Thursday, January 23, 2014

India UnInc - The Small People

In the past I have recommended a few books I considered a good read. Beginning now I will sometimes write about good books that I come across that have concerns of India at heart. India UnInc is one such book.

Santa Claus is a much celebrated figure. He is the one who is dressed up and is seen all around during Christmas. But in his hometown somewhere in the North Pole, it’s the little ‘Elves’ who keep the wheels turning at his gift-factory. They’re the ones who also maintain his sled and reindeer. The story of elves is not going to be told as often. The story of Indian economy is somewhat similar. I believe there are two economies; one is the political economy and the other is the “real” economy. The political-economy pays a lot of attention to the corporate sector but the real economy comprises both the corporate and the unorganised sector as also the “unincorporated” sector. This is the story that “India UnInc” looks at in the just-released book by Prof R. Vaidyanathan (RV). The book looks at the whole UnInc industry with facts and figures and a narrative that is enjoyable to read.

There are organised and unorganised sectors in our economy which are recognised. Both sectors are usually registered under some Central or State legislations and maintain regular books of accounts and file returns. The UnInc constitutes all the other “small people”, partnerships or proprietors (P&P as RV calls it). This sector can include your corner-pan-shop, barbers, carpenters, plumbers, rickshaw-pullers and even CAs, architects, lawyers and so on. These are non-agricultural and non-governmental in nature. To give you an idea of how this sector keeps the wheels of Indian economy turning let me quote from the book:

The Unincorporated sector in India contributes about 45% of the national income, which, by far, surpasses the corporate sector’s contribution of about 15% and yet its contribution remains unacknowledged. Also, it is important to note that the estimates of this sector in manufacturing and services need to be more accurate.

RV hilariously tells us how national planners and economy-analysers sometimes use POTA in their studies or analysis of this sector and economy in general. No, this is not that POTA, this POTA is data “Pulled out of Thin Air”. He states: “We observe that the non-corporate service activities, which, in turn, constitutes nearly two thirds of our economy. These are also the fastest growing activities. So justifiably, it is the non-corporate sector that should be termed ‘the engine of our economic growth’ and the Indian economy be called the partnership and proprietorship economy (P&P economy)”.

Thus RV deals with some myths about our economy that have always surrounded us and led us to believe that the corporate sector is the great backbone of the Indian economy. The truth, as with all myths, is quite different. This is not in any way to dismiss the corporate sector or its deserved place, but to indicate that they get more attention than due. Known for his wit and research RV also makes some stunning points with a good sense of humour: “There is a witty saying in the Army, that to move up in the ranks what needs to be done is “Salute all things moving and paint all things standing”. In the same vein, governments attempt to control and regulate an economic activity if it does not understand it and tax it if it is growing fast”. 

RV also touches upon education concerns of these small people and also how they contribute to many causes; both social and religious for their own community. That they also make a great contribution to savings while managing their own expenses. He writes: “What is really important is that the educational expenses are, in a perverse way, inversely related to the level of education, like KG being more expensive than post-graduation”… Banks do not provide loans for school education but provide for IIM/IIT education”. This is an absurdity in our system. Narendra Modi in his last speech at a BJP meet outlined primary education in his vision statement. RV explains it as giving loans for constructing the second and third floor of a building but not the foundation. I would go further and suggest primary education should be free for all children no matter private or public schools. This freebie or burden is one that we should gladly bear.

Public and media discussions largely centre around macro-economics. This is a reason why you’ll find “eminent economists” like Sagarika Ghose quizzing Modi on US business interests or fiscal deficits. Our lives are related to micro-economics. Even on the issue of reservation in private sector, RV logically explains why SCs/STs would be better served by developing their skills to be entrepreneurs. Indians are gifted at enterprise. This is where govts should be investing energy instead of more and more doles and reservation.

I have met RV a few times and he is a keen observer of the economy and political policies. Apart from being a popular teacher at IIM Bangalore he conveys his messages with a lot of facts and figures and analogies. His articles feature in many newspapers and he often appears on TV as a panellist. We tend to discuss economics in casual conversations with issues that directly affect our everyday lives. This book takes it further for the country and will inevitably become a tool and resource for anyone seeking a deeper understanding and learning of Indian economics of the small people. You can get it as paperback or a Kindle version.

PS: Please vote on the India’s worst journalists poll -2014 (Right margin of this page).


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  2. Very true Ravinar. Hope traders like us too come under this unincorporated sector. A small time trader has to take care of Vat, Income Tax, TDS, Service Tax and other local corporation/muncipality taxes for smooth running of his business. I hope the next Govt under Modi with inputs of people like Prof.RV would take steps to reduce the hassle of traders in India. Have placed my order for the book straight away...

    1. Well said.

      Before rationalizing taxation BJP/Modi should read this book/get the gist of the contents.

      I hope this is an eye opener for those preparing the manifestos of BJP

      Think how much the UPA has given tax concessions in the last few years to the 15% of the economy.
      Corporates like Gopinath/Mallya always privatizes profits but nationalize the losses.

  3. Why did you miss Vinod Sharma (HT) in the poll? He is being seen quite frequently on debates these days and has a clear pro-Congress agenda. In fact, a few days ago on Zee news he made such blatantly pro-Congress statements that Sudhir Chaudhary taunted him by saying, "Thanks for presenting Congress' side of story", to which he took great offense and started kicking and screaming like a child. Phrases like "mujhe bulaya mat karo", etc...It was really funny!

    By the way, what is the direct link to see the latest TRPs of news channels? The website tamindia is quite a maze and even Google didn't give me the exact info I was looking for...

    1. Adding to Nagesh point any specific reason to keep out Sting Operation Journalists away from this Rating?

    2. After having followed almost all Hindi & English channels, Sudhir Chaudhary & Shiv Aroor, don't seem to suck up to any political party or individual in particular.

    3. True he is quite a prick,who sulks for congress.he also appears On newsx And will be ranting about RAGAs visions .And he is quite inflammable.and talks bout journalist ic ethics and x panelist rahul shiv shankar is slightly towards right but atthar khan is clearly biased against MODI andBJP.The place were i stay in andhrapradesh only this channel comes thank god.

  4. what RV's idea of economics is similar to one in TN. Say for example, people outside TN knows salt means TATA salt, but in TN there are 12+ local brands selling salt to segmented market. Undergarments- people outside TN think VIP/LUX but again there 32+ brands available in TN. Even the myth of HLL taken head on for every RIN/SURF there are 7+ brands. To put it simple the myth VELVET shampoo forced HLL to buy it out. VELVET started way back in late '70's-first to sell shampoo on sachet for 0.25paise. in early 90's acquired by HLL to cut the competition.
    SME is the reason, Why the state like TN moved forward and states like UP/Bihar lagged behind.

  5. The best part of the journalists poll-2014 is that it gives the voter the option to select multiple journalists name. Otherwise it would have been unfair to Barkha :-) who seems to be leading.
    RV is one of the leading intellectuals of our time.

  6. Indeed primary education must be free for all..
    all neighbourhood govt schools must be converted into KV standard schools so that rush for the prestigious private school will come down.
    free primary education will actually also bring down considerably the corruption levels that we see on day to day basis in public services.
    a framework must be made to route all CSR & worthwhile NGO's (ones with no credibility must be abolished right away) for next 10 yrs towards primary education.
    1 re idli & 1 re rice can be abolished and proceeds of tht can be routed towards this project !

  7. Very insightful thoughts.
    I have been reading posts on this blog almost everyday from past few weeks.
    Gives me a feeling of being closer to the reality (truth). Thank you. Please keep posting.

  8. The education system would need to be overhauled completely to focus on skills development. The curriculum needs to focus on developing skills which will empower Indians to choose and learn a skill that would help them earn a livelihood. We require millions of electricians, plumbers , mechanics , gardeners , nurses , carpenters, cleaners , teachers, technicians , manual skills specialists ( ancient indian techniques) etc. But the Indian society is shaping completely tangential to this and is very urban, western oriented .

    1. True, for that, the skilled workers have to be paid at par with techies and white collared executives

    2. Not necessarily. There is no other option. People will have to become entrepreneurs basis their skills and earn their livlihood.
      Look at the present day situation.. what real skills ( tangible ) do people in service sectors have ??? phone operation, computer operation, english speaking skills.. and so if their industry crumbles ( or gets substituted by something else ), these will all be unemployed.. whereas if one has a specific knowledge, skill set .. one can always open ones own business ( provided one is willing to move out of ones existing comfort zone for livlihood).

      It is high time Indians realize their traditional wisdom.. self help is the best help; one is entirely on ones own. if one cannot help oneself , nobody else will . There is no other option to self entrepreneurship and co-operative soceities ( for colloboration. )

  9. Good article. In fact education is stressed as one of the primary agenda in NaMo's vision. It is very unfortunate that none of these congress boot licker channels are ready to discuss or even report about NaMos's vision speech. I was following all the news websites on that day and this TimesNow idiots did not even report BJP's national meet as a news. I really even doubt about the timings of this stupid AK's drama at Delhi. This seems to be purposely planned to blackout two things- 1. NaMo's speech and vision statement 2. Conspiracy behind Sunanda Pushkar's death.
    Very disgusting and ashamed of these news channels.

  10. Excellent article! Have to buy the book. I have always wondered why does the Govt not try to make the life of these small businessmen easier! For example, why do bhajiwalas not get a clean proper space to hawk their wares? These businesses cater to needs of everyone, are ecologically safe and provide employment to millions of people.

    Thanks for writing on such a positive subject, Ravinar! For once, I could enjoy your lucid writing without my blood boiling.

  11. Nice to see C5M and Numeree Unee neck-to-neck on the poll...They say women will be truly liberated the day they are bald and paunchy and still find themselves attractive...similarly, when they compete and outdo men in sheer professional crappyness...they have arrived! As a feminist, day to celebrate ;)

  12. In the corporate sector, taxes are cut before one gets his/her salary and tax paying is unavoidable in that way but i believe large portion of “unincorporated” sector, does not pay their taxes,that's probably the reason behind being called the backbone of the economy,suitably to finance government's economic policies.

    1. Every person is free to take the risk and be an entrepreneur. That way they can pay tax post business expenses deduction. Most people seek jobs as that is the safer option. Also, tax evasion is not the forte of small businesses...bigger businesses use all the tricks in the book to evade taxes...they can afford an army of CAs. And surely, any enterprise that creates jobs and adds to the economy, does the nation a favour.

    2. That's being rather simplistic. A businessman who is "not paying his taxes" still provides employment and livelihood to many people!!
      By the way, where do you think he gets the money to pay bribes to sundry govt. departments. He will have to pay bribes regardless of whether he pays or does not pay his taxes.
      E.g., i read a reader's letter in a newspaper, he relocated his existing shoe making unit from UK to India in the heady days of liberalization. Now he says that he was able to work with 9 employees there where as in India he needs several employees full time just to do the "rounds" of the various govt departements for the "paperwork".

  13. You suggest government to invest more energy into entrepreners, I suggest govt. To do nothing and see how small businessmen like me flourish. Govt. Is biggest hurdle and main reason why small scale industries are disappearing. Look at the licence and tax terrorism of govt. There are too many licenses one has to obtain to start small business of trading. I have to take licences of Shop and establishment , Apmc license, Nmmc license, Vat registration, Import export code, food safety and security license.. LOL. A single business, single govt and 7 license for just trading businrss. Why doesn't govt. Open a department where you have to put your documents once and all documents are transferred into respective department via email? But govt. Has not to do that.

    Custom duty
    Apmc/ nmmc tax
    And now created LBT by peon mentality officer. You have to pay tax on purchase , hell with sales of that goods or goods damaged and not sold.
    This kind of taxes and licenses are biggest hurdels of SMEs.
    That's why I am carried away with arthkranti and baba ramdev proposal of banking transactions tax. 1 or 2% tax on each deposits. Small business having turnover of 1cr annually will be direct deducted 2 lac. 50-50 portions can be shared with state and center. This will end secular games of parties like SP, BSP, Congress. As ruled states by them want more income must have more trade. Only solution left to income, trade.

    I think this idea of cashless has taken seriously by RBI governor Raghuram that's why he called for return of notes worth Rs. 14 lac printed between 2000-2005.
    I hope NaMo comes to center and finish this corrupt systems forever by introducing Single license, Single tax.

  14. Indeed Primary Education is most important.I am involved with pre-Primary and Primary education sector for last about 15 years and a trustee of an NGO which strives to improve the quality of Primary Education. Has anybody given a thought about the medium of instructions? We as an NGO in education sector every day face these problems because people think that if a child is taught in English medium then the doors for his progress will be automatically opened. And this is true in India. But has anybody thought what are we doing? The knowledge commission of India says that even after 100 years we are able to take English education to just 5 % of the Indian population. According them this is the main reason we do not have quality research done in India at par with the world. Due to this language policy and hegemony of English, we are depriving our large majority population from opportunities. Due to English hegemony, we will not be able to make inclusive growth and the communists are exploiting theses fault lines. Can we offer our majority population best opportunities in their own language? Can we make progress in Indian Languages at par with Chinese, Japanese, Taiwanese, South Korean, Germans, French, Russian? All these countries are not communists and champions of Capitalism and world trade. People fear that this will give rise to Regional Factionalism and therefore prefer English hegemony. For the unity, this country is trying to change the Language of 1 billion people to English. How many good English teachers do we require? Can somebody estimate? How much financial provision we need to make for teacher's salary? A teacher trained in English by British Council costs somewhere Rs. 4 to 5 Lakhs.

    India was united even with many languages and will be united if we want to remain that way respecting everybody's language.

    Ravinar, when you say free Primary Education these are some of the thoughts that came to my mind due to experience of last 15 years. Teaching Reading writing is Rocket Science even in America Anybody can search on the Internet with this term and you will find ample resources on various issues involved in First Language teaching. Hope this helps the discussion on this important subject of Primary Education.

  15. Before 1500 AD, when we were the largest economy in the world, we did not have those so called corporate giants or MNCs.In UDYOG PARVA of MAHABHARAT there is reference to 14 items which are to be given free and not sold - one of these items is salt ! Salt is produced along our sea coast.Man sitting around Delhi is supposed to get it free.How? over thousands of years our agriculture,manufacturing,trading,services got integrated in a unique way.Reason why we have a huge artisan class,entrepreneurs,transporters,sea faring communities...
    This book should be an eye opener for our planners and babus.India moves on like it has been moving on since last 10,000 years, not so much because of her leaders but because of billions of faceless ,anonymous people.

    1. Mahabharat did not take place around 1500 A.D and nothing should be given for free. get that into your head, you're ignorant.

  16. Dear Ravinar,
    I am both fan of you & Prof R Vaidhyanathan. Prof RV is an expert in giving speeches post lunch session & still keep every one attentive. His students in IIM Banglore are really blessed to have him as their teacher
    Very informative & educative article which of course our #MediaMafia will never bother to debate.
    Appreciate your honesty to tell every one about you meeting Prof Vaidhya few times.
    Wonderful review & looking forward to read it soon.
    Hope some one translates this Book in to all regional languages inc Tamil
    Pradeep Kumar

  17. I have been buying books based on what Ravinar has been suggesting and to be frank all the books have been awesome reads.. thanks Ravinar.

  18. Ravinar - You left a few luminaries from your worst journo list..Srini Jain, Vinod Sharma, Sunetra Chaudhury (ok..may be she is a confused one..bad on NDTV & good on DNA), Arti Jerath, Shankashan Thakur....

  19. Excellent blog. Heavy, I must confess. Something new for me. Is it really true that so many smaller businesses are not Incorporated? Are they have to have license? In America you seldom find any business which is not incorporated or is not limited partnership. Mainly because, the owners want to protect themselves from creditors in case of unexpected mishap. The creditors can go only after company asset but cannot even touch the owner. The company can go bankrupt and the owner would not lose a cent of his money.

  20. Ravinaar you are such a fantastic writer. Its sheer treat to read ur articles. Kudos to you and your features....

  21. I do fear RV to be haunted and defamation suit brought against by India Inc -- because this is India -- where commie capsule & WTO don't want it happen FOR India -- so we have to look inwards. Guess ---- N Modi.

  22. Old & Wise saying......Every Indian was content & prosperous when 'Agriculture' & 'Farming' used to be the most sought after profession.

  23. HI,
    Just a small disagreement on the economic idea you proposed. Your suggestion to have free schooling no matter pvt or pub is impossible ..if implemented then lacs will simple flock to the best most expensive pvt schools in their areas .. and how will then the schools decide who to admit?

    Please go through milton friedman's ideas of a voucher system.

    Sanjeev sabhlok has written extensively on this system on his blog and in his books.

    Also as you have said you will endorse books. I would like to suggest some:

    Breaking Free of Nehru - by sanjeev sabhlok. : He explains how nehru pushed India into an economic darkness with his socialist ideology and love of russia and advocates economic freedom, free markets and world best policies for India along with reforms to revamp our IAS system, health care, education, infrastructure etc.

    Atlas shrugged - by ayn rand : this is an fictional story which makes the moral case for capitalism.

    Just suggestions . .thanks for your amazing posts .love your work.

  24. Nice post, I bookmark your blog because I found very good information on your blog, Thanks for sharing
    Quality Services & Training Pvt.Ltd.

  25. I re-read this article again and so much said, nothing has changed even after BJP has come to power, we thought that people like RV , Ravinar, and others who immensly contributed for the BJP sweep to come to power, have not been properly utilised, for their rich thoughts and perceptions


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