The article “Bubbles: Good and Bad”, Mint, 19 December, seems to judge, at least according to me, little prematurely that no good will come out of the housing bubble. The homeless still outnumber owners world over. So, irrespective of how these homes were built, through good finance or through subprime, they are real and not castles in the air. Given these two facts, it is now left to human ingenuity to make the best of a bad situation. Planned subsidies seldom reach the targets they are intended for. Now these kind of situations probably force subsidies through bail-out packages, which may serve better. So, it is better to suspend our judgement and fervently hope that even this bubble will lead to some good outcome for the homeless.
Re: Ourview “Tough choice”, Mint, 24 December. We have increased revenues today due to efforts of the finance minister in the last couple of years to bring awareness about the importance of tax payments. Fortunately, due to the increasing education and income levels across the middle class, which is one of the main contributors to the economy, revenues have gone up.
Even today, we have a large World Bank (WB) debt incurred by many states across the country. Maharashtra has had huge deficit for quite some time. If we have increased revenues, why can’t the Centre lend to such governments at a rate less than the WB?
We seem to be obsessed with the European flat tax rate system. I am not sure if there is a link between this form of taxation and better infrastructure and public services. Britain, for example, charges flat 20% and 40%. Even then, more than 50% of the trains over the weekend don’t run as they are always under “planned engineering works” across the country. We are in a far better position than them. I haven’t heard of so many trains not running due to any disruption. So, let us take pride in what we do.
Coming back to the issue, if we have started collecting taxes from a greater percentage of the society, why not keep doing that for some more time? People do have money—they have already shown it in home lending cases, irrespective of various measures taken by the Reserve Bank of India and the increasing rate hike in the recent past. Also, the volatile fuel market has not made anybody step back and think twice before purchasing a personal vehicle.
Let the finance ministry be more accountable on the application of tax revenues to various infrastructure projects or assume a role like that of a mini-WB for state governments. We are as such famous for setting up inquiries and panels in this country. We can set-up one more panel, this time from industry. Let none of the members belong to any of the political parties. This panel can keep a close eye on the finance ministry’s allocation of tax revenues for various projects, requirements, etc.
The article, “Case for social lending”, Mint, 19 December, was interesting. I was playing with the idea of social lending in India some months ago, after reading an article. I wanted to create a model for a presentation to venture capitalists but had two problems. I did not know the barriers that existed in India, which inhibited such a case. I also couldn’t come up with the means to reduce delinquency while lending to strangers. This is because there’s no social security number and other proof for identity that can help track a person in case he defaults. But it’s interesting to note the three changes that are due to take place in our country. Social lending will do great in India, once we’ve sorted out the connectivity problem. So, does it spell an end for retail banking? I should probably withdraw my money from the bank stocks that I own.