10 ISSUES AND INSIGHTS
>
Women first?
India has a lot of catching up to do on gender gap
HUMAN FACTOR
SHYAMAL MAJUMDAR
he Global Entrepreneurship
T Summit that concluded in
Hyderabad on Thursday lived
up to its theme — ‘Women First,
Prosperity for All’. Women made up a
majority of the 1,500 entrepreneurs
invited to the event; a lot of commit-
ments were made by all and sundry
and a lot of success stories were shared.
This is encouraging as such talk fests
Rewari Museum needs some steam
Of the 16 steam engines in working condition, 11 are in Rewari. Yet despite the attractions, Rewari might prove commercially unviable
INFRA DIG
BIBEK DEBROY
few weeks ago, there was a news
A item. A steam locomotive
derailed at the Rewari Railway
Heritage Museum, earlier known as
Rewari Steam Locomotive Shed. This is
the famous locomotive Akbar, aka WP
7161, built by Chittaranjan Locomotive
Works (CLW) in 1965. For a very long
time, especially in the 1960s and 1970s,
before diesel and electric took over, WP
(broad gauge, passenger) locomotives
did the bulk of the work for the Indian
Railways (IR). Initial WP locomotives
were manufactured by Baldwin
Locomotive Works (Philadelphia), later
ones in Canada, Poland and Austria and
still later ones in Chittaranjan. (All WP
locomotives have a cone-shaped nose,
often with a silver star.) When was
India’s last steam locomotive manufac-
tured? The answer depends on the
gauge, so let’s stick to broad gauge (sig-
nified by W). The last such steam loco-
motive was built in 1970 and was under-
standably named Antim Sitara. For a
long time, we were rather shoddy about
preserving our railway heritage, includ-
ing steam. But Antim Sitara has been
preserved (it is not in working condi-
Making room for big ideas on taxes
The new tax code should aim at widening the tax base with bold actions
MUKESH BUTANI
Based on Prime Minister Modi’s obser-
vation that the present Income Tax Act
needs to be redrafted in consonance
with economic needs, the Ministry of
Finance has in its brief proposed draft-
ing a new Income tax code, keeping in
line international best practices.
However, the official communique sets
out the task force’s responsibility to sub-
mit its report within six months. It is
unclear if the mandate is to merely
make recommendations on the new
code or draft the new code. If it is the lat-
ter, it is a tall order to accomplish draft-
ing the code in such a short period, giv-
en that drafting requires wider
stakeholder consultation. I was com-
paring the objectives that were set out in
2009, wherein the then government
unveiled a draft new Direct Tax Code
with the objective to reduce complexity
and compliance cost, broaden the tax
base by minimising exemptions, check
tax evasion and remove ambiguity. The
2009 Direct Taxes Code (DTC) went
through several alterations, though it
failed to see the light of day with the
expiry of the DTC Bill of 2010. The then
Standing Committee of Finance made
useful recommendations at that time.
Given that the present provisions
of the Income-tax law have minimal-
istic exemptions and plethora of gen-
eral & specific anti-avoidance rules,
some of the objectives of the DTC of
2009/2010 have been met. Of course, a
lot is desirable from the point of view of
reducing complexity and compliance
do help in raising awareness about the
issues involved.
But the real tone was set by Ivanka
Trump, who while celebrating the pow-
er of women, brought out the actual pic-
ture. Representation of women in the
workforce, she said, needs to be
improved for gender equality in coun-
tries like India, but even the US grapples
with the issue. Only 13 per cent of engi-
neers and 24 per cent of computer sci-
ence professionals in the US are women.
The figures for India are, of course,
more discouraging. According to the
National Sample Survey Organisation,
only 14 per cent of business establish-
ments in India are being run by women
entrepreneurs. While most of these are
small-scale, almost 80 per cent are self-
financed. In 2015, The Global
Entrepreneurship and Development
Institute issued a report containing its
Female Entrepreneurship Index rank-
ing countries on the conditions present
that will fuel high potential female
tion) in CLW. Antim Sitara was a goods
locomotive, WG. Akbar must have
been one of the last of the WP locomo-
tives built. (The last one was built in
1967.) It had been consigned to oblivion
in Siliguri, before it was brought to
Rewari and resurrected. Having fea-
tured in several films, including
Bollywood ones, it is reasonably famous.
Sixteen steam locomotives are still
in working condition and 11 of them are
in Rewari. The oldest among working
ones are the twins Express (in Perambur)
and Fairy Queen (in Rewari), construct-
ed in 1855. Earlier, the Fairy Queen used
to chug along from Delhi to Alwar (the
Steam Express) between October and
March. The Steam Express then con-
tinued with Akbar doing the pulling.
Some years ago, my wife and I travelled
on that trip and it was quite an experi-
ence. Obviously, the market didn’t think
that, or marketing didn’t work. The
Delhi-Alwar-Delhi trip was commercial-
ly unviable and closed down. There is
now a Steam Express from Delhi to
Rewari. The Alwar Steam Express was
over the weekend, the Rewari one is a
day’s trip. You leave Delhi Cantonment
in the morning and return in the evening.
On the way to Rewari, it will be the Fairy
Queen. On the return, it will be a more
pedestrian diesel locomotive. Unlike the
Alwar trip, there is no catering on this
train. It leaves every second Saturday,
with a possible fourth Saturday trip if at
least 50 per cent of seats (out of 60) are
booked. The two-way ticket costs a little
less than ~6,500. But for half the cost,
you can also buy one-way tickets.
Recently, my wife and I travelled on this.
There were a few people on the outward
journey. On the return, it was close to
INSIGHT
cost for taxpayers.
I would, therefore, imagine that the
new code would prominently feature
broadening of tax base as one of its main
objectives, given the focus on address-
ing the menace of parallel economy.
Though the number of taxpayers has
increased significantly in the past
decade, our tax-to-GDP ratio continues
to be range bound. Hence, I would
imagine that a key objective should be to
widen the tax base by embarking upon
bold initiatives such as taxing agricul-
ture income, and bringing a wider sec-
tion of untaxed and under taxed non-
salaried taxpayers. If our vision 2030 is
to be a $10 trillion economy, the new
code should address a bold agenda to
increase the tax-to-GDP ratio.
Since we are embarking on this exer-
A tax on agriculture income will go a
long way in widening the tax base
cise, equally important is to rewrite the
subordinate legislation by way of rules,
administrative guidance and so on. This
has been an area of weakness resulting in
India being the most tax litigated juris-
diction. The Committee besides look-
ing at international best practices should
consider laying down a framework for
deeper tax administrative reforms.
The Tax Administration Reform
Commission (TARC) has laid down a
plethora of recommendations — sub-
mitted in 2014, and 2015 in four vol-
entrepreneurship development. India
was near the bottom on that Index,
ranking 70th out of 77 countries. In
2017, MasterCard issued its Index of
Women Entrepreneurs where India
ranked 49th out of 54 countries.
And a McKinsey report found that
women generate 37 per cent of global
GDP despite accounting for 50 per cent
of the global working-age population.
But the global average masks large vari-
ations among regions. The share of
regional GDP output generated by
women is only 17 per cent in India.
The reasons for this gender gap are
many. Apart from gender bias at work
place and a weak infrastructure in
capacity building for women to derive
necessary skill sets, there is an overall
lack of awareness among women
themselves of their own potential and
opportunities. Social barriers are also
intimidating, with many women hav-
ing to deal with hostility from people
closest to them before venturing out to
CHUGGING TO AN END Built in 1893, Rewari Steam Locomotive Shed was turned into
a museum in 2002 and given a new name, Rewari Railway Heritage Museum
WIKICOMMONS
empty. We were told the foreign tourist
season will make a difference. But I sus-
pect, despite attractions in Rewari, this
will also prove to be commercially unvi-
able and will close down.
In Rewari, Akbar has another steam
locomotive (WP 7200) as a companion.
This is older and was built in 1947 by
Baldwin Locomotive Works. This had
been consigned to oblivion in Howrah,
though it has historical value. It was pre-
sented to IR on 15 August 1947, though it
arrived on Indian shores in October 1947.
Therefore, despite being initially dubbed
Shahenshah, it eventually got the name
Azad. Of the 11 steam locomotives in
umes — implementation of some of
which spans over a decade. Most, if not
all of them, are relevant in today’s con-
text, despite the efforts made by the
new government. Important TARC rec-
ommendations, amongst others,
include taxpayer’s services and impor-
tance of treating taxpayers as customers,
governance of direct tax laws including
separation of functions of IRS officials
between policymaking, assessments,
investigations and dispute resolution.
The TARC also dealt with hiring, train-
ing and the entire gambit of people
function. An important recommenda-
tions was on dispute resolution, identi-
fying not just global best practices, but
also what would suit India, including
strategy for avoiding disputes and set-
tling disputes before they go on trial.
Though, the government is pursuing
an aggressive digital agenda, there is
scope for embracing tax technology for
bringing in a shift in data mining, ana-
lytics, taxpayer services, risk manage-
ment and revenue forecasting exercise.
To sum up, my key expectations
from the new tax code would be to
focus on:
 Taxpayer segmentation: salaried,
business, trust and exempt entities
including political parties. The business
taxpayers be segmented into small,
medium, large and multinational cor-
porations.
 Inducing fresh energy into existing
dispute avoidance functions of Advance
Ruling, Advance Pricing etc.
Revamping the dispute resolution sys-
tem before tax administration, tribunal
and high courts, including setting up a
National Tax Tribunal or a National Tax
Court, the latter in coordination with
the Ministry of Law.
 Implementation of administrative
measures (some listed above) and
strengthening subordinate legislation.
The author is partner, BMR Legal
do business on their own. Others say a
lot of women entrepreneurs in India
do not have an ability to access certain
opportunities as they lack certain soft
skills — like pitching their ideas to
investors. This is understandable as
unless they come from a family that
has a business or have worked in a
business, women entrepreneurs have
not seen many role models and have
had no coaching on how to start, run
and build a business. A mentoring pro-
gramme can fill that gap.
Besides, numerous studies have
found that women in emerging mar-
kets have much more difficulty in
securing loans than men and have to
rely on their own financing. In devel-
oping countries, 70 per cent of women-
owned small and medium-sized busi-
nesses are denied access to capital.
That is why organisations such as
the IFC have stepped in. Nearly half of
all microfinance loans in India are pro-
vided by IFC-backed microfinance
institutions, and most of their 40 mil-
lion borrowers are women. Besides,
eight of the small finance banks are
IFC’s partners and investees and all of
them will focus on women borrowers,
just like the microfinance model.
In India, where 400 million people
Rewari, seven are broad gauge and four
metre gauge (all manufactured by TEL-
CO in the 1950s and 1960s). Each metre
gauge locomotive has a story to tell.
However, most people are probably more
fascinated by broad gauge ones, the likes
of Fairy Queen, Akbar, Azad and Virat
(AWE 22907). Virat was built in 1943 by
Baldwin. There is a bit of history associ-
ated with Sher-E-Punjab (WL 15005),
built by Vulcan Foundry in 1955. On 6
December 1995, this hauled the last time-
tabled broad gauge steam passenger
train, between Firozpur and Lohia Khas.
But there is some more history associat-
ed with Sher-E-Punjab. Post-retirement,
> LETTERS
Prompt delivery of justice
The Chief Justice of India, Dipak Misra,
said at a conference on the National Law
Day on November 26 that protection of
fundamental rights of citizens is the
sacrosanct duty of the judiciary which is
conferred on it by the Constitution. The
moment the governing entities encroach
upon the fundamental rights of the citi-
zens or there is an apprehension that
there is an encroachment, the judiciary is
obliged to stand by them. He has also
appealed to the lawyers not to seek
unnecessary adjournments. He has
assured ‘zero’ pendency of cases at the
apex court if there is ‘zero’ adjournment
sought by the lawyers. He is trying to
ensure speedy justice, with high courts
working on weekends to clear the back
log of old cases. He has himself followed
his advice to others in letter and spirit
and hence, the pendency has gone down
since he became the CJI two and half
months back.
The forgoing developments at the
highest jurisprudence should help those
yearning to get relief from frequent
adjournments. Incidentally, the pen-
sioners of Banks and LIC are fighting legal
battles with their respective manage-
ments and government at the centre for
MUMBAI | FRIDAY, 1 DECEMBER 2017
remain cut off from the electricity grid,
IFC built a market for off-grid solar
products by focusing on women as dis-
tributors. It tied up with Frontier
> CHINESE
Markets, a clean-energy-products
company, to develop a network of self-
employed women recruited from self-
help groups. These women-run
alliances provide access to funds and
technical assistance to help women in
local villages improve their lives and
start their own businesses. Between
2016 and 2020, the network is expect-
ed to expand to 20,000 women dis-
tributors from just 250 in 2016.
India needs more initiatives like
this if it has to get out of the trap of
women being heavily dependent on
low-paying, low-skilled dead-end jobs.
India, in fact, sees the highest drop in
representation of women from junior
to middle-level positions, unlike sev-
eral other Asian countries where such
a drop occurs from middle- to senior-
level positions. Data also shows almost
one-third of women employees have
not resumed work in the absence of a
support system at home to take care of
the child. And close to 80 per cent of
eligible female graduates choose not
to participate in the organised work-
force or set up their own ventures.
in 2007, it was hauling Palace on Wheels
(without any passengers) and because of
a boiler malfunction, the driver and an
inspector died. The police seized the
locomotive as “case property” and it
required court intervention for it to be
released in 2007.
Built in 1893, Rewari Steam
Locomotive Shed is also old. It was a
metre gauge shed, with a metre gauge
line between Delhi and Rewari con-
structed in 1873. In those metre gauge
days, Rewari was a major junction, with
lines radiating towards Rajasthan,
Gujarat and Punjab. Trains from Delhi
towards any of these directions had to
pass via Rewari. With gauge conversion,
Rewari junction’s importance remains,
but a metre gauge locomotive shed
became irrelevant. After celebrating the
centenary, the shed was closed down, as
a steam locomotive shed. For a few
years, it functioned as a metre gauge
diesel locomotive maintenance shed.
But not only was steam dead, metre
gauge was also dying. In 2002, it was
announced that Rewari Steam
Locomotive Shed would become Rewari
Railway Heritage Museum. To add to
metre gauge, broad gauge lines had been
laid in the shed. But where were the
locomotives? (In fairness, Rewari pos-
sesses railway heritage beyond locomo-
tives.) Especially after 2010, the ones I
mentioned were gradually brought there
and restored to working order.
Unfortunately, other than locals and die-
hard tourists, especially of the foreign
variety, not too many people go there.
The author is chairman, Economic Advisory
Council to the Prime Minister. View are
personal
periodic updated pension for the last 15 to
20 years in some high courts and / or at
the Supreme Court. The pensioners in
their petitions have prayed for equality
and right to life and liberty under Articles
14 and 21 of the Constitution of India.
Right to life includes right to live in dig-
nity. The CJI is definitely a man of words
and hence, the pensioners of the banks
and LIC may entertain hopes of getting
due justice in the next couple of months.
Ramanath Nakhate Mumbai
Food for thought
With reference to ‘Paswan expresses help-
lessness in controlling rising onion price’
(30 November), as a matter of fact, in a
democracy, when a minister gives a state-
ment, it is treated as a policy matter of the
government. It may be recollected that
before the 2014 general elections, the
Bharatiya Janata Party had clearly men-
tioned in its manifesto that it would check
prices, especially of essential commodities
of daily use. After 42 months, the Union
government has totally failed to keep prices
in check and the masses have suffered
tremendously because of skyrocketing
prices of pulses, onions, sugar, petrol and
petroleum products. The callous attitude of
the government has led to continuation of
starvation deaths in the country, and ulti-
mately Union Minister for Consumer
Affairs, Food and Public Distribution Ram
Vilas Paswan has had to admit that the
government has virtually failed to keep its
promise on prices.
S.K. Khosla Chandigarh
> HAMBONE
1
WHISPERS
Back in the frame
Bharatiya Janata Party (BJP) Hamirpur
Member of Parliament Anurag Thakur heads
the Parliamentary Standing Committee on
Information Technology. He is also the son
of BJP’s chief ministerial candidate in
Himachal Pradesh, Prem Kumar Dhumal.
Since being removed from the post of
president of the Indian cricket board earlier
this year, Thakur has struggled to make
headlines. The row over Hindi movie
Padmavati has offered him an opportunity
to claw his way back into limelight. The
Thakur-led parliamentary committee on IT
might have little do with films, but it asked
Padmavati director Sanjay Leela Bhansali,
chairperson of Central Board of Film
Certification Prasoon Joshi and other officials
to appear before it to “bring an end to the
controversy". Thakur hails from the Rajput
community, sections of which have been at
the forefront of the protests against the film.
His father, Dhumal, is 73, and would need to
retire in two years from holding an elected
office if the BJP were to apply its unwritten
retirement age of 75. Thakur, 43, would be
hopeful a better profile would help him
succeed his father as BJP's number one
leader in the hill state.
The best spinner of 'em all
In his recently launched collection of
essays, Inside Parliament: Views From The
Front Row, Trinamool Congress Rajya Sabha
member Derek O'Brien has described the
goings-on in the Central Hall of Parliament.
The Central Hall is formally used only once a
year, for the address by the President to the
joint sitting of both Houses. O'Brien says for
the rest of the period, it is an exclusive
coffee and talk-shop for MPs and
journalists. Several leaders have their
dedicated following among journalists.
But, O'Brien says, “easily the most attractive
magnet for the media is Finance Minister
Arun Jaitley". "His critics call him the best
'spinner' in the history of India after Bishan
Singh Bedi... They say he 'spins' stories to
suit his political party when the wicket gets
sticky. It's all part of the game."
Under the spotlight
With the appointment of senior IAS officer BN
Sharma, till now additional secretary in the
revenue department in the finance ministry,
as the chairman of the National Anti-
Profiteering Authority under the newly
introduced Goods and Services Tax, focus has
shifted to GC Murmu, who has joined as
additional secretary in the revenue
department in the finance ministry. Gujarat
cadre Murmu, who was at one time principal
secretary to Modi when he was the chief
minister, could be in line to become revenue
secretary if incumbent Hasmukh Adhia
moves on as cabinet secretary.
Not viable
With reference to “Nearly 70% of stressed
SMEs face liquidation” (November 3O),
SMEs, which contribute almost 40 per cent
to our GDP, such a news is really alarming.
We all know that the latest changes in the
Insolvency and Bankruptcy code has liter-
ally removed promoters from the bidding
process of stressed assets, and since these
SMEs do not generally garner interest from
third party, it would be really impossible to
save these companies from liquidation
now. After the recent changes in the law,
even promoters with serious intent to
revive their company will have to face the
heat and let go of their business. Now com-
ing to the point where such SMEs will pre-
fer S4A over IBC, even S4A will not be very
easy as creditors may be wary of turning
their debt into equity as it is not a viable
proposition for them. It is only when these
stressed projects or companies turn prof-
itable again that banks will be able to liq-
uidate their equity. Otherwise, it is just a
fruitless exercise. Of course, these smaller
companies will not have as strong a man-
agement team as their other bigger coun-
terparts in the corporate sector, but they
should not be penalised because of this.
So, in a nutshell, the Insolvency Ordinance
needs to be reconsidered to for the larger
benefit of the economy.
Bal Govind Noida
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201 · E-mail: letters@bsmail.in
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number
BY MIKE FLANAGAN
 >
OPINION 11
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Volume XXII Number 79 ILLUSTRATION BY BINAY SINHA

MUMBAI | FRIDAY, 1 DECEMBER 2017

Reversal in trend
Economy seems to have shaken off note ban, GST effects

T
he headline number provided by the Central Statistics Office in its first
estimates of economic growth in the July-September quarter provides authors work out “poles” such as the US, Germany
a welcome reversal of trend. Gross domestic product (GDP) at constant and Switzerland around which most disputes have
2011-12 prices has grown by 6.3 per cent in the second quarter of 2017-18 appeared and how such poles have changed over
time. For example, by the 1990s, Switzerland was
over the figure reported for the corresponding quarter of 2016-17. In the previous quar- replaced by the Netherlands in terms of the share of
ter, between April and June this year, GDP growth was 5.7 per cent. Output growth disputes. And in the 2000s, the US had become
has been declining, according to CSO estimates, since the January-March 2016 quar- overwhelmingly dominant.
ter. The reversal of this multiple-quarter slowdown suggests that the economy has (5) Most litigated treaties emanate in source
put behind it the short-term pain inflicted by demonetisation and the introduction countries. Thus source country tax authorities have

Global trends in
tended to resist tax treaty law more than those of
of the goods and services tax, or GST. Growth aside from agriculture and public
residence countries, reflecting an inherent bias
expenditure has been considerably stronger than in the previous quarter. This restricting the taxing rights of source countries in
means that transitory effects are over, and structural pushes and constraints are now the OECD Model Tax Treaty. (6) India, a source
central to the future trajectory of Indian GDP. Hopefully, in the coming quarters, the country, has experienced “an unparalleled upsurge
government’s timely adjustments to the GST mechanism will aid a further recov-
ery of growth.
Closer analysis of the data shows that much of the push to GDP growth in this
quarter has come from manufacturing, the gross value added (GVA) of which grew
tax disputes in tax treaty disputes in the 2000s, pulling away
from the system alone,” indeed a most remarkably
strong observation by researchers on the basis of
sophisticated analysis at a globally renowned cen-

at 7 per cent, year on year, in the recently completed quarter, as opposed to 7.7 per cent India continues to be weighed down by its disputes tre of learning.
(7) Government success rates have been declin-
in the equivalent quarter a year ago. Manufacturing GVA had grown at 1.2 per cent, ith the advent of the Base Erosion and Documentation (IBFD) database in order to view if ing over the decades reflecting changing attitudes of
year on year, in the April-June quarter. This increase in year-on-year growth may also
indicate the effect of restocking after the implementation of the GST. The contribu-
tion of stockholding to final GDP expenditure posted 6.7 per cent year-on-year
W Profit Shifting (BEPS) project of the G20- and why any discrepancy may exist. Second, a spe-
OECD, the global incidence of tax disputes cific definition of leading cases was discussed and
is back on centre stage. BEPS Action 13 deals exclu- arrived at a 2015 conference at LSE of the experts
courts and a rising quality of private sector advo-
cates. It also reflects a more aggressive approach of
tax authorities thus lowering their thresholds based
sively with this matter and Action 15 focuses on, with the objective of evening out differences and on likelihood of success. (8) “A particularly low gov-
growth in the second quarter, which should be compared with the 1.2 per cent it grew among other things, how countries should come ambiguities in national legal systems. Consequently, ernment success rate in India is perhaps unsurpris-
in the previous quarter. together on a common platform to sign on a mech- each entry became compliant with the same defini- ing, although (note) the 100 per cent (success) rate in
However, some methodological questions should be highlighted, as they are rea- anism for dispute resolution. Commensurately, the tion of a leading tax treaty dispute. China.” China boasts only tax authority rulings with
son to take the new GDP numbers with a pinch of salt. The introduction of the GST analysis of disputes has sharpened and the conclu- But just counting the absolute number of leading no independent court judgements! Thus, China and
was a major structural break for the Indian economy, and thus for data collection and sions from such analyses have become more mean- cases in each country would tend to weigh heavily India are at two ends of the same scale.
ingful. One illuminating revelation towards those countries that have a (9) Examining individual Articles of tax treaties,
analysis. Growth in the trading sector, for example, has been estimated in the current
at a recent London School of tradition of earlier cases to be cited variations are striking. Three-quarters of disputes
GDP series by examining increases in sales tax receipts. This comparison was not pos- Economics (LSE) seminar was that in court judgements whether or not over the definition of permanent establishment (PE)
sible for the CSO to make between the July-September quarter and the April-June a mere counting of disputes may such citations possess direct rele- are won by taxpayers, but they win only one-fifth on
quarter. Hence the government’s statisticians used other methods to estimate it, such yield erroneous conclusions and, vance to the particular case. This capital gains. (10) OECD members have moved away
as looking at the increases in tax revenues from petroleum-related products (which instead, the measurement of dis- occurs in Germany and India. To from PE litigation as their PE structures are scaled
are outside the GST) and in the nominal value of commodity output. Given that glob- putes should be appropriately nor- “normalise” this factor, the num- back even as they grow in BRICS countries; but the
malised across countries before ber of leading cases in a country OECD represent a larger share of capital gains cases
al trends in such prices have been upwards, the trade sector numbers may only imper-
comparing and drawing conclu- were taken as a proportion of the (despite a handful of high profile cases such as
fectly reflect underlying reality. Since trade has been the biggest contributor to sions on entry costs and exit costs total number of tax treaty cases in Vodafone in India). (11) The academic researchers
growth, with GVA growth clocking in at almost 10 per cent, year on year, the overall for potential investors which is, court. Thus the analysis pertains point to the clear evidence of the OECD’s movement
growth estimates should be viewed with a corresponding degree of caution. after all, the crucial role that dis-
P A R T H A S A R A T H I S H O M E to the relative importance of par- away from the judiciary to the “parallel route” of
The most worrying indicator, however, is that structural headwinds for high pute resolution has to assume. ticular kinds of disputes in a coun- mutual agreement procedures (MAP), led by the US
growth continue to be visible in the data. Exports’ contribution to GDP continued to Baistrocchi and Hearson1 delin- try’s total disputes rather than on and Germany. They believe this to be a more opaque
eated a step by step method of “normalisation”, cov- the absolute number of disputes. route since the complete dimensions of a MAP may
be anaemic, growing at the same 1.2 per cent registered in the previous quarter. And
ering all G20 countries. Through an expert survey From this voluminous and reflecting constraints not be revealed.
the investment crisis has not moderated appreciably. While it is true that the contri- comprising international tax experts, a “G20 Leading of space I have drawn a dozen conclusions that I (12) Finally, the authors view the international tax
bution of fixed investment to GDP grew faster than in the previous quarter – at 4.1 per Tax Treaty Case Dataset” was compiled. First, only feel are useful to the practitioner. (1) In the 2000s, the system as at a crossroads. Encouraging cross-coun-
cent against 1.6 per cent – as a proportion of GDP gross fixed capital formation has disputes over tax treaties were identified. Second, the US treaties account for one-third of the litigation try tax competition should stimulate growth though
declined, at 26.4 per cent as opposed to 27.5 per cent in the previous quarter. In spite list was narrowed down to court cases only. Third, among G20 countries, and the UK one-tenth. In fact, automatic exchange of information could improve
of the modest signs of recovery, much more work remains to be done. the period was confined to the pre-BEPS Reports the US overtook the UK and the Netherlands. (2) transparency at the cost of growth. Optimising from
era (1923-2015). Fourth, out of these, only “leading” Switzerland, the Netherlands, Belgium, Spain, and the contradictory forces remains a challenging task.
cases – those cited at least once in court or by the tax Germany are also among the top 10 litigated coun- Needless to say, the volume charts a new course
administration – rather than leading cases plus tries. Cyprus has also become important in this and should be explored by professionals interested
Self-reliance in urea? “progeny” cases – those that can be resolved in court respect. (3) The importance of the US for its treaty
through existing leading cases – were taken. countries is revealed in that, for Australia, Canada,
in international taxation and, in particular, by those
working on dispute resolution pertaining to tax
It’s a distinct possibility in the near future Two standardisation exercises were carried out. Japan, Mexico, and South Korea, half of their dis- treaties.
First, every list drawn up by the country expert was putes are with their US treaties. On the contrary, for

I
n his latest Mann ki Baat address, Prime Minister Narendra Modi counseled compared by the same expert against an alternative the US, treaties with Canada and the UK represent 1. Eduardo Baistrocchi, ed., A Global Analysis of tax Treaty
farmers to shun excessive use of urea. This plea is in sync with the government’s list available from an International Bureau of Fiscal only one-fifth of the US tax treaty disputes. (4) The Disputes, Cambridge University Press, London, 2017
plan for achieving self-sufficiency in this most consumed and heavily import-
dependent fertiliser by curbing its superfluous consumption and boosting
domestic production. Self-sustenance in urea seemed out of reach till recently as fresh
investment in this sector had virtually dried up due to flawed official policies and inor-
dinate delays in subsidy reimbursement to the industry. But a series of reforms-ori-
ented steps taken in the last few years have altered the investors’ outlook on urea, mak-
In Gujarat, again a Modi referendum
ujarat Assembly elections started receiving physically most of the time, but through his visits The noted sociologist and former vice-chancellor
ing self-reliance a distinct possibility in the near future. Indigenous production has,
in fact, already begun to look up, clocking an annual growth rate of around 4 per cent
since 2013-14, and imports are shrinking. The pace may accelerate as the government
G national media attention in 2002. The cover- (plenty frequently) and remote-control grip over local
age has continued to increase in every elec- politics (again plenty powerful), he looms larger than
tion since then. It has now reached a level that can ever over the entire state from the arid northern
of the Sardar Patel University, Pravin Patel, whose
study of the patidars is considered authoritative, says
that in Gujarat, kinship groups are the dominant per-
and the public sector fertiliser units plan to spend over ~50,000 crore on renovation only be termed over the top even in politics-obsessed expanse of Kutch to the southern riverine plains. Some suaders, rather than castes. That would explain the
and modernisation of existing plants and revival of closed fertiliser factories. India. Much has been made of all pundits believe that this may not limited domains of influence enjoyed by leaders such
The process of fertiliser reforms, which paved the way for the anticipated turn- leading lights of the Union govern- sway the voters sufficiently this time. as Hardik Patel and Alpesh Thakor even among their
around of this sector, was actually initiated by the previous United Progressive ment and those state governments They cite the concentration of the caste groups. The patidars of central Gujarat, for
of the Bharatiya Janata Party (BJP) BJP firepower in support of their sur- example, have remained relatively aloof from the
Alliance (UPA) government by introducing a new investment policy in 2012. However,
laying siege to the poll-bound state. mise. Some of them even see this as reservation agitation.
it did not elicit the desired response from potential investors till it was amended and But virtually all print and electronic a sign of nerves, if not panic, in the This does not mean that Gujarat has no problems;
made more attractive by the present government in 2014. The caveat that the bene- media stars have para-dropped to BJP ranks. indeed it has and quite obvious ones. Grievances, espe-
fits of the revised policy would be available to only those units which go on stream offer their “in-depth” take after That can be quickly countered. cially in villages, are real, but have not yet reached the
within five years helped to expedite matters. Besides, a New Urea Policy was launched spending some hours in some select The BJP is always in the campaign stage that will cost the BJP dear. The general perception
in 2015 which focused specifically on maximising domestic output, promoting ener- pockets. Doubtless more of it is in mode. It takes all elections seriously, is that Gujarat has prospered ahead of the country.
store in the days before the last votes even when out of power, and throws Any criticism of it is not taken lightly. People readily
gy efficiency in urea production and rationalising subsidies. It offered incentives to
are cast on December 14. in the kitchen sink into its all-too- credit the BJP and emphatically Mr Modi for this.
fertiliser units to produce more than their reassessed capacities. Gujarat pre-election analyses have SHREEKANT SAMBRANI energetic canvassing. As its That brings us to the main, if not the sole, issue of
Policy apart, some well-advised supplementary measures taken by the gov- followed a set template. Pundits say resources, such as the states it rules, this election: Mr Modi, once again and even more so.
ernment, too, helped to prop up urea production. For one, the few plants that still use early indications could mean a diffi- have grown, so has its deployment of Gujarat will again hold a referendum, as it effectively
naphtha as feedstock have been allowed to continue production till they get assured cult situation for the government, following it up by these. That is in sharp contrast to the Congress, the field did in 2012 (see “The Gujarat referendum,” Business
gas supply. Besides, steps are on to revive fertiliser plants at Ramagundam, Talcher, predicting on election-eve a tight contest which could force of which comprises almost entirely of its presi- Standard, December 18, 2012). This time around, the
go either way, with, of course, pointed reference to dent-forever-in-waiting, Rahul Gandhi. Its other gen- party leaders, including Mr Modi, make no bones about
Gorakhpur, Sindry and Barauni, apart from setting up a new unit at the premises of anti-incumbency coming into play. In reality, the BJP erals are content to fight the battles in the backrooms. it. The message delivered now is that state needs to
the Namrup plant. A new gas pooling policy has been put in place to supply gas to sailed through all these polls with almost half the votes Will the economic factors matter in this election? back Mr Modi in Gujarat and in Delhi to protect and
all urea units at uniform rates. and 60 per cent or more of the seats. The obvious disruptions of demonetisation did not continue with its progress. In the latest round of rallies,
Among the moves that are intended particularly to curb extravagant use of urea This year’s election scene is different in two aspects. deter the Uttar Pradesh voters to choose the BJP in its the prime minister conveyed as much. Trust him (and
and prevent its diversion to non-agricultural activities, the most noteworthy are neem- First, the coverage is far more intense (but the tenor of immediate aftermath. In Gujarat, the impact was much others) to do this even more loudly and clearly in the
coating of urea, packing it in smaller bags and introducing soil health cards. Neem- the analysis is much the same), with the clear under- less even a year ago, thanks to the Gujarati genius of remaining days of the campaign. The Congress has
tone of disruptions caused earlier by demonetisation devising effective coping strategies. The notebandi greatly facilitated this through Rahul Gandhi’s per-
doped urea needs to be applied in relatively smaller doses to get the same crop yields. and recently by the goods and services tax (GST), pos- now is a distant memory, done and dusted. Even the sonal attacks on Mr Modi, as it had done in 2007 with
Besides, it is unfit for non-farm use. Packing of urea in 45 kg bags, instead of the usu- sibly souring the outcome for the BJP. The growing initial adverse effects of the GST are now accepted the maut ka saudagar remarks.
al 50 kg ones, too, helps to economise on its use because the farmers normally apply proximity of the putative leaders of the patidar agita- with equanimity, as reported in this paper (“GST tweaks Dhanjibhai Patel, 70, a first-time BJP candidate
it in terms of the number of bags per hectare. Soil health cards, on the other hand, rec- tion, the kshatriya community and the Dalits to the help restore BJP’s edge,” November 29). P from Wadhavan in Saurashtra, a Jain-dominated con-
ommend the laboratory test-based exact doses of different fertilisers needed for each Congress has led to speculation about whether the Chidambaram, no friend of the Modi government, stituency, concludes all his village meetings saying,
grievances of these electorally significant communities thanked the Gujarat voters for bringing about the lat- “This is a direct fight between Rahul Gandhi and
farm holding. However, the inadequacy of soil testing laboratories and the indiffer-
would possibly impact adversely on the fortunes of the est adjustments and simplifications. Promises of the Narendra Modi,” and the audience roars its choice of
ent quality of test results are holding back the scheme from delivering its full bene- party that has enjoyed power in the state for the last 22 finance minister and the finance secretary to do more the winner. The formal outcome of the contest will be
fits. This issue needs to be addressed urgently. Moreover, urea also needs to be years. Pronouncements based on cherry-picking of as needed would surely further soothe those at the known on December 18. Be prepared for history repeat-
brought under the nutrient-based subsidy regime to ensure balanced use of the three anecdotal evidence and often projecting the analysts’ receiving end, traders and small manufacturers. For ing itself, possibly even more forcefully.
major plant nutrients – nitrogen, phosphate and potash – to maintain soil fertility. own predilections are rife. most voters, the aam aadmi and aurat, the GST was
The second major difference is Narendra Modi’s and will continue to remain a non-issue, since it has not The writer is a long-time resident of Vadodara, Ahmedabad,
move to the national stage. He may not be in Gujarat really hurt their pocketbook. and Anand

beverage supply that led Britain to grow its The colonial rulers adept in playing one Crown had assumed direct authority over

Globalisation storm in a teacup
BOOK REVIEW
KUNAL BOSE
Except for spices, no other commodity
besides than tea has its history written in
such detail over the centuries. Accounts by
growers, blenders and retailers, papers of
Dutch East India Company and British East
India Company and countless books and
newspaper articles on tea have built a rich
archival on the commodity. This could not
be otherwise since archaeologists have
more recently found evidence that use of
tea goes back to at least 2,100 years ago in
western China. Scientists will continue to
split hairs, however, as to how tea found in
an emperor’s tomb was used at the time.
What is nonetheless universally accepted
is that over a thousand years ago it was first
in China that tea was seen as an “agent of
civilisation,” of temperate pleasure and with
health properties. It took the Europeans
some centuries to “appropriate and adapt”
the Chinese ideas about tea to make these a
“core part” of the culture of their continent.
The Europeans gave identical treatment to
many other commodities produced in other
parts of the world but whose trade and, in
many cases, ownership of their production
mostly stayed with them.
So well recorded is the history of tea that
another book on the commodity will find
justification if it throws light on the largely
unexplored “underlying ideologies and cul-
tural norms and political and economic
thinking that shaped the behaviours of a
transnational business.” Erika Rappaport’s
A Thirst for Empire is mounted on a large
canvas that packs in it an early colonial
industry whose ascendance and profits
supported the expansion of British Empire
and funded its wars.
China ruled world production and
exports of tea for centuries. Taking advan-
tage of its dominance of the commodity
which was increasingly gaining in popular-
ity in Britain and among British settlers in
colonies, the Celestial Empire would from
time to time put “humiliating” conditions
and logistical disadvantages for English
merchants. Hostilities between the two
powers in the early 19th century reached a
point when the British and the Chinese
started viewing each other as Barbarians.
In Assam, Britain saw an enticing prospect
of growing tea on a large commercial scale
that could become over time an important
source of imperial revenue. This would
also give Britain a handle to “chastise”
China. Incidentally, Assam had grown tea,
albeit in an unorganised way, and con-
sumed the beverage.
Ms Rappaport has done an excellent job
in describing the compulsions centred on
growing tensions with China, the lifeline of
own tea in Assam. This would allow Britain
to keep control of the trade in the course of
time. Besides the lingering China threat to
stop supplies, Britain had to take note of the
emergence of the Americans as a “notable
force in the tea trade” and the Dutch “start-
ing to grow tea in Java.”
Ms Rappaport writes “in the 1820s and
early 1830s, Indian tea came to be regarded
as a solution to a series of interconnected
global problems. Assam could satisfy the
world’s thirst for an inexpensive and
healthful beverage, could provide the
British government with steady revenue.”
Equally importantly, growing tea in abun-
dance in Assam would give Britain a
chance to tell China that of the two empires,
it was the more powerful. But before tea
growing could start in any meaningful
manner in Assam, Britain had to fight a
“costly and difficult war” to rid the place of
Burmese occupation and then win over the
local people who in the beginning were not
well disposed to the British with “opium”
and “soft words.” Smoking the peace pipe
yielded results because the inhabitants
were aware of gunboats lurking behind.
local group against another adopted the
tactic in Assam too with one clear goal of
making the place a tea producer of size.
Ms Rappaport rightly points out that the
“local elite and foreign nationals had
worked with the British to bring capitalism
to Assam” to turn what were wild plants
grown in wasteland into highly rewarding
tea plantations. For example, as the author
points out, Assam Company, the first cor-
porate engaged in tea growing was initially
a “racially hybrid business.” Prince
Dwarkanath Tagore was a member of the
board and one Maniram Dewan was
appointed chief executive of the company
in 1839. This puts to rest the common per-
ception that the adventurist English and
Scotsmen alone brought thousands of acres
under tea cultivation.
The challenge for Assam planters for
many years was to recruit people on a large
scale from “impoverished villages in
Bengal, Orissa, the Northwest Provinces
and Oudh” mostly by unfair means such as
“tempting workers with loans, liquor and
women.” Describing the wretched working
condition in plantations even after The
its biggest colony, Ms Rappaport writes the
“workers were essentially enslaved and
high death rates, low birth rates, diseases
and countless abuses continued.” Labour
reforms in spite of government claims to
the contrary were painfully slow.
The book is a lot more than the growth
of tea industry in British colonies and how
it helped the Empire through good and bad
times. The long discourse on how govern-
ment funding on generic promotion
helped the beverage to become popular in
British colonies and outside and fend off
competition from coffee, which incidental-
ly arrived in Europe earlier than tea, and
subsequently other soft drinks makes inter-
esting reading. A Thirst for Empire, which
has a brilliant narrative style, shows how
trade in commodities, including tea,
helped the cause of globalisation.
A THIRST FOR EMPIRE
How Tea Shaped the Modern World
Erika Rappaport
Princeton University Press
549 pages; £32.95