Black Money- A Further Note

Further Note on the proposal about Black Money inside the Country

There has been some feed back on the note about Black Money circulated
among citizens.

It is said that the so called Black Money does not solidly exist in the hands of anybody in the country because such money is immediately converted to real estate, gold reserves, shares and undisclosed stock and trade by companies and traders, benami investments etc. Hence, lump sums of money cannot be expected to be deposited in the specialised banks.

This, of course, is a known fact. This is an ever increasing wealth of the corrupt persons. The high price of the real estate is in fact the evil result. This must somehow be checked to keep the prices within the reach of the middle class and force the wealth into the tax-net. This is possible by a nation-wide drive to investigate the holdings – wealth, acquired during the last ten or twelve years through the records of registration all over. This is a must for any government – a responsibility that cannot be evaded. Otherwise this evil will keep growing to dangerous proportions.

The Black Money that has gone into the real estate etc is obviously present in the country, if not in lump sums. This is bound to be present in smaller size among the upper classes. This would mean that the deposits if attracted into the special Banks, may be smaller ones. If not hundreds of crores, the deposits may be 1, 2, 5, 10 crores or millions. As the time progresses this is bound to accumulate very well. When proper check is introduced on heavy real estate transactions, the future deposits may gradually increase. Pressure applied at one end and relief at the other should work. Thus the money distributed in the country can be netted like small fish. If the offer of trouble-free deposits for a fixed time is available and not for all time, it is bound to work in this country. This will also gradually reduce the high price of the real estate besides eliminating fake currency, etc.

Recently in a TV interview with Dr Arun Shourie, the interviewer tried to convince that the money in Swiss and other Banks is not money from India but it is the deposits of NRIs. His sources of information are not known. But true, the Commissions from the foreign military hardware suppliers to the Indian agents or Indian politicians may have been directly deposited there without routing through India. Secondly, the names of the NRI depositors could have been benamis for the Indians. It is difficult to believe that NRIs earned so much money as to escape the foreign taxation and deposited the same in secret accounts. According to Swiss Bank reports of 2006, India’s deposits are 1456 Billion Dollars i.e. 72.8 Lakh crores of rupees. Even the direct foreign commissions, morally speaking, is Indian money.

In any case, the question is, is the government totally helpless to unearth the corruption money? Does it mean that the evil will go on perpetually and these political governments will turn a Nelson’s eye to this evil? At the cost of the crores of middle class people and the poverty-stricken people, does it not lead to a socio-economic unrest uncontrollable?

It is reasonable to believe that the foreign money would also flow into this country using the limited time facility.

These are the questions of an unqualified non-technical senior citizen who feels that these are issues seriously debatable among all knowledgeable citizens.

Black Money: A Painless Remedy

The full version of this document including the flowcharts is available at :
http://www.scribd.com/doc/14388011/Black-Money-Proposal-KSM-April-18-2009


Black Money: A Painless Remedy
by Shri K Sivananda Murty

This scheme of dealing with the problem of black money was proposed in 2001 by me and presented to certain important persons but was not followed by any timely action. In these 8 years, the problem has at least doubled. In the recent G20 summit in April, Prime Minister Sri.Manmohan Singh urged the G20 leaders’ attention to bring tax havens and non-cooperating jurisdictions under close scrutiny as a part of implementing tighter global financial regulations. Surprisingly, there is no mention of the black money circulating in India. Strangely the attention to this serious problem surfaces in the last part of his tenure in office and not at the beginning. The original scheme of 2001 focused on the black money circulating within India. The Indian money secreted in foreign banks would automatically flow back to India, if the proposed scheme is implemented. The proposal will succeed by virtue of its incentive and not in its pain of disincentive. This is purely based on a citizen’s idea to deal with the phenomenon of black money.

Today, we have three economists in India at the helm of affairs. These men of eminence can certainly help in the matter. The original scheme of 2001 is updated to highlight few more substantive issues that can be effectively tackled. The scheme mentioned by me has been developed into a technical presentation by a highly qualified economist. It is painless incentive model scheme, with many benefits. Learned, qualified and capable persons may kindly examine this in the country’s interest.

Sivananda Murty

Black Money Proposal in the ligh of recent global financial meltdown:

The purpose of this article is to critically re- evaluate the visionary proposal submitted by Shri.K.Sivananda Murti in 2001 to unearth black money in India to deploy it for infrastructure development and thereby obviating the need for foreign borrowing. This proposal offers a novel alternative to the various schemes implemented by government of India in curbing the black money generation since last five decades that eventually proved unsuccessful in their objective. The focus of this article is not on tracing the genesis of black money generation in India or its measurement. The operational definition of black income and black economy considered for this essay is based on Arun Kumar (1999). The black economy is defined as the totality of economic activities in which black incomes are generated. Black incomes are defined as factor incomes, which should have been reported to income tax authorities but are not.

The innovative perspectives offered in black money proposal by Shri.K.Sivananda Murti (2001) is highly relevant even today, especially in the light of recent sub-prime crisis that originated in the mortgage sector in the US and spread like a contagion to the stock market through conduit of
securitization The contagion adversely impacted the US domestic real economy and spread across globe through integration of financial markets enabled by aggressive globalization. The economies that were otherwise functioning well were caught in this tsunami leading to an unprecedented destruction of value and wealth.

The claims of globalization that it can unlock the value of assets located worldwide exposed the vulnerabilities generated within complex system of interactions inherent in the functioning of global financial markets .The paradox inherent in the financial markets is insightfully articulated in the recent book “ A demon of our own design”- Richard Bookstaber:

“The structural risk in the financial markets is a direct result of our attempts to improve the state of the financial markets; its origins are in what we would generally chalk up as progress. The steps that we have taken to make the markets more attuned to our investment desires — the ability to trade quickly, the integration of the financial markets into a global whole, ubiquitous and timely market information, the array of options and other derivative instruments — have exaggerated the pace of activity and the complexity of financial instruments that makes crises inevitable.Complexity cloaks catastrophe. (Emphasis added) …The markets continue to develop new products to meet investors' needs. Regulation and oversight seek to ensure that these advances land on a level playing field, with broad and simultaneous dissemination of information and price transparency. But the innovations are somehow making our investments more risky. And more regulation, ironically, may be compounding that risk. It would seem there is a demon unleashed, haunting the market and casting our efforts awry: a demon of our own design.”

‒ ”A Demon of Our Own Design,” R. Bookstaber, 2007

The implication of these recent global events must trigger serious introspection in the minds of our national policy makers to seek self-reliant solutions through tapping vast pools of liquidity manifested as black money instead of being exposed to invisible financial tsunamis brewing that
will erode value and wealth.

Message delivered by Shri.K.Sivananda Murti on June 18th, 1987

It is fundamental instinct of all living creatures to procreate and wish their perpetuation in safety and plenty. A man in society thinks of his progeny and its welfare. To treat this as offence against any law is injustice natural. Such a law has an obvious infirmity in itself. If there is a law against a basic instinctive nature of man it is bound to fail by violation or perpetual amendments. Amendment or violation, therefore only prove the inherent infirmity in the law. There should be a law in conformity with man in his original nature of self-preservation and perpetuation. Our laws and their failures have to be studied and reviewed in this perspective.

Introduction:

Indian government deserves credit in boldly implementing the market-based reforms in 1990’s. This provided a much-needed boost to our stagnating economy. It also provided opportunities for private entrepreneurship in participating in economic growth and prosperity. The economy posted impressive growth measured in terms of GDP and other macro-economic indicators. The GDP of India is the fifth largest in the world close to a trillion dollars. Despite this economic success, the phenomenon of black money still persists. The post-liberalization phase minimized the need for black economy but provides opportunities to make easy money. According to Arun Kumar (1999), the size of the black economy was 40% by the end of 1995-96 and is estimated currently close to 50%. One of the manifestation of the black economy is the widespreadprevalent of cash-financed transactions. According to Dash (Dec 16 2008), “The cash economy is thriving. Evidence: currency holding by people, according to latest Reserve Bank of India (RBI) data, was up Rs 93,610 crore in a year to a whopping Rs 6,18,713 crore as on November 21, 2008. This is the highest ever year-on-year increase in cash holding by the public – over Rs 20,000 crore more than the rise seen in the preceding year”.

This is the magnitude of potential loss of direct tax revenue by the government resulting in widening of the fiscal deficit. In addition to the tax dimension, the black money is a serious issue judged from the following perspective. Substantial amount of black income is redirected towards directly unproductive profit-seeking activities. These are defined in Bhagwati (1982) as ways of making profit (i.e. income) by undertaking activities which are directly unproductive in the sense that that they produce pecuniary returns but do not produce goods or services. Typical examples include activities such as tariff-seeking lobbying, revenue-seeking lobbying, monopolyseeking lobbying, tariff-evasion, smuggling etc. These are evidently profitable activities but are wasteful, as they yield no output. This is a considerable wastage of human resources, as people could otherwise be doing something of higher productivity. Judging from all
these considerations, black economy is a serious drain of precious resources for any given country and therefore merits serious consideration in minimizing its generation. The negative consequences of black economy are illustrated using the flow chart developed by Chugh and Uppal (1986) on page 13.

Indian economy has benefited from globalization on account of its cost advantage. The quality of infrastructure manifests itself in two key dimensions among others notably; sustaining competitive advantage and the quality of basic living standards. Our inadequate and outdated infrastructure has hampered our ability to fully leverage cost advantage from cheap skilled labor. Infrastructure inadequacy and bottlenecks have escalated the cost and eroded our competitive advantage bestowed on us through skilled human capital. Investment in improved infrastructure is seriously lacking in the government policies. It occupies an important place in the official plan documents but with unsatisfactory execution. In a recent article, Jay Dubashi a noted Indian economist comments on the lack of sound long-term financial planning in government’s economic policies. Indian government in the recent times has frequently resorted to foreign borrowings to meet the fiscal deficit. The negative consequence of this policy is well argued by Dubashi (Nov 6, 2000).

“The reason why the budgets turn out to be such disasters is that the finance minister simply has no levers to control the economy. Everything in India now depends on outsiders. The stock market now depends on foreign institutional investors who bring in or send or take out their funds according to their own convenience, which has nothing to do with the state of affairs in India. The foreign exchange market also depends on outsiders, and how many dollars they bring or take. The current account deficit also depends on foreign investors and nobody knows how they do their calculations.” This strategy cannot be sustained for
long without plunging the economy into bankruptcy.

The quality of life, in terms of access to basic amenities (clean drinking water, sanitation, electricity) for the rural and urban poor continues to be deplorable. The lack of basic amenities manifests itself in mortality rates, rampant episodes of diseases and crime. The quality of life for this segment of the society can be ameliorated if the unaccounted money that is circulating can be diverted appropriately. There is widespread migration of rural poor to urban regions in search of employment has resulted in urban congestion and other social problems like crime.
Review of Policies to Curb Black Money: It is ironic that no Five Year Plan including the seventh Plan has ever mentioned the phenomenon of black economy and the impact it has on the various aspects of the Indian Economy. Indian government has taken few measures to curb the menace of black economy. The various measures and their effectiveness in controlling black income are summarized in the table below. An analysis of failure of the schemes implemented by the government with good intentions to control the menace of black income on the economy reveals the following. The black economic activity flourishes in an economy
characterized by excessive state intervention, lack of economic competition among firms, barriers to entry for private industry, high tax rates and inadequate penalties for tax evasion, frustrating black money curbing measures implemented by the government as knee jerk reaction to the phenomenon. In addition to simplification of tax laws, the government must demonstrate that the taxes collected are being used for productive purposes instilling confidence in the taxpayers that they would be a beneficiary from their contribution.
Susan Rose-Ackerman (1996) aptly argues that reducing the menace of black economy, corruption entails an integrated approach. This encompasses civil service reforms, increased transparency in public sector financial activities, campaign finance reform, less state intervention in economic activities and allowing economic competition among firms and simple and clear tax laws. Administrative reforms must target to reduce payoffs from corruption from abuse of monopoly power vested in government officials. This enhances the government’s chance of reducing the size and magnitude of black economy and provides opportunities for economic well being to its citizens.

Critical Evaluation of Anti-Black Money Schemes

Scheme Features Results

Voluntary Disclosure Scheme 1951 Individuals granted immunity from prosecution
if they disclose their black wealth.
Amount disclosed was small and marginal tax revenue collected. This scheme was a failure.

Voluntary Disclosure Scheme 1965 Version #1 It was also known as 60:40 Scheme. Flat rate of 60% would be collected on the disclosed amount, which had to be paid immediately or within six months subject to furnishing security. The amount disclosed was very small because the taxpayers perceived the scheme to be harsh. The taxpayers felt that government would persecute them in the future. It once again failed to meet its objectives.


Voluntary Disclosure Scheme 1965 Version # 2 It was also known as Block Scheme as taxes
would be collected at the rates prescribed under the Indian Finance Act of 1965. The governments repeated assurances of granting immunity made this scheme marginally successful compared to version # 1


Voluntary Disclosure Scheme 1997-98 To provide immunity under interest, penalty and
prosecution. Main objective to encourage payment of tax and avoid litigation. The amount collected is a tiny fraction of what exists in the black economy. These schemes have repeatedly failed in the past.

De-Monetization 1946, 1978 De-recognition of particular currency as legal tender and their replacement by newly issued and legally acceptable currency notes. The new legal tender will be exchanged for the old provided the owners of the currency have adequate and valid reasons. Limited in its scope and hence not effective. It is effective with respect to cash. Black wealth is held in various other forms besides cash. It also causes inconvenience to the owners of legal currency holders and lot of administrative cost of implementation.

Special Bearer Bonds 1981 These Bonds have a face value of 10,000 with a simple interest of 2%. The subscribers of these bonds were granted complete immunity from prosecution and no questions were asked about the source of funds. The interest income and capital gains were exempt from taxes. Despite its liberal provisions, this scheme was able to generate less than 1,000 crores. There was no clear plan to create a fund to use for any productive channels. Undervaluation of Real Estate 1975 The government has the power to acquire the property if the difference between the declared price of property and the fair market value is more than 15%. This policy had the following built-in infirmity. It is difficult to prove that the alleged undervaluation was deliberately done for tax evasion purposes. The burden of proving this lies with the Income-Tax department. Searches and Seizures To raid the premises to unearth evidence of black money. This policy is counterproductive as the people learn to dodge and also lose faith in the government.

Review of Shri.K.Sivananda Murti’s 2001 Proposal:

The key players in the economy viz, private sector, government and banks are linked in the following way. The first step involves establishing a group of banks either independently or as subsidiaries to the existing nationalized banks. These “specialized banks” would be granted the following powers by passing suitable laws or provisions. They would be the sole repositories for the black money and would grant complete confidentiality and immunity from prosecution to the individuals who deposit their black money with these specialized banks. These specialized banks would protect the confidentiality of its depositors even from the government. This may entail adding the necessary legal provisions in the bank charter. This feature is a powerful and a compelling incentive to drive black money secreted in tax havens for decades abroad to flow into the coffers of the specialized banks preempting the need todesign any specific policies or institutions in dealing with tax havens. The private sector (corporate and non-corporate) would deposit their holdings of black money with the specialized banks for a time horizon of 15 years. The funds deposited with the specialized banks earn a nominal rate of interest not more than 5%. At the end of 15 year period, the depositors would get back their deposit after paying 20%-25% of their total funds towards deferred taxation. The withdrawn deposit after the lock-in period is “legitimate funds” that will come under the purview of IT for future taxation and circulate within the official banking system. The deposited funds with the specialized banks are channeled to the government and its depositors provided the following conditions are met. The specialized banks would lend the money to the government at concessional rates for projects, which are socially productive. The specialized banks would thoroughly scrutinize the government’s proposal to ensure that the government does not fritter away this resource on wasteful avenues while monitoring the progress of the project closely. The specialized banks would deal with the government directly and have the final authority in disbursement of funds to the government ensuring optimal allocation and utilization of resources.

The specialized banks would route the funds through the nationalized banks to its depositors provided the following conditions are met. The nationalized banks guarantees to the extent of 80% of the outstanding balances from the specialized banks. The depositors can obtain a loan of 80% of their deposits at an interest rate of 15% provided the investment is made in the following sectors: Power, Telecommunication, Public Transportation, Housing, Sanitation, Food-Processing industries, Education etc and only 50% of their deposits if they were to invest in commercial sectors. The large scale infrastructure projects would guarantee employment to the unqualified poor and mitigate unwarranted urban migration in search of employment.

Commercial underwriting of loans by the banks would incorporate a break through idea suggested as a part of the proposal by Shri.K.Sivananda Murti to incorporate the profit margin in the industry as a parameter in underwriting. This will ensure that banks avoid excessive lending to ventures in a given industry that would eventually result in; driving down profit margins to all firms in the industry, market glut and bankruptcy. The blind spot in the current underwriting criterion which focuses exclusively on the repayment behavior to minimize default risk overlooking the profit margin of the industry which is eroded with increased competition. The depositors who obtain loan can treat the loan as deductible expenditure and the interest income on their deposits is exempt from taxes.

The serious issue of counterfeiting of currency that is prevalent today and exacerbated through economic terrorism can be innovatively tackled when the private sector deposits their currency with the banks. This feature is embedded within the proposal itself and empowers banks in dealing with the menace without any extra investment in infrastructure in dealing with this issue.


Currently 80% of the government's revenue comes from taxes paid directly and indirectly by individuals and corporate sector. In the current tax regime in India, tax expert, Subhash Lakhotia asserts “The lower income households end up handing over nearly a fifth of their total income to various governments in the form of taxes, while the higher income earners give up a little over onethird of their income in the form of taxes" (Source: How much tax do you really pay? Rakesh Rai, Money Today Jan 7, 2009).


This tax oppressive regime can be replaced with exemptions to the lower income households to allow them opportunities to save and a better economic well being. This possibility is enabled through the access to large pools of black money being harnessed for positive economic growth initiatives obviating the need to tax low income households to garner resources. This will offer a big relief to millions of hardworking, low income households who battle harsh economic realities of inflation, poor living conditions and uncertain job opportunities. The incentives/payoffs for all participants impacted by the proposal are summarized below.

Payoffs to the Private Sector (Corporate and Non-Corporate):

 The participants avoid the high taxes, tax penalties, searches, raids and the cost involved in hiding their black income.

 The costs to the participants in this scheme are: interest on loans borrowed and payment of 20-25% of their total funds as deferred taxation. The interest on deposits is exempt from taxes.

 The participants also are able to invest their funds, build up their assets and earn profits with the benefit of deducting the interest on loans as expenses.

 Encourage declaration of earnings. Payoffs to the Government:
 Prevents leakage of domestic capital abroad.
 Development of infrastructure.
 Recycle evaded taxes into productive channels
 Avoid tax raids, searches and seizures
 Enabling circulation of funds within the official banking system Payoffs to the Banks:
 Increased business opportunities
 Better financial monitoring of resources
 Retention of domestic capital
 Increased liquidity within the banking system Payoffs to the common citizen:
 Employment opportunities for unqualified working poor
 Exemption from income taxes for low income households
 Better infrastructure and better quality of life
 Obviate the need to migrate to cities in search of employment.

Conclusion:

This scheme offers a novel alternative to all the schemes experiment by our government till date. It provides the incentives for better compliance from the private sector and ensures availability of funds to the government without relying on external sources. The private sector would find this scheme attractive to part with their resources for legitimization than face tax penalties and raids. The participants in the private sector feel assured that their resources are being closely monitored by the specialized banks before they are being lent to the government in socially productive channels.

This prevents wastage of resources by the government. The pre-requisite for success of this scheme entails serious commitment by our government in establishing the specialized banks with the features mentioned above. The government must make serious efforts in reforming civil service and bureaucracy, reduce state intervention, and create economic environment for private enterprise to flourish. If such an integrated approach were taken in conjunction with the scheme proposed, our country would achieve far greater economic success. The proposed scheme has the built-in incentive mechanism to achieve multiple objectives in this hour of need in our country.

Our government should avail this opportunity in implementing this brilliant scheme conceived by its distinguished citizen before it loses its battle against black economy, burden of external debt and unhealthy exposure to financial contagions. The proposed scheme demonstrates the features of a sound economic policy built on a deep and original understanding of human behavior and psyche with the right ingredients to deliver its promise and pave the way for economic self-reliance.

The current laws in place are capable of dealing with this evil if it’s confined to a limited size involving only a few people in the country. They are certainly inadequate to tackle the monstrous size of the phenomenon of black money however bonafide the intention to curb black money maybe and therefore not an effective financial solution to the problem. Constant feigning innocence or ignorance about the monstrous evil that lends its strength to the corrupt electoral system or subsequent governance must to come to end. The evil in short, brooks no further delay. A solution offered in 2001, therefore is very much relevant in 2009.

We call upon all genuine thinkers, experts, moralists and politicians alike to consider this proposal with sense of emergency to save our country economically, politically, morally, internally and externally. The indifference of policy makers to this serious economic issue will either lead to repeated exposure to invisible financial tsunamis or economic implosion under the weight of our domestic economic and social issues. The time to implement such breakthrough proposals is now!

References:
Chugh, R.L. and Uppal, J.S. (1986): Black Economy in India, Tata-McGraw-Hill Publishing Company Limited, New Delhi.
Acharya N.S. (1986): Aspects of the Black Economy in India, National Institute of Public Finance and Policy, New Delhi.
Monga, G.S. and Sanctis, V.J (1984): The Unsanctioned Economy in India, Himalaya Publishing House, Bombay
Chugh, R.L (1983): Black Money and the Indian Economy, India’s Economic Problems-An Analytical Approach, Tata McGraw-Hill
Publication, New Delhi
Bhagwati, J (1988): Directly unproductive profit-seeking (DUP) activities, The New Palgrave Dictionary of Economics.
Rose-Ackerman, S. 1996: Redesigning the State to Fight Corruption, Public Policy for the Private Sector, World Bank Note: 75
Gupta, S.B (1992): Black Income in India, Sage Publications, New Delhi.
Thomas, J.J (1992): Informal Economic Activity, The University of Michigan Press, Ann Arbor, USA
Kumar, A (1999): The Black Economy in India, Penguin Publishers, New Delhi.
http://www.mydigitalfc.com/economy/slowdown-my-foot-economy-black-483 accessed March 21, 2009
http://moneytoday.intoday.in/index.php?option=com_content&task=view&id=4926&issueid=60 accessed April 14, 2009
13
lll
Economic Consequences of Black Economy
Source: Chugh & Uppal

Violation of Economic regulations Black Income Tax Evasion
Loss of Tax Revenue
Bribery and graft
Greater burden on honest taxpayers
Bribery of regulatory agents
Bribery of Law enforcement agencies
Consumption
Conspicuous
consumption of domestic goods
Investment in gold and precious stones
Black Savings Deposits in foreign banks
Holding of currency
Inventory build-up
Creation of further income inequality
Demonstration Effect
Conspicuous consumption of foreign goods
Real Estate
Investment in business
Perpetuation and expansion of controls
Delays and inflexibility
Multiplicity of bureaucracy
Support of a socially less valuable pattern of production
Smuggling in of goods
Smuggling in of gold and precious stones
Immobilization of investible goods
Black Liquidity
Loss of confidence in government
Drain of scarce domestic resources to
foreign countries
Avenues for further earning of black income
Investment in these visible areas is normally done through under-valuation and under statement


The full version of this document including the flowcharts is available at :
http://www.scribd.com/doc/14388011/Black-Money-Proposal-KSM-April-18-2009

The Election of a Government

The Indian Model


Sivananda Murty

We are on the threshold of the general election for the fifteenth Lok Sabha along with the elections for A.P.Assembly. The election manifestos in a healthy democracy in a civilized country must necessarily be the issues that the people have before them. In our country, this does not appear to be the case. The manifesto of any political party virtually promises of utopian boons to the suffering people which tantamount to temporary bribes. These promises are neither totally fulfilled nor possible to fulfil.

Among the election promises we find millions of houses to the poor, jobs to everyone, old age pensions to every one and two rupees for a kilo of rice and so on. If, atleast, three sucessive governments could fulfill these promises the country would have been different from what it is. Neither the countrywide slums holding a one third of the population have been cleared or replaced by apartments nor the millions of poor people got any pension. The stink of the slums increases steadily and provides material for making shameful but prize-winning movies to clever business men. The hospitals and schools run by the government being sub-standard, create excellent business opportunities to commercial enterprise in expensive hospitals and expensive education.

These institutions are of course unapproachable even to the lower middle class and the poor. Corruption in the country grows by leaps and bounds which results in creating more black money day by day. Black money in turn raises the cost of a dwelling, unapproachable to the wage-earning middle class. The black money rules the economy of the country unlike in any other country in the world. Selling or buying any property in real money transaction escapes all record. Thus, the unaffording lower middle class and the poor move farther and farther away from a hope to own a house.

Moneylenders including banks make brisk busienss by lending moneys to the tempted people who can never repay within their earnings. The economy is galloping fast in our country to suit only the corrupt blackmoney maker, thus widening the gap between the salaried middle class and the money-making politician or dubious business men. The poor are nowhere in the picture. Such an economy is bound to crash because the poor and the middle class have no part to play, have no say, and have no voice to be heard in the situation.

In fact, the budget of the government is entirely contributed by the wage-earning middle class who can not escape any taxation whether as a consumer or as an income tax payer. And yet, the politician never goes to the educated middle class to know their grievances nor suggestions. It appears that the politician has only a single minded objective of going to the poor masses for votes promising them all sops. The masses consisting of labour, organized or otherwise, the self-employed poor who eke out their living as a vegetable vendor, petty trader, or rickshaw-puller, porter etc. neither pays any tax to the government nor does he know what the politicial process in the country is. The promises made to them, in fact, spend the budget without all
the benefits reaching the poor.

Thus, the poor millions listen to the mouth-watering promises of the politicians, ever hoping to get a free house, a job, a pension, a school, a hospital etc. The billions that are shown as spent are from the earnings of the middle class, whether as an employee with recorded salaries or a struggling shop-owner. The tax that the latter pays is some times equalled by the bribes he pays to the harassing government servants. The middle class people are the very substance of the society.

To sum up the phenomenon, the voiceless tax payer pays for the expensive schemes ostensibly meant for the benefit of non tax-paying majority population. One loses and the other does not gain! The benefits go largely to the politicians, contractors and the ranks in government. The budgets grow in size year by year, election after election. The black-money in the country, it is said, has reached a whopping four million crores, not to speak of the unaccounted millions in the Swiss banks.

If this system continues unabated, the country will reach, if it has not already reached, to an irreversible failure of democracy which would lead to any disstrous consequences, like a violent revolution. There are revolutinary leftist forces with violence as their means, committed to whipping up the passions of the masses calling upon them to revolt against the system of governance in place, to destroy the rich and even the culture of the middle class called the bourgeois. These forces like the Naxalite, Maoist etc. are drawing thousands of youth into their fold and indulging in violent destruction of the men and machinery of the government in no small measure. This is a growing danger which the politician of any brand pretends to be ignorant about.

This is a potential danger to democracy ifself, more so due to the corrupt and failing democracy ( Nepal is an example). Political parties or the existing Laws in the country have evaded their responsibility in this matter. Neither there is a policy, nor an action-plan in the country today even after six decades of continued violence.

Election time is a mile stone in the political history of a country. When a government is formed, a vote by a citizen is inherently meant to be his judgment on the performance of the government thus far and a considered choice of the next government, in our country, this basic meaning of a vote is long lost. It is, in bulk a maneuvered extraction in numbers from the uneducated, gullible non tax-paying masses which are a numerical majority. This massive manipulation goes unabated without being an expression of any choice or judgment.

The visible boom in consumerism need not be considered as progress of our economy nor as success of our democracy. In fact, both are in peril. It is nothing but diversion of the middle classattention from a responsible citizenship to a debt trapped attraction towards a glamorous life style.

It is high time that the educated middle class are separately consulted without mixing them with the millions of purchased votes. A process has to be evolved wherein the educated, understanding the relevant opinion in the country is heard and allowed to play a role in the making of a government. The tax-paying citizen should be treated on a different plane from the bribed millions of voters, who can neither understand what is happening to the economy of the country, what is defective in the functioning of government, what justice is being done to them etc. An educated citizens vote by quality should count for much more than that a poor villager who does not vote with any opinion.

The educated man as a tax payer can certainly judge what is good for the poor, what ought to be done and what ought not to be done. His vote is a vote of discretion. He does not cast his vote for a bottle of liquor and Rs.200/-. These purchased votes with no opinion behind are like fake currency. The intrinsic value of vote therefore must be accepted as several times more than that of a cheaply purchased vote. This is in fact a real election. He can certainly think of security of the country and welfare of the poor. Is there a mechanism to recognize such a differential value of his vote? In the name a democracy and equality of all citizens, the system of election has benefited the cash-rich candidate to win the election bypassing the judgment of the people. Thus, the election is reduced to a farce!

In countries like France, for a long time all men and women did not have a right to vote because a few thinking men could decide what was good to all. We should, therefore, evolve a system in which there are discreet and considered votes in an election. The P.R.Act should be made to be truly representing the educated tax payer If the present system continues inevitably, the performance of the government after about two years should be judged by a separate opinion-poll from the eligible tax-payers and the educated citizens. Such a mid-term election should be a statutory judgment binding on the government.

After the maneuvered election there ought to be checks and balances on the performance of a governent involving the judgement of the people instead of a wholesale mandate to misrule. This aspect of a necessary reform should be considered by all including legal experts, honest politicians and responsible citizens to save our country from a future disaster. I am aware that the issue raised here is seeking a differential treatment between voter and a voter which under the Constitution in place is legally unacceptable but if the Constitution or a Law has not proved to be beneficial to the society by an experience of six decades, under the principle of natural justice such letter of Law needs to be reconsidered and revised in the interest of the people.

If such revision can be accompanied by disqualification of tainted politician in election and if it can effectively prevent violence between constesting political parties, the country can hope for real democracy with justice for all. It can also include a reform in the matter of reservations. Reservation and exclusive encouragement to the down-trodden to become more competent for selection would be far more beneficial to them rather than reservation of employment. It is high time our country had a re-look at our performance in the past six decades and thought of radical reform.

Sivananda Murthy

Date: 04-03-2009
Bheemunipatnam

(http://www.scribd.com/doc/13132301/Sadguru-Sivananda-Murty-Indian-Elections)

The Tenth Annual Vedic Conference at Bheemunipatnam, Vizag Dist,
Andhra Pradesh

On 12th April 2009, Guruji hosted the annual Veda Sabha in Bhimili. For 10 successive years, he has been hosting/sponsoring this important event, wherein not only the Vedic Pandits are honoured but young students of Vedas are also honoured and given certificates. As usual, he considers his large donation as 'small contribution.'

The Sabha witnessed crisp group chanting of portions from all the four Vedas. Guruji explained that Vedas are important for the unity of the country and how important is the role played by Andhra in that. He shook everyone when he mentioned that the present land of talibans (SWAT valley) was the Brahmin Vatika!

Later, when asked for the reason for such a downfall, he answered, "Brahmins can only dedicate themselves to Vedas. Theirs a life of total committment to a singular cause. They cannot protect themselves. They have to be protected. When kshatra dharma left us, things collapsed."