did (mining, making steel, making pressure cooker), not for the entire chain of activities preceding it. This makes sense by considering the alternative to VAT – (1) if each layer pays tax for the entire chain, well, we’re collecting tax multiple times for the same lower-level activities, (2) which raises the cost and thus sale price of the product, (3) in turn, making Indian goods expensive and thus uncompetitive in the global market.   Other advantages flow from a single tax system. If simplified enough, it makes compliance and comprehension easier. A corollary of that is greater transparency. Since taxes are

Kerala or Gujarat? Which model of governance is better? Pranay Kotasthane correctly says that such questions are a proxy for the left v/s right debate in India. He analyzes this topic in Missing in Action and concludes that neither the Left nor Narendra Modi can claim the credit for either state. Let’s see why. ~~   In Kerala, in the age of the royal states of Travancore and Kochi, the Christian missionaries began to attract lower caste Hindus. Further, their schools were open to all. The royal family responded in 1817 not with force but by announcing free education for all.   The royalty also began to focus on public health and vaccination – the Queen of Travancore had herself and her family inoculated publicly to show it was safe and desirable. By 1879, vaccination was made compulsory for government servants and those dependent on the state.   Long before independence, landholding was privatized and commercial crops were introduced, all with positive economic consequen

In recent times, there are more and more attempts to “muzzle” the Internet. Rahul Matthan writes that the main driver for this is, unsurprisingly, social media and messaging apps.   As always, history is relevant. When the Internet got started, the US (which was where most of the Internet existed) wanted to protect and nurture it. So they came up with a “provision that shielded network operators from being punished for what their users posted”. As the Internet spread across the world, most countries adopted a similar policy.   But progressively, it became clear that crimes were being planned and committed on the Internet. So governments wanted access to content, who was posting it, where they were located etc. The West felt its own processes had checks and balances to protect abuse of such demands.   Increasingly though, the rest of the world doesn’t buy that argument. Why should the rest trust that Microsoft (Windows) or Google or Apple (smartphone OS and app stores) or F

Judicial activism. Some approve of it, saying the courts have to step in when the legislature refuses to do the right thing. Others support it because the pace at which society reforms itself is too slow; and politicians, even if they believed in some reforms, would not risk losing the next election. Judges, in this view, should actively speed up the move in the right direction.   Others are deeply suspicious of judicial activism because, hey, the judges aren’t elected representatives. Also, as Pranay Kotasthane says in Missing in Action : “It is difficult to imagine how a single complainant with a specific grievance in a combative judicial process would be the basis for drafting a norm or law for the society.” Besides, are judges qualified to understand second and third order consequences of the laws they create? Do they even try to weigh the costs and benefits of a big picture change while passing judgment? And can’t individual judges be biased?   These views are not uniq

Keying errors. It refers to accidentally entering wrong or incomplete data on computer screens. Tim Harford’s post on the topic was triggered by a fine at a parking lot where he hadn’t entered the entire license number of his car. The system compared the parked car’s license plate number against the partially entered license number and concluded the car was parked without payment.   Harford discovered other cases where the cost and consequences of such mis-entries have been huge. In May, ‘24, a Citigroup trader’s mis-entry caused “fleetingly crash stock markets across Europe ”. His error? “The trader typed a number into the wrong box, asking the system to sell 58 million units instead of $58mn worth of units. ” Each unit was worth thousands of dollars, so the deal size ended up being billions of dollars instead of the intended $58 million .   We instinctively feel warning message would help. Since I work in Healthcare, I know the problem with warnings – after a point, do

One of the errors we tend to make is to evaluate policies by focussing on their intent rather than focussing on its consequences . Pranay Kotasthane gives a good example of why that is a bad idea in Missing in Action .   Take the ubiquitous RO water purifiers. They reduce the total dissolved solids (TDS) in water, and yes, it wastes a lot of water. Besides, the body does need minerals; so RO’s in areas where TDS is low to begin with are not such a good idea. Therefore, the government set a limit – no RO’s in areas where TDS is lesser than 500 mg/liter.   A terrible policy if you stop focussing on intent and instead look at consequences. First , the real problem is the poor quality of water for consumption. Should the government spend on trying to address that or on framing and then enforcing regulations? Second , did anyone check what fraction of fresh water is used by domestic consumption? It’s just 2%. Which raises the question – did it make sense to focus on the wastage inv

Tea or coffee?   Since I grew up in the north, I was used to chai everywhere. It always tasted good – at home, in dhabas , at the hostel canteen, and the oh-so-many darshinis in Bangalore; in hot places and in cold places.   It was only when I went abroad that I realized that (to be blunt) the rest of the world sucks at making tea. The Chinese may have discovered tea, but God, no Indian can drink their version of tea (We used to carry tea bags when we visited China – even tea bag chai is better than what they have). The West is just as bad, so much so that I stopped drinking tea altogether when I was there.   Coffee, I learnt from true blood south Indians, is different. Unlike tea, all coffee (even Indian made coffee) is definitely not the same – it is sacrilegious to even think such a thought. Coffee has to be made exactly right (And each individual has a different preference on how coffee should taste).   All of this came together in this great exchange in the Ne

Why do people believe false things?   Dan Williams takes a stab at that question… in a very different way. Before we get into his analysis, let’s first understand the method he uses for this and other questions. Take a different question: Why is there poverty in the world? Invert the question. In this case:             Why is there wealth in the world? Ask yourself which of the two conditions – wealth or poverty – has been the norm through most of our history: “(Poverty) is humanity's default state. Until very recently, everyone lived in what would now be regarded as shocking poverty.” Wealth then is the surprise. So try answering why there is so much wealth today. “Wealth creation depends on complex, improbable, and fragile institutions and incentives for coordinating human activity and the division of labour.” The Industrial Revolution. Property rights. Rule of law. Infrequent wars. Competitive markets. Education system. “There is nothing “natural” or “aut

The story of sandalwood is far more interesting and extends over a far longer period than I’d known, as I learnt when I read Missing in Action by Pranay Kotasthane.   Even 200+ years back, sandalwood was in demand. In China! Not surprisingly, the East India Company wanted to export it to China. But there was a problem – most of the sandalwood was grown in Tipu Sultan controlled Mysore state. Recognizing its commercial value, Tipu forbade his subjects from trading it with the British. He went a step further and declared it a “royal tree”, thereby monopolizing sandalwood trade.   This then was one of the factors in the Anglo-Mysore wars. Once the British won, they continued the sandalwood trade monopoly rule, with them in control. “The conception of sandalwood as a source of government revenue strengthened.”   After Independence, the state government continued this practice and denied property rights to sandalwood growers. Even if the trees grew on private land, they belon

In the last blog , we went over the history and consequences of delimitation in Inda. In this one, we go over the solutions Shruti Rajagopalan proposes .   Solution 1: Fiscal Federalism + Perfect Apportionment of Seats As mentioned, the reason delimitation is so contentious is that it is about money. This solution is, therefore, about moving to a completely decentralized system, where states get to keep (most of their) revenue, and the Center has little to give to states on any criteria.   The richer states would have no objections left and delimitation could go ahead. Total MP count would be increased, relative share of MP’s across states would reflect their population, India’s MP-to-population could be brought closer to other countries, and with fewer constituents, MP’s would take better address their constituents’ needs.   An obvious problem is that the Center would not be willing to give up its share (and control) of the money. In addition, the poorer states can’t rai

Shruti Rajagopalan wrote this excellent piece on the topic of delimitation (and possible solutions): “Delimitation refers to the action of fixing the boundary or limits of something. In Indian politics, it means determining the number of constituencies, their size in each state, and their boundaries.”   There is a very good reason for updating the number of MP’s in the Lok Sabha from each state periodically. The intent is that an MP, anywhere in the country, represent the same number of citizens . This principle implies that if the population of a place rises, then those places should have more MP’s. (The Constitution sets an upper limit on the number of Lok Sabha MP’s, which has been periodically updated via Amendments since independence).   Then: “In 1976, (the 42nd Amendment) froze the number and boundary of constituencies in the Lok Sabha and state legislatures according to the population numbers from the 1971 census.” The official reason for the freeze was because d

There are a lot of theories (and thus, prescriptions) on what leads to a country’s economic prosperity. In Missing in Action , Pranay Kotasthane evaluates the most popular of such theories.   Economic freedom : This consists of open markets and less government in economic matters, labour reforms, low tax rates, and ease of doing business. This certainly describes the West. And since the West funds international organizations, the IMF and World Bank push for such policies when they give aid. But there are too many exceptions to this policy – South Korea and Taiwan became rich by focussing on exports while making it hard for foreigners to sell; and the South Korean banking system was largely government owned. Many countries that have followed these prescriptions have failed, from Argentina to Greece to South East Asia at different points.   Political freedom and institutions : This refers to individual rights, property rights, and judicial effectiveness. That certainly is how the