Politics of reservation

From the Eco times

IN A development that holds ominous portents for the Manmohan Singh government’s quota plans, the Supreme Court on Wednesday asked the Centre as to how a 75-year-old sample survey, covering a few villages and a small percentage of the population, could be the basis for determining backwardness of OBCs and providing 27% reservation. “What was the hurry in providing reservation without collecting authentic and determinable data? Why didn’t you (the government) wait to gather the data first and then come out with such reservation?” asked a division bench comprising Justices Arijit Pasayat and LS Panta.
The poser from the Supreme Court was a clear indication that the top court was unconvinced about the rationale behind providing 27% reservation to OBCs. The question as to how tenable it was to base the quota largesse on a 1931 sample survey was among the many queries the division bench raised during the hearing on a clutch of petitions challenging the constitutional validity of the Central Educational Institutions (reservations in admissions) Act, 2006, as well as seeking a stay on its implementation from the coming academic year.
The non-exclusion of the creamy layer also came in for scrutiny. “How did you quantify the socially and educationally backwards among OBCs as a class and not as castes as in SCs? Unless a full determination of these indicators are done, how could this act be given effect to,” asked the bench. This is bad news for the government as the exclusion of the creamy layer from the quota ambit is stoutly opposed by the ‘social justice’ parties in the ruling alliance such as DMK, RJD, PMK and LJP.
That legal opinion was in favour of keeping the creamy layer out was evident when the court took note of the arguments made by counsels for the petitioners — Fali S Nariman, P P Rao, Vivek Tankha, M L Lahoty and Sushil Jain. The counsels said that the parliamentary standing committee attached to the HRD ministry too had favoured a fresh survey to determine the backwardness of various sections of the society. The proposal was, however, stonewalled by the Centre.
Additional solicitor-general Gopal Subramanium, appearing for the Centre, said that other sources were also taken into consideration, but the 1931 census was made the basis for providing such reservation. Mr Subramanium’s plea that general category students will not be affected by such reservation as the number of total seats will be increased proportionately was contested by the court. “Had it (reservation) not been implemented, the advantage due to increase in seats would have gone to the deserving,” said the court.
The judgement in the case is expected to be out in around 10 days, barely a fortnight before the UP elections. In UP, where caste decides the electoral outcome, any setback for the Centre could prove costly for the Congress. Parties like the SP are sure to blame the Centre for the failure to get judicial sanction for the quota decision.

Budget 2007

This is my perspective for Indian middle class from Budget 2007 announced by PC
especially for Mumbaikars - My rating 1 out of 10.

PC the magic fm, darling of the markets and part of the dream team of congress has in my opinion always been a word and number juggler and a figure fudger or a Numbers man Everybudget he makes looks wonderful on paper but once analysed in detail offers little or negative to the middle class man.

For Mumbai nothing concrete no money to show just more blabber after PM s Shanghai
about making it a financial hub in Asia.

POSITIVES (if any/ if u can call them that)
1. Personal income tax: Little relief to the taxpayers.
Exemption limit increased to Rs 110,000, for women Rs 145,000 (Rs135000 budjet 06)
for senior citizens up at Rs 195,000.(Rs185000 budjet 06)
That means after all the price rise in all daily essentials the bread earner gets benefit of a paltry
Rs 1000 on taxes in a year ie not even Rs 100 a month.
Also the paltry increase in slab limit is negated by Increase in Education Cess, which is increased to 3% from 2%. meaning pay for follys of Arjun Singh and undeserving Obc reservation candidates.

Deduction: Medical insurance (Sec 80D) to be increased to Rs 15,000; for senior citizens Rs 20,000. Time now for planning to take that medical insurance i have been postponing Ps how many middle class people have Medi Insurance above 5000 i wonder cause a cover for 2lakhs does not cost more than 3000 even wt private insurers, this is more to benefit Oriental National and other health insurance cos.

2. Banking Cash Transaction Tax. The limit for individuals and HUF raised from Rs 25,000 to Rs 50,000. God knows how many people will benefit basically i wont, but it mite be useful in emergency cash needs.

3. No hike in S T T / S T C G - Much expected measure was not taken up this time, well this means good news for Speculators, Traders, big players, institutions and jobbers ie those who trade and dont hold stocks but trade in them. Nyways STT is not very low as it had been increased in the last budget by 25 per cent from 0.1 per cent to 0.125 per cent.

4. Student Loans : the benefit on student loans- Sec 80E is henceforth extended to parents and relatives who can claim rebate for loans taken for children`s education.

5. Introduction of a Reverse Mortgage scheme 2007/08 for Senior Citizens - Just a tiny note put in by PC but lets see how beneficial it will be to them when the details come out.

6. PAN with a prefix as id for markets - late but good - if correctly implemented, this will help investors with reduction in paperwork and proliferation of id cards like min uin etc.

7. Lastly no increase in VAT especially in branded essential commodities, which i really cant call as a positive but have to in desperation as i see it there are little positives in this budget.Point to note is that he has put a few more things under VAT

Negatives and many of them
Intention is to tax the middle class ie Milk the Urban Middle class not by direct tax means but by limiting exemptions or reducing savings benefits. Overall the message is dont save and if u do - be ready to be taxed so that whatever u get over inflation will be transferred to govts coffers so they can spend it on some vote grabbing scheme.

1. Dividend distribution tax raised from 12.5 to 15 per cent. Hello more taxes on dividend this one is a shocker mainly hitting the middle class and Small investors holding equity on long term basis and not the rich businessmen like say a birla or ambani who earn like crores in dividends and a lot more in Salaries and perks.

2. Minimum Alternate Tax being extended to I-T companies. ESOPs to be brought under FBT and Education cess increased. Be ready to see ur tech portfolio taking some hit at least say of 10 to 20% in the next 3 days.

3. No benefit for Salaried class which lost standard deduction benefit in last budget especially the urban poor or middle class people who earn upto 2 lakh. This is bad news due to the price rise.

4. No reduction in the lock-in period for fixed deposits to three years from five years to get deduction under Income Tax Act, 1961. No resumption of 80l benefit on Savings and Deposits.

5. Mutual funds- big negatives
Equity Mf investors who have to face double STT, will see an increase in DDT , FBT , MAT on Equity which will reduce their overall returns substantially will start to pinch especially when the market will turn southwards .
The Debt funds which had seen negative returns and were taxed have not got any relief either. Overall there is no focus or talk in developing our debt market which are wholly based on govt and govt institutional debt and private co debt is negligibly traded.
The dividends on Money market funds and liquid mutual funds will henceforth be taxed at the rate of -- YES--- 25%.

Well live with it and be happy paying taxes on negative returns on savings interest and FD interest earning just above inflation.The taxation of liquid funds will also be Savings negative. Biggest negative for the Senior Citizens who have payed substantial taxes in their youth during Indira Gandhi era and are straddled with overall higher cost of living and obviously without any state benefit or social security.

6. Capital gains Bonds
The FM had, by a notification in December 2006, restricted the limit of investment in bonds of NHAI and REC, eligible for capital gains tax exemption under Section 54EC, to Rs 50 lakh per investor per year with retrospective effect from April 1, 2006. The limit will be continued.

7. Taxation of super rich agriculturists has never been talked about. This is one reform which I never expect to be implemented because of obvious reasons.

United Western Bank

The SEBIs credibility as independent regulators have always been suspect and it has always been called a paper tiger. The messy fall of the Global Trust Bank put a dent in the RBIs regulatory credibility.
This i say because both RBI and SEBI failed to act against the politically very well connected ex ceo pomoter Gelli of GTB, whose share transfers to his family members and sales and transactions in the GTB script before it went bust were never investigated. The Depositors including me got back our money but the shareholders especally the small ones lost out.
I was a fd holder in gtb and well remember that RBI had astonishingly commented that the Bank was turning around for the good just before the nasty morotorium, after which i started listening more to Soros(who euphamistically broke the British treasury)instead of listening to Rangarajan .
The Credibility of the RBI had fallen to a low after the Madhavpura Bank fiasco and an Andra regional coop bank went bust and the Promoters(Debtors)fled to South east asia and most depositors(some greedy)who lost their deposits, cursed the regulator saying tha the RBI was sleeping when the banks networth was eroding.

The other big bank to fall recently was United Western Bank, which is now as per reports taken over at a price of 28 per share by IDBI.
Well the Depositholders have something to cheer,as they will soon be able to access their savings. The shareholders will also benifit from the larger than expected valuation of Rs 28.
But Really who will benifit?
Most obviously the Staff, SIICOM, the Central Agri Minister and supporters of Ruling Cong/NCP Coalition in Mah who it is speculated are known to hold some shares and for obvious reasons demanded that the Maharashtrian character should remain.
A leading punting broker and his followers who bought the shares in the crash when the moretorium was announced will also gain handsomely and so will the makharia grouping and family - the root cause of the banks ills -
Someone got to study the transaction patern from the day before announcement of the morotorium till today to get a conclusive picture.
Most or at least some of the small investors in UWB have already lost out as most of them panicked and sold their shares close to 18 in the secondary market fearing the UWB would go the GTB way, and who could blame them.
A detailed analysis of the plan will also give us an idea if the Idbi shareholders would gain because of this merger.
Lastely the Rbi will also gain some lost credibility for successfully handling this crises.