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BW Businessworld

Doctor’s Plainspeak

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Ever before has a Mint Road incumbent put it so bluntly why we have such a big dud-loan mountain. But Reserve Bank of India governor Raghuram Rajan showed he is different. On the issue of big borrowers taking banks for a ride, he noted that many of this ilk typically see a bank as holding not a senior debt claim that overrides all other claims (when the 
borrower gets into trouble), but a claim junior to his equity claim. This is unlike what happens in much of the globe, wherein when a large borrower defaults, he is contrite and desperate to show that the lender should continue to trust him with management of the enterprise. “In India, too many large borrowers insist on their divine right to stay in control despite their unwillingness to put in new money.” He added a statistic: the total write-offs of loans made by banks in the last five years was Rs 1,610,18 crore, which is 1.27 per cent of GDP!  
— Raghu Mohan
Dubious Demands
Attorney General of India Mukul Rohatgi seems to have advised the tax department not to contest the recent the Bombay High Court decisions giving relief to Vodafone and Shell. Unlike the earlier Rs 12,000 crore case in which the Supreme Court favoured Vodafone (leading to the retrospective taxation), the I-T department’s claims against the two were 
nonsensical. The taxman found that the companies bought shares in their Indian subsidiaries at a discount to what the tax department thought was a fair value. To bring them within the tax ambit, the department treated the difference in valuation as a loan, and charged notional interest as income to the Indian subsidiary — at best a circuitous and 
unwarranted argument. The new government has promised a more sensible tax policy. But they could perhaps start by taking a more sober view of tax collections. 
— Abraham C. Mathews
Getting The Act Together
The ugly indian campaign to clean up Bangalore seems to have been more effective than PM Modi’s Swachh Bharat Abhiyan. The group is now trying to raise awareness and enlist volunteers in other Indian cities through Facebook and Whatsapp. So, at a time when vainglorious celebrities are posing for photographs holding brooms in support of the Swachh Bharat Abhiyan, there’s a band of youngsters striving hard to bring about real change. The Ugly Indian group states explicitly that theirs is not a political movement. Now that’s a point well-taken. But who can deny the fact that social revolution and reformation have always sprouted from the masses. It’s time to be the not-so-ugly-Indian, folks. 
— Shailesh Menon
Caught Behind
Scrupulous promoters of Indian companies have for long taken refuge behind the corporate veil. N. Srinivasan is no exception. He ran both India Cements (as well as the BCCI) as if they were his fiefdoms. The Supreme Court chose to pierce that veil. It asked how the $100-million investment in IPL franchise Chennai Super Kings was an independent decision if Srinivasan (also BCCI president) and his immediate family had three seats on the 12-member board. It asked how Srinivasan’s son-in-law Gurunath Meiyyapan could be considered as unrelated if his wife was also on this same board. Jignesh Shah and Vijay Mallya are other recent examples of much-seen promoters suddenly directing question marks to their company boards. While the corporate veil ought to be sanctimonious, it has been much abused in India. Caution is certainly necessary, but it’s time to ask questions and out those hiding their deeds behind the veil of corporate protection. 
– Abraham C. Mathews
White Paper On Black Money
The government’s effort to curb black money is appreciable, but the measures adopted are a wee bit out of whack from a practical point of view. It should adopt a two-pronged strategy to deal with black money. To begin with, it should try to bring back the money that has gone out of the system by launching amnesty schemes. The primary focus here should 
be getting in as much money as possible. Then, the government should apply brakes on generation of black money. However, the government action so far has been directed at curbing black money emanating from business operations. Effort should also be made to reduce the flow of illicit political funds. Measures such as banning high-value currency notes, monitoring election expenditure and frequent tax raids, among others, will compliment the efforts of the government to shrink the burgeoning parallel economy. 
– Shailesh Menon
Double Standards
Comedy Central, the Viacom18 television channel that has been ticking the funny bone of Indian audiences with some success, has been in and out of court against the Information & Broadcasting ministry’s orders banning it for offensive sexual content. The channel was initially indicted by the I&B ministry last year and told to go off the air for the two shows it aired in mid-2012 — Stand Up Club and Popcorn. In one the ban order stated that a man performed with “suggestive gestures” that “denigrated women” and in another show a person appeared to perform a sexual act with a mannequin. Last year, the channel went off the air for four days but was allowed to recommence broadcasts pending an appeal in the Delhi High Court against the ban. The high court upheld the ban holding the programmes to be ‘vulgar’ and ‘derogatory’ to women. More recently, the Supreme Court stayed the Delhi HC order and allowed the channel to commence broadcasting again. These knee jerk invasions of freedom of expression must be decried. As long as there is no explicit obscenity or nudity, prudish interpretations of fun and laughter shows deserve to be ignored. A government that is unable to curb the unending cycle of rapes and crimes against women should not sermonize on what is ‘acceptable’ TV content.  
– Gurbir Singh
(This story was published in BW | Businessworld Issue Dated 29-12-2014)