Fijian Hindu Leaders reject Hindutva claim of preferential treatment

Thursday, July 06, 2006

THE Hindu American Foundation, controlled by Hindutva forces says Fiji should stop granting preferential treatment to members of the Christian community.

This was contained in its survey of human rights reports on a number of countries where people of Indian origin resided, including Fiji, it said. The report said Fiji Hindus continued to face a barrage of anti-Hindu speeches and criticisms and that several temples were desecrated, destroyed or looted.

It said the Methodist Church repeatedly called for the creation of a Christian State and has endorsed forceful conversion of Hindus during previous coups.

“Many Fijian leaders today perpetuate hate and intolerance against Hindus on the island,” the report said.

However, a prominent Hindu religious organisation yesterday denounced the report.

The Arya Pratinidhi Sabha of Fiji president Kamlesh Arya said the authors of the report did not see it fit to hold dialogue with local leaders of the various Hindu organisations in the country to ascertain the truth.

“There are occasional social thuggery, criminal intrusions, personal attacks and stealing of property but these cannot be regarded as orchestrated criminal offence against the Indian community per se in Fiji compared to Bangladesh, Afghanistan and Pakistan,” he said.

Mr Arya said they have also relayed their concerns on hate speeches and derogatory remarks by extremists and had asked the Government to take a more firm position on such matters.

With inputs from FIJI Times online

India: Annual Survey of Violations of Trade Union Rights (2006)

Population: 1,100,000,000 / Capital: New Delhi / ILO Core Conventions Ratified: 29 – 100 – 105 – 111

The savage beating by police of hundreds of unarmed Honda Motorcycle workers in Haryana put the plight of workers on the front pages of the newspapers, and at the centre of policy discussions, for months. Barriers to the creation of trade unions remain in law and practice, as do strong limitations on the right to strike. Government employees are barred from striking by a High Court ruling, and the government ignored comprehensive ILO recommendations to revise Tamil Nadu states’ repressive laws and practices against public servant unions.

TRADE UNION RIGHTS IN LAW

Workers may establish and join unions of their own choosing without prior authorisation. However, there is no legal obligation on employers to recognise a union or engage in collective bargaining.

The legislation makes a very clear distinction between civil servants and other workers. Public service employees have very limited organising and collective bargaining rights.
Freedom of association limited

The 1926 Trade Unions Act was amended in 2001. Under the amended Act, a union has to represent a minimum of 100 workers – which is excessive by international standards – or ten per cent of the workforce, whichever is less, compared with a minimum membership of seven workers previously. The amendment also reduced the number of “outsiders” (those not employed at the enterprise) allowed to sit on a union executive and requires unions to submit their accounts for auditing.

Anti-union discrimination
The Trade Unions Act prohibits discrimination against union members and organisers, and employers can be punished if they discriminate against employees engaged in union activity.
Restrictions on the right to strike

Under the 1947 Industrial Disputes Act (IDA), industry workers in public utilities have to announce a strike at least 14 days in advance. In some states, the law demands that certain private sector unions must submit formal notification of a strike before it is considered legal.

Workers in the banking industry have to give six months’ notice before going on strike. The industry has been declared a public utility under the Industrial Disputes Act.
Strike bans

The Essential Services Maintenance Act (ESMA) enables the government to ban strikes and demand conciliation or arbitration in certain “essential” industries. However, the Act does not define which these essential services are. Interpretation therefore varies from one state to another. Legal mechanisms nonetheless exist for challenging a decision taken under the terms of this Act, if a dispute arises.

The Central Civil Services (Conduct) Rule, 1964, stipulates that no government servant shall resort to, or in any way abet, any form of a strike.

In August 2003 the Supreme Court ruled that government employees did not have the right to strike because it “inconvenienced citizens and cost the state money”. The ruling came following a strike in the Tamil Nadu state, whose government dismissed 350,000 striking employees. In December 2003, the Court ruled that lawyers had no right to go on strike, or to boycott the courts.

The Industrial Disputes Act prohibits retribution by employers against employees involved in legal strike action.
Increased threat of “reforms” to gut labour laws

The government finalised amendments to labour laws in 2003 which were aimed at empowering the employers to hire and fire at will, legalise contract work in a wide range of occupations and introduce unilateral changes in service conditions. In May 2004, however, following the general election which saw a change of government, the new governing coalition pledged to consult the trade unions in advance before tabling any amendments to labour law.

In October 2005, the Ministry of Labour followed up that pledge by sending a proposal on “Making Labour Markets Flexible” to the major trade union congresses. The proposal was met with outrage by trade union bodies across the political spectrum.

Among the changes proposed were amendments to the Contract Labour (Regulation and Abolition) Act, 1970, which would open up huge swathes of the economy to contract labour arrangements by expanding exclusions to the Act for work of a year-round nature. Among the new sectors that the Ministry proposed to exclude are information technology and support services in establishments at ports and dockyards, airports, railway stations, interstate bus terminals, hospitals, educational and training institutions, and guesthouses and clubs. The Ministry also recommended that export oriented activities, including those in special economic zones, and support services for those zones, should be on the list, which would make contract labour available for these sectors. Another problematic proposal is raising the threshold (from 100 workers to 300 workers) of the size of enterprises that do not need government permission to lay off workers.

At the end of the year, no concrete legislative action had been taken on the government’s proposals.
Sikkim – excluded from the law

The Trade Unions Act, even after its amendment in 2001, does not apply in Sikkim, a State annexed to India in 1975. Consequently, workers there do not benefit from trade union rights. Although there are some workers’ associations, no one sector, as such, is organised. Registration of trade unions is subject to a police inquiry and then depends upon receiving the permission of the Land Revenue Department of the Government of Sikkim. One negative comment by the police about a member of the union’s executive can be grounds for refusing registration. Furthermore, the public too has an opportunity to state its objections to the creation of a trade union, which can also prevent its registration. According to the State government, however, no such instance of objection by the public to the creation of a union had come to its notice.
Repressive legislation in Tamil Nadu State

The Tamil Nadu Essential Services Maintenance Act (ESMA) was passed in May 2002. Characterised by trade union leaders as one of the most repressive pieces of legislation enacted against workers in India since Independence, the Act prescribes a punishment of up to three years’ imprisonment and a 5,000 rupee fine against participants in a strike involving “essential services”. A large number of public services are included within the definition of “essential”, such as those relating to the supply of water and electricity, passenger and goods transport, fire fighting and public health. Activists who call for a strike or instigate workers to go on strike, or anyone who provides financial assistance for the conduct of a strike, risks the same penalties. Under the Act, the word “strike” not only includes the refusal of employees connected with these “essential services” to “continue to work or to accept work assigned”, but also a “refusal to work overtime” and “any other conduct which is likely to result in, or results in, cessation or substantial retardation of work in any essential service”. The government has ignored ILO recommendations to amend the Act.
General strikes banned in Kerala

In 2002, the State of Kerala declared that all general strikes were illegal when they involved a complete close down of all activities. This was upheld in the courts.
Export processing zones (EPZs)

The right to join trade unions and bargain collectively exists in law for EPZs. In the 2001 Trade Union Act, the government designated the EPZs and Special Economic Zones (SEZs) as “public utilities”, requiring a 45-day strike notice period.

The Mahanagar Asangathit Mazdoor union reported that the government of Delhi State has exempted EPZs from most labour legislation and there is a ban on the formation of trade unions.

TRADE UNION RIGHTS IN PRACTICE
Only a small minority of workers protected

In practice, workers’ rights are only legally protected for the small minority who work in the organised industrial sector.

Over 90 per cent of workers belong to the agricultural and informal sectors where there is almost no union representation, and where it is difficult to enforce legislation. The growing use of contract labour also creates problems for organising, and weakens the unions. Even governments are turning to contract labour. In 2004, the government of the Tamil Nadu state ordered its health department to recruit personnel, other than doctors, on a contract basis through private agencies.

The Tamil Nadu state government also continued to refuse to recognise and bargain with unions of government employees and teachers, and continued to seal off the Tamil Nadu secretariat building, which served as the Tamil Nadu Government Employees’ Union headquarters until a 2002 strike. The ILO CFA called on the Government to immediately extend recognition to these unions, and cease to hold the building. Unfortunately, the government declined to send any communication to the ILO CFA regarding the case, indicating a continued unwillingness to seriously consider trade union rights for its public servants.
Hostile employers, poor law enforcement

The hostile attitude of employers towards trade unions is clearly a deterrent to organising. Employers tend to either ignore the law making it illegal to dismiss a worker for their trade union activities or circumvent it by transferring workers to other locations to disrupt union activities or discourage union formation. Seeking justice through the judicial process is time consuming and costly. Unions report that some employers resort to intimidation, threats, demotion, beatings and, in extreme cases, death threats or even attempted murder against trade unionists. A more popular form of harassment, however, is the filing of false criminal charges.

One problem with such charges, in addition to unfair dismissal, is that the courts are excruciatingly slow. Legal charges were brought by a police officer against 12 leaders of a tea workers’ union, the Hind Khet Mazoor Panchayat (HKMP) in 1995. They related to a peaceful demonstration in the Araria district in December 1993 attended by thousands of workers, which allegedly blocked the passage of the police officer. The case didn’t come to court until 12 years later, in September 2005. Three of the accused had passed away in the interim. There is no concrete evidence to support the charges filed, but the legal battle has effectively distracted the officers from their union work for all that time.

Globalisation and economic liberalisation have created a climate in which there is further pressure to dilute labour standards, in particular labour inspections and the enforcement of labour legislation.

New employment sectors such as call centres, the visual media and telecommunications are not covered by any explicit employment regulations and employers obstruct the formation of unions. High levels of casual employment were built into the structure of the call centre/business process outsourcing (BPO) industry, affecting many of the approximately 400,000 of these workers in India, and making it difficult for them to organise.
Repression in the construction and ship-breaking industries

Contractors and sub-contractors in the construction industry are loathe to allow workers to exercise their right to trade union membership, and are likely to threaten them with dismissal should they try. Since all work is project-based, the possibilities for engaging in collective bargaining are extremely limited.

Similarly, in the ship-breaking industry, employment is so precarious that workers do not try to enforce their right to organise trade unions. Anyone who even attempts to demand a wage increase is fired instantaneously. Intimidation is commonplace and the “muqadam”, who is responsible for hiring and supervising the workers, sides more with the ship-breaker than with the workers.

Collective bargaining
In the absence of a statutory right to collective bargaining, employers are frequently reluctant to negotiate, and in particular, refuse to negotiate with the unions of the workers’ choice.
Strikes

The procedures for holding a legal strike are so cumbersome that unions rarely fulfil them completely. Most private sector strikes are therefore technically illegal, although reprisals have been rare so far.

In the public utilities, unions tend to take strike action, despite the ban. Such strikes are declared illegal and, if the union is not strong enough, can lead to reprisals.
Export processing zones (EPZs)

The government seeks to keep trade union activity in the country’s seven EPZs to a minimum. Although the right to join trade unions and to bargain collectively exists in law, in reality entry to the zones is restricted to the workers, who are transported in by their employers. Since trade unionists are not able to enter, organising is extremely difficult and union activity rare in the EPZs.

There are moves to exempt the zones from the application of labour laws. Some states, such as Andhra Pradesh, have even dissuaded labour departments from conducting inspections in the zones.

The majority of workers in the EPZs are women, employed in industries such as ready-made garments, electronics and software. In the Santacruz Electronics Export Processing Zone (SEEPZ) near Bombay, 90 per cent of the workers are women who are generally young and too frightened to form unions. Working conditions are bad and overtime is compulsory.

Workers fear victimisation by management and those who protest are immediately sacked. It is common for workers to be employed by fictitious contractors on temporary contracts rather than directly by the company. In the Noida EPZ, workers have been sacked for demanding that labour laws should be implemented.
VIOLATIONS IN 2005
Background

The UPA (United Progressive Alliance) government of Prime Minister Manmohan Singh continued to promote economic reforms, but was unable to pass major labour legislation during the year. Southern India, especially the Tamil Nadu state, was struggling to recover from the Asian tsunami of 26 December 2004, which killed thousands and destroyed the economic livelihoods of the survivors.
Busting the union at Pepsi

Workers at PepsiCo’s directly-owned bottling plant in Bajpur, Uttaranchai, formed a union in June 2005, and applied for official registration. Within days of this application, management transferred seven officials and activists (all of them production workers) to distant facilities. When the union responded by calling a strike on 8 June, PepsiCo suspended the transferred workers and followed this up by suspending seven more union activists for their activities during the strike. A month long strike ensued, with 87 permanent workers on the picket line. During this time, PepsiCo hired temporary workers to replace the strikers. PepsiCo maintained that the strike was illegal since statutory notice had not been provided, and they had no obligation to bargain with the strikers. Tripartite mediation by the Ministry of Labour was initiated to resolve the dispute, yet no solution was found. At the end of the year, the dispute was still unresolved.
Police violence against Honda workers in Haryana

Using lathis, which are heavy wooden clubs bound with iron, over 100 Haryna police and security officials surrounded and viciously attacked a group of protesting unionists from Honda Motorcycles and Scooters India (HMSI) Co. on 25 July. More than 250 workers were seriously injured, one worker was killed and an undetermined number went missing after the attack, which drew national and international condemnation, and compelled the direct involvement of the Prime Minister, Manmohan Singh, and UPA leader, Sonia Gandhi, in seeking solutions. The incident confirmed Haryana’s reputation as a state where there is close collaboration between the local government and employers in the violent suppression of workers’ rights.

Over the six months leading up to the incident, HMSI engaged in a systematic campaign to prevent the formation of a union by employees unhappy with the poor treatment of workers, and sharp increases in workload without a commensurate wage rise. The union’s application for registration was in its final stages when Honda began its anti-union tactics in February. In April, management decided to terminate four workers without notice, including union President, Suresh Gaur, and one other officer-holder in the nascent union. In May, Honda management suspended more union leaders and activists – first 13 workers, and subsequently another 37. The union continued to mobilise and seek supporters, and the conflict escalated. On 27 June, workers reporting to the factory found themselves illegally locked-out. Management required workers wanting to enter the factory to sign an anti-union “good conduct” letter, which most refused to do.

As the lock-out continued, police surrounded the factory, giving the first hint of the close relationship between factory management and authorities. Mediation by the Department of Labour in early July failed, as management reneged on an agreement to allow the return of workers to the factory, and refused outright to reinstate the four fired and 50 suspended union activists.

On 25 July, approximately 2,700 workers gathered peacefully in Kamla Nehru Park to protest the lock-out. Without provocation, Haryna police brandished lathis, and charged the rally in an unsuccessful attempt to disperse it. An undetermined number of workers and at least one policeman were injured when workers defended themselves. Approximately five hours later, leaders were invited to meet with the Deputy Commissioner of Police, Sudhir Rajpal, for talks at a local government office. A large group of unarmed workers accompanied the leaders, and sat peacefully outside the office, waiting for the outcome. Public security officers – who appear to have been organised in advance for this purpose, since the force included Haryana police, fire brigades, Rapid Action Force members, and police officials from neighboring police stations – then surrounded the protesters and brutally attacked to them. Eyewitnesses say that the attack started in the presence of the Deputy Commissioner. Claims by the Deputy Commissioner and police that the workers were armed, and that the police action was in self-defence, were exposed as lies by media videotapes and independent investigations into the incident.

Among the approximately 400 workers arrested, 340 were released after being held overnight, while 63 were kept locked up and charged with offences ranging from assault to attempted murder. Union sources reported that only two of the 63 held were spared grievous injuries to the head, arms, or legs, and that many had single or multiple bone fractures from the beating.

National outrage prompted the Haryana Chief Minister to accuse the media of engaging in a “conspiracy to defame” his government by reporting the incidents. Haryana police alleged they were acting in retaliation for attacks earlier in the day, further eroding the credibility of those responsible for this police riot. After five independent inquiries and a debate in the national Parliament, the Haryana Chief Minister finalised a “settlement” between the local union (national labor leaders were excluded by the government) and the HMSI management on 26 July. HMSI agreed to take back the 54 fired and suspended workers, but only provided that these workers could be shifted off the line where the majority of workers are. Recognising the lock-out had been illegal, the HMSI also agreed to back-pay to all locked out workers for May and June. The union in turn was required to forego a wage hike for one year, withdraw its collective bargaining demands, and “maintain discipline” at the factory. Both the Deputy Commissioner of Police and the Police Superintendent were transferred out of the area.
Protesting workers beaten in Haryana

On 14 August, in Rohtak, Haryana, a large group of police, armed with lathi, charged a group of 70 protesting workers who were former members of the disbanded Haryana Industrial Security Force. The former security guards were seeking an audience with the Chief Minister of Haryana. Eight workers, including two women, were injured seriously enough to be hospitalised, while another 30 were treated at private clinics and released. The police arrested 40 workers, of which 19 were women, in connection with the incident.
Protesting teachers attacked by police

On 26 December, police armed with lathi used water cannons and then charged and beat hundreds of contractual, temporary teachers who were protesting in front of the Birla Institute of Technology in Patna. The attack sent 25 educators to the hospital. The teachers were seeking to meet the Chief Minister to press demands about about pay and conditions.
Tamil Nadu arrests picketing Electricity Board workers

Members of the Tamil Nadu Electricity Board Employees’ Union conducted non-violent pickets to pressure Board to consider regularising field staff. The protests occurred in early and mid-November, and on 12 November, public pickets in prominent areas prompted police to make mass arrests. They included 301 arrested in Dindigul, 197 in Tiruchi, 273 in Pudukottai, 80 in Perambular, 137 in Karur, and several thousand in Chennai. The workers were released soon after their arrests.
Self-Employed Women’s Association (SEWA) under attack

SEWA, a dynamic trade union of 700,000 informal sector women workers operating in Ahmedabad and surrounding areas, reported that it was facing a campaign of systematic harassment from the conservative BJP-led government of Gujarat state. Using its power as an intermediary to the international community, the Gurajat government halted funding from the UN’s International Fund for Agricultural Development (IFAD) to SEWA for the support of 14,000 families impacted by a devastating 2001 earthquake. Government allegations that there were “financial irregularities” were belied by the fact that its own auditors had examined SEWA’s accounts, and already approved the audits. The Government also sought the return of other monies given for previous programmes completed (and audited successfully) as long as five years ago. The government’s activities effectively paralysed SEWA and prevented it from carrying out a range of its representation activities. Over 11 months of effort by SEWA to negotiate with government officials was frustrated by an unwillingness to resolve matters in good faith. This brought SEWA to publicly state in October 2005 that the government’s campaign seeks “to destroy our credibility, our solidarity, and our reputation.” Support from three Global Union Federations to which SEWA is affiliated, and letters endorsing SEWA’s integrity from IFAD, have fallen on deaf ears. SEWA has been given no option but to end all cooperation with any government agencies, and as the year ended, the campaign of financial harassment and slander against SEWA continued unabated.
Stallion Garments – bringing union activity to a standstill

Stallion Garments, a leading member of the Tirupur Exporters’ Association, engaged in a systematic campaign to harass unionists, fire workers, and threaten labour support organisations. The problems began in June 2004, when workers held demonstrations seeking pay raises in line with a regional wage accord. Management responded by firing 20 worker activists in the factory. This in turn sparked further demonstrations, and the company sought (and received) interim stays from three district courts. The three courts’ overlapping rulings prevented unions from entering the factory area, from raising banners or chanting slogans within 100 meters of the factory, from holding meetings within 300 meters of the factory, and from holding any sort of assembly at all. Management then alleged violations of these orders and filed court cases against the six labour unions involved in the struggle. International solidarity support from the NGOs in the Clean Clothes Campaign brought pressure on the factory, and resulted in threats of violence being made by the locally influential factory owner against a labour NGO involved in the campaign. At the end of 2005, the workers had not been reinstated, the unions were fighting legal cases in the courts, and the campaign for better wages and union representation was stalled.

The International Confederation of Free Trade Unions (ICFTU)

Richest 2% own ‘half the wealth’ of the World, India is among the poorest

The richest 2% of adults in the world own more than half of global household wealth according to a path-breaking study released today by the Helsinki-based World Institute for Development Economics Research of the United Nations University (UNU-WIDER). Under the study, India’s average per capita net worth was only 24.7 per cent of the world average, while its GDP was 29.2 % of the world average.Highest : $144,000 per Capita household wealth in the USA

Lowest : $1,100 per Capita household wealth in India

China is twice wealthy than India

The most comprehensive study of personal wealth ever undertaken also reports that the richest 1% of adults alone owned 40% of global assets in the year 2000, and that the richest 10% of adults accounted for 85% of the world total. In contrast, the bottom half of the world adult population owned barely 1% of global wealth. The research finds that assets of $2,200 per adult placed a household in the top half of the world wealth distribution in the year 2000. To be among the richest 10% of adults in the world required $61,000 in assets, and more than $500,000 was needed to belong to the richest 1%, a group which — with 37 million members worldwide — is far from an exclusive club.
The UNU-WIDER study is the first of its kind to cover all countries in the world and all major components of household wealth, including financial assets and debts, land, buildings and other tangible property.

The US is the richest country, with mean wealth estimated at $144,000 per person in the year 2000.4 At the opposite extreme among countries with wealth data, we have India with per capita wealth of about $6,500 in purchasing power parity (PPP) terms. The two low income countries in our sample, India and Indonesia, stand out as having particularly high shares of non-financial wealth.12 This is no surprise since assets such as housing, land, agricultural assets and consumer durables are particularly important in many developing countries. In addition, financial markets are often poorly developed. In India, the only low or middle income country for which we have some detail on financial assets, most of the financial assets owned by households are liquid.

India is categorized under the last group consists of 64 low-income countries. This group’s collective household net worth on a PPP basis amounted to 8.3 per cent of world wealth, compared to 39.9 per cent of the world’s population and 11.3 per cent of world GDP.

The ratio of liabilities to total assets is particularly low in India and Indonesia (for China only non-housing liabilities are reported). Again poorly developed financial markets help to explain this phenomenon. But, in addition, underreporting of debt appears to be more severe than underreporting of assets. Subramanian and Jayaraj (2006) estimate that debts are, on average, underrepresented by a factor of 2.93 in the AIDIS.

Of the 13 countries for which we have the pertinent data, the US again ranks first in net worth per capita, at $143,857, followed on a PPP basis by Australia at $101,597, and Japan at $91,856. In this group, India is last, at $6,513 on a PPP basis and $1,112 on an exchange rate basis, preceded by Indonesia, at $7,973 on a PPP basis and $1,440 using official exchange rates. China appears to be about twice as wealthy as India, having per capita net worth of $11,267 on a PPP basis or 2,613 using official exchange rates.

‘Thirds’ feature prominently in describing the overall pattern of results. India dominates the bottom third of the global wealth distribution, contributing a little under a third (27 per cent to be precise) of this group.

The middle third of the distribution is the domain of China which supplies more than a third of those in deciles 4-8.

At the top end, North America, Europe and highincome Asia monopolise the top decile, each regional group accounting for around one third of the richest wealth holders, although the composition changes a little in the upper tail, with the North American share rising while European membership declines.

Another notable feature is the relatively constant membership share of Asian countries other than China and India.

As regards the rankings of individual countries, Brazil, India, Russia, Turkey and Argentina are now all promoted into the exclusive class of countries with more than 1 per cent of the members of the global top wealth decile. The most dramatic rise, however, is that of China which leapfrogs into fifth position with 4.1 per cent of the members. Even without an increase in wealth inequality, a relatively modest rise in average wealth in China will move it up to third position in
the global top decile, and overtaking Japan is not a remote prospect.

‘One should be clear about what is meant by “wealth”,’ say co-authors James Davies of the University of Western Ontario, Anthony Shorrocks and Susanna Sandstrom of UNU-WIDER, and Edward Wolff of New York University. ‘In everyday conversation the term “wealth” often signifies little more than “money income”. On other occasions economists use “wealth” to refer to the value of all household resources, including human capabilities.’

‘We use the term in its long-established sense of net worth: the value of physical and financial assets less debts. In this respect, wealth represents the ownership of capital. Although capital is only one part of personal resources, it is widely believed to have a disproportionate impact on household wellbeing and economic success, and more broadly on economic development and growth.’

Wealth levels across countries

Using currency exchange rates, global household wealth amounted to $125 trillion in the year 2000, equivalent to roughly three times the value of total global production (GDP) or to $20,500 per person. Adjusting for differences in the cost-of-living across nations raises the value of wealth to $26,000 per capita when measured in terms of purchasing power parity dollars (PPP$).

The world map shows per capita wealth of different countries. (Figure 1: World Wealth Levels in Year 2000) Average wealth amounted to $144,000 per person in the USA in year 2000, and $181,000 in Japan. Lower down among countries with wealth data are India, with per capita assets of $1,100, and Indonesia with $1,400 per capita.

Per capita wealth levels vary widely across countries. Even within the group of high-income OECD nations the range includes $37,000 for New Zealand and $70,000 for Denmark and $127,000 for the UK.

Wealth is heavily concentrated in North America, Europe, and high income Asia-Pacific countries. People in these countries collectively hold almost 90% of total world wealth. (Figure 2: Regional Wealth Shares)

Although North America has only 6% of the world adult population, it accounts for 34% of household wealth. Europe and high income Asia-Pacific countries also own disproportionate amounts of wealth. In contrast, the overall share of wealth owned by people in Africa, China, India, and other lower income countries in Asia is considerably less than their population share, sometimes by a factor of more than ten. (Figure 3: Population and Wealth Shares by Region)

The study finds wealth to be more unequally distributed than income across countries. High income countries tend to have a bigger share of world wealth than of world GDP. The reverse is true of middle- and low-income nations. However, there are exceptions to this rule, for example the Nordic region and transition countries like the Czech Republic and Poland.

The authors of the UNU-WIDER study explain that in Eastern European countries ‘private wealth is on the rise, but has still not reached very high levels. Assets like private pensions and life insurance are held by relatively few households. In the Nordic countries, the social security system provides generous public pensions that may depress wealth accumulation.’

World wealth inequality

The concentration of wealth within countries varies significantly but is generally high. The share of the top 10% ranges from around 40% in China to 70% in the United States, and higher still in other countries.

The Gini value, which measures inequality on a scale from zero to one, gives numbers in the range from 35% to 45% for income inequality in most countries. In contrast, Gini values for wealth inequality are usually between 65% and 75%, and sometimes exceed 80%.

Two high wealth economies, Japan and the United States, show very different patterns of wealth inequality, with Japan having a wealth Gini of 55% and the USA a wealth Gini of around 80%.

Wealth inequality for the world as a whole is higher still. The study estimates that the global wealth Gini for adults is 89%. The same degree of inequality would be obtained if one person in a group of ten takes 99% of the total pie and the other nine share the remaining 1%.

Where do the world’s wealthy live?

According to the study, almost all of the world’s richest individuals live in North America, Europe, and rich Asia-Pacific countries. Each of these groups of countries contribute about one third of the members of the world’s wealthiest 10%. (Figure 4: Regional Composition of Global Wealth Distribution)

China occupies much of the middle third of the global wealth distribution, while India, Africa, and low-income Asian countries dominate the bottom third.

For all developing regions of the world, the share of population exceeds the share of global wealth, which in turn exceeds the share of members of the wealthiest groups. (Figure 3: Population and Wealth Shares by Region)

A small number of countries account for most of the wealthiest 10% in the world. One-quarter are Americans and another 20% are Japanese. (Figure 5: Percentage Membership of Wealthiest 10%)

These two countries feature even more strongly among the richest 1% of individuals in the world, with 37% residing in the USA and 27% in Japan. (Figure 6: Percentage Membership of Wealthiest 1%)

According to Anthony Shorrocks, a country’s representation in the rich person’s club depends on three factors: the size of the population, average wealth, and wealth inequality.

‘The USA and Japan stand out’, he says, ‘because they have large populations and high average wealth. Although Switzerland and Luxembourg have high average wealth, their populations are small. China on the other hand fails to feature strongly among the super-rich because average wealth is modest and wealth is evenly spread by international standards. However, China is already likely to have more wealthy residents than our data reveals for the year 2000, and membership of the super-rich seems set to rise fast in the next decade.’

Composition of household wealth

The UNU-WIDER study shows major international differences in the composition of assets, resulting from different influences on household behaviour such as market structure, regulation, and cultural preferences.

Real property, particularly land and farm assets, are more important in less developed countries. (Figure 7: Asset Composition in Selected Countries) This reflects not only the greater importance of agriculture, but also immature financial institutions.

The study also reveals striking differences in the types of financial assets owned. Savings accounts feature strongly in transition economies and in some rich Asian countries, while share-holdings and other types of financial assets are more evident in rich countries in the West. (Figure 8: Composition of Financial Wealth in Selected Countries)

According to the authors of the UNU-WIDER study, savings accounts tend to be favoured in Asian countries because ‘there appears to be a strong preference for liquidity and a lack of confidence in financial markets. Other types of financial assets are more prominent in countries like the UK and USA which have well developed financial sectors and which rely heavily on private pensions.’

Surprisingly, household debt is relatively unimportant in poor countries. As the authors of the study point out: ‘While many poor people in poor countries are in debt, their debts are relatively small in total. This is mainly due to the absence of financial institutions that allow households to incur large mortgage and consumer debts, as is increasingly the situation in rich countries’

The authors go on to note that ‘many people in high-income countries have negative net worth and—somewhat paradoxically—are among the poorest people in the world in terms of household wealth.’

Download the Report here

Power Point Presentation

54% from Hindutva heart land want to settle down in US

A recent  opinion poll by Outlook—AC Nielsen  shows that 46 % of India’s urban class want to settle down in US. Interestingly, 54 % of Ahmedabad residents want to settle down in the US even their Chief Minister, Narendra Modi was denied an American Visa.

The survey  results is a blow to Hindutva’s copy righted ” Your patriotism is not enough!”  slogan against Muslims. 63 % from Lucknow, 69 % from Patna and 59 % from Hyderabad, said NO to the same question, which is having considerable muslim population. But, in Ahmedabad, the Hindutva heart land, only 38 % said NO to this question.
Survey proves that  “Right Wing Nationalism” and “Pseudo Patriotism” promoted by Hindutva fascism  cannnot sell  any more among urban Indians.
The survey was conducted in major indian cities like,  Mumbai, Delhi, Calcutta, Chennai, Bangalore, Hyderabad, Ahmedabad, Lucknow and Patna. 37 % of the participants were looking for  Job opportunities in the  US, while 22 % them fall in love with America’s high standard of living. 38 % praised high technology owned by US.

49 % of Indians favoured Bill Clinton comparing to 43 % for Bush. 72 % consider US as a bully. Only 30 % of Indians believe US as a close ally to India, while 50 % think they are more inclined to Pakistan. On average, the results exhibit the views of a generation married to “cola” and “bubble gum” and far removed from the times when the word “India” stirred the heart, when a call from “bharath matha” meant everything else was the second lead. It is the vision of an urban generation that has its own priorities: discos, jobs and jeans. The poll results should remind a famous quote to our politicians “To love our country, Our country must be lovely”

Story of Migration from India 

In fact, Indians migrated to US is not contributing much to India’s economy comparing to Indians living in Gulf countries.Remittances from the region have continued to grow and formed the cornerstone of Kerala’s economy during 1999-2004. In 2002-03, remittances were to the tune of $14.8 billion in Kerala alone. It is expected that  remittances would go up from $21.7 billion in 2004 to $24 billion in 2005.  Nearly half of more than three million Indians working in various Gulf countries are from Kerala. They are credited with having boosted Kerala’s economy in the past three decades by sending remittances worth billions of rupees every month. During 2004, the remittance was reached 18460 crore rupees. As a result of remittances, the per capita income in Kerala has increased by 5,678.

Foreign remittances to the state have been 7 times of what kerala received from the Government of India as budget support. They have formed 1.8 times of the annual budget of the state and 1.74 times the revenue receipts of the state and the remittance were sufficient to wipe out 60% of the state’s debt in 2003!

Unlike United States, Gulf countries don’t provide citizenship to foreigners which causes them to invest more in India. “Any society which scorns plumbing will soon realise that there are neither any pipes nor any water to drink.” The observation by a Dubai-based NRI Suresh Kumar, quoting a Greek philosopher, set the tone at Pravasi Bharatiya Divas 2006 in Hyderabad.

At an open session on the Indians in the Gulf, the NRIs lamented that despite being the “real freedom fighters”, espousing the cause of all Indians, they get a raw deal not only at the hands of the government of the countries for which ‘they live and die’ but also from their motherland.

It’s always the ‘celebrity overseas Indians from the UK and the US’ who get all kinds of attention and walk away with dual citizenships, they deplored.

What making Indians to settle down in America?

On July 3, 1946, a bill passed through  US Congress to allow citizenship to Indian nationals. The bill was signed by President Truman. In 1949, Dalip Singh Saund became a US citizen, and four years later he became the first Asian to be elected to the US Congress. July 3 considered to be the true Independence Day for Indian nationals in the US.
Rajiv Desai, a US  thinker of Indian origin recently wrote an article about the  American dreams of Indians:

Talking to Indians in all walks of life in America, he became convinced that the key factor in the emigration of middle-class youth was the ideology propagated by the ruling elite in India.

“Over the years, the country came to be held in thrall by a government-anointed nexus of bureaucrats, politicians, academicians and businessmen, the so-called “privilegentsia.” Under this dispensation, connections counted for more than achievement, privilege more than performance. For ordinary middle-class families, with no strings to pull, there were simply no opportunities to make a decent and dignified living.”

“Today, as the wave of crude nationalism begins to recede in the face of severe problems of governance and finance, the “privilegentsia” is up to its old tricks again. This time, it seeks to revive jingoism by projecting Indian as a “beauty superpower.” This is with reference to the rash of “Miss World” and “Miss Universe” awards that have come the way of Indian contestants at mindless beauty pageants that are made for television and commercial endorsements. ”

“Meanwhile, Indian foreign policy is reduced to disputes with OECD members about visas for Indian computer programmers, who are shipped to the Silicon Valley and elsewhere, much like indentured labor of earlier times, to perform mindless tasks for Western firms at a fraction of the cost of local employees.

On the other hand, domestic policy is exercised by such weighty issues as match-fixing and illegal betting on cricket, a game with which India’s millions are obsessed. At the same time, the real issues of governance such as water, power, roads, pollution, jobs, fiscal deficits, subsidies and the privatization of the parasitical public sector are caught up in the familiar political battles over turf and spoils.

“The “privilegentsia” does not give up that easily. It will try to hold on to its power as long as possible, never mind the country and its pressing problems.” he says

Why Do Indians Flee India? Sikh Spectrum Monthly, Issue No.10, March 2003
http://www.sikhspectrum.com/032003/flee_india.htm  

Another US Thinker of Indian diaspora, Dinesh Dsouza, questions the reverse thinking habit of Hindutva fascists:

“In general, America is the only country in the world that extends full membership to outsiders. The typical American could come to India,live for 40 years, and take Indian citizenship. But he could not “become Indian.” He wouldn’t see himself that way, nor would most Indians see him that way. In America, by contrast, hundreds of millions have come from far-flung shores and over time they, or at least their children, have in a profound and full sense “become American.”

“America offers more opportunity and social mobility than any other country, including the countries of Europe. America is the only country that has created a population of “self-made tycoons.” Only in America could Pierre Omidyar, whose parents are Iranian and who grew up in Paris, have started a company like eBay. Only in America could Vinod Khosla, the son of an Indian army officer, become a leading venture capitalist, the shaper of the technology industry, and a billionaire to boot. Admittedly tycoons are not typical, but no country has created a better ladder than America for people to ascend from modest circumstances to success.”

http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/06/29/IN290713.DTL&type=printable

The Indian diaspora is today the third largest Asian community in the US, is upwardly mobile and is on its way to becoming a political force in that country. Cherian Samuel, a scholar at the Institute of Defence Studies and Anlyses (IDSA), made the observation during a seminar  held in New Delhi on Thursday on Indo-US relations, organised ahead of George W. Bush’s visit.

Samuel said Indian Americans totalled about 1.7 million in the US according to the 2000 census, their numbers having gone up by an incredible 106 percent since 1990. It grew at a rate of 7.6 percent annually in the last 10 years.

“In the process, Indian Americans replaced Japanese Americans as the third largest Asian community in the US after the Chinese (2.7 million) and Filipinos (1.9).”

He said much of this was fuelled by the technology boom in the 90s when Indian techies made their way to the US in large numbers. The number of H1-B visas issued to India jumped from 2,697 in 1990 to 15,228 in 1995 and to 55,047 in 2000.

“The number of Indians getting Green Cards every year has also more than doubled since 1999,” Samuel said. “And Green Cards are one step away from citizenship which gives full voting rights.

“No doubt,” he added, “Indian Americans will become a political force in the years to come.”

Samuel pointed out that Indian Americans were much above the median on a score of indices. Sixty-four percent of them were college educated as against the national average of 27 percent.

The average median family income for the Indian American community was estimated at $70,000, against the average family income of $50,000.

The Indian community was also upwardly mobile and included a large number of professionals.

To take a point, Samuel said, 38 percent of all physicians in the US were of Indian origin, as were 10 percent of all medical practitioners.

The American Association of Physicians of Indian Origin was the largest ethnic medical organisation in the US, with an active membership of over 9,000 doctors and representing more than 38,000 doctors of Indian origin.

One in every nine Indians in the US was a millionaire, comprising 10 percent of the estimated 1.2 million US millionaires, Samuel said.

“Many of them are located in Silicon Valley. About a third of engineers in the Silicon Valley are of Indian descent. It is estimated that 35 percent of the technical workforce of Boeing is Indian American.

“And between 10-30 percent of the workforce in Microsoft and NASA are of Indian origin. There are also over 5,000 Indians on the faculties of US universities. This list can go on and on.”

Quoting a Merrill Lynch market study, Samuel said that Indian Americans had a net worth of $90 billion. “Given the right (Indian) government policies, much of this could be channelised into investing in India.”

Samuel also touched upon the reverse brain drain now taking place, and said a large number of Indian Americans were returning to India, bringing along the best professional practices and exposure to an international environment.

He said the diaspora played a key role in projecting India’s soft power and creating global awareness about the country. One way this was achieved was by their demand for Bollywood movies, which then entered the mainstream market in the US.

But Samuel said it would be too early to credit too much power and influence for the Indian community in the US although they contributed heavily to the coffers of both the main political parties.

“However, these groups are nowhere near acquiring the influence of their role model, the Jewish Caucus,” he said.

One reason for this, he explained, was that the Indian Americans were a relatively new entrant on the American political scene and “are yet to build up networks and war chests that would be needed to sustain an enterprise”

Full Survey  Report  can be seen at:

http://www.outlookindia.com/full.asp?fodname=20060306&fname=Cover+Story&sid=1

Luxury in India is Rs 65,000 crore business: Study

MUMBAI: The Indian customer is spending more on luxury items, whose market is pegged at a whopping Rs 65,000 crore and growing at about 14 per cent a year, a new study reveals.

According to the report by Technopak Advisors Ltd, India currently has 1.6 million households earning over Rs 45 lakh per annum, and each of these households spends about Rs four lakh per annum on such goods and services. The report categorised luxury households and also classified them into four distinct segments.

“While over 1 million luxury households have been slotted as luxuriented, the topmost segment 6-7 million have been termed very affluent, 10 million as getting there and up to 15 million upper middle-class households as mid-affluents,” Technopak Advisors chairman Arvind Singhal said. The research is based on a study that took into account households that earn Rs 40 lakh per annum or more.

The company met 4,000 affluent consumers in 12 cities and covered 17 products and services. Affluence has been defined by car ownership, overseas travel in the last six months and purchase of products in luxury categories.

The categories taken into consideration for the survey included clothing, fashion accessories, timewear, footwear, fragrances, jewellery and digital accessories, furniture and antiques, tableware, collectibles, fine dining and gourment food, wines and liquor, vacation, health and entertainment.

The market opportunity across these categories is estimated at Rs 64,000 crore and is accounted for by categories such as jewellery that has 27 percent of the pie, clothing 16 percent, digital accessories 13 percent, timewear 8 percent and cosmetics and skincare 8 percent.

Technopak’s knowledge company associate director Saloni Nangia said Indian luxury retailing has not taken off due to lack of proper atmosphere. “Organised retailing itself has taken off in India very lately. All the malls have been coming only recently. With more development on in Delhi and Mumbai better retailing atmosphere is being created. This will help in the future growth,” Nangia said.

However, she did not see much contribution of FDI in the segment’s future growth.
PTI

How Indians cheat their own Country?

Mauritius as a Tax Haven

Mauritius-based front companies of foreign speculators evade paying taxes in India amounting to thousands of crores of rupees with the help of loopholes in a bilateral agreement on double taxation, with the connivance of the Indian government.

THE logic of a liberal economic regime can result in apparent paradoxes. Mauritius, a tiny speck in the Indian Ocean, with a population of 1.2 million and an economy one-hundredth the size of the Indian economy, is the biggest exporter of capital to India.

The use of Mauritius as a gateway to funnel foreign investments into India has always been controversial. The island nation’s financial regime, endowed with the key characteristics of a quasi tax haven, has facilitated this. Curiously, successive Indian governments, which have cried themselves hoarse about a runaway fiscal deficit and a resource crunch, have indulged in self-denial and have refused to tax the earnings of these foreign entities. But the issue is much more than lost revenues. The question is of equity. Can ordinary citizens be asked to pay taxes even as a small body of foreign-based entities are not even asked to pay a fraction of their earnings made through speculation on Indian soil? Although the Supreme Court on October 7 quelled the legal challenge to the government’s refusal to clamp down on the Mauritius gateway, the controversy refuses to die.

The key to the apparent paradox lies in the provisions of a two-decade-old bilateral agreement, the Double Taxation Avoidance Convention (DTAC). Foreign entities have set up paper companies in Mauritius, claiming to be Mauritian residents. These companies, masquerading as Mauritian companies, have invested in India. And, taking advantage of the DTAC they avoid paying any taxes in India. They pay no taxes in Mauritius too.

Mauritius is the single biggest source of foreign direct investment (FDI) in India – amounting to $534 million in 2002-03 (about one-third of all FDI). But that is not all. Mauritius-based foreign institutional investors (FII) are also believed to be major players in the Indian bourses. FII investment in Indian stock markets between April and October this year amounted to almost $5 billion – almost ten times what they invested in the whole of the last financial year. Indeed, they are believed to be the ones leading the current boom in the stock markets. But the Mauritius angle does not end there. Reports in the financial media indicate that a substantial part of FII investment is believed to be coming from Non-resident Indians (NRIs) bringing back funds to participate in the ongoing speculative orgy in the Indian stock markets, much of which is said to be routed through Mauritius-based paper companies.

Mauritius is also reportedly the base of much of the hedge funds that are reported to be active in the current boom. Hedge funds, which deploy large volumes of funds in thin arbitrage deals made for very short-term gains, account for at least 30 per cent of the FII activity in the ongoing boom in the bourses. These entities, using the device of Participatory Notes, and dealing through the sub-accounts of the FIIs, which need not be registered with regulatory agencies such as the Securities and Exchange Board of India (SEBI) or the Reserve Bank of India (RBI), constitute the core of the speculative excess that is currently on.

This bout of speculation is not confined to the stock markets. In fact, from an economic perspective, this boom is far more dangerous than previous episodes because these players are betting simultaneously in several markets. While bringing in dollar denominated funds and thereby adding to the burgeoning foreign exchange reserves, currently amounting to over $90 billion, they are betting in stocks, the Indian currency and also speculating on the interest rates, all at the same time. That Mauritius is a home base for all this is common knowledge. The lack of regulatory oversight means that one is unable to quantify the funds coming in from the tax haven.

Although the losses to the government are difficult to estimate, primarily because it is difficult to ascertain how much comes through the Mauritius route, it is reckoned that the potential losses because of the loophole could run into several thousand crores since 1991, when India opened the floodgates to foreign investment. The government has repeatedly fought shy of taking on foreign investors. Instead, it has restrained its own arm, the Income Tax (I.T.) Department, from investigating the misuse of the bilateral agreement by foreign investors.

FII investiments in India

ALTHOUGH successive governments have refused to plug the loopholes in the DTAC, Indian regulators have always viewed them with suspicion. In late March 2000, officials in the I.T. Department in Mumbai investigated 24 Mauritius-based entities and issued “assessment orders” on them. The officers, racing against time to file their orders before the March 31 deadline, were basically engaged in lifting the corporate veil covering these entities. For instance, the I.T. Department’s assessment of Cox and Kings Overseas Funds (Mauritius), made on March 29, 2000 for the company’s assessment year 1997-98, showed that the company was in fact a subsidiary of Cox and Kings Overseas Fund Incorporated in Luxembourg. The assessment order revealed that the company routed its investment through Mauritius because “it realised that if it directly made investments in India, it will be liable to pay Indian income tax on investment including capital gains”. Aware that if investments were made through a Mauritius-based company it would not have to pay taxes in India, it floated a fully owned subsidiary in the island nation. In 1994, Cox and Kings incorporated the subsidiary in Mauritius. It hired professional consultants, who were readily available for hire in Mauritius, to serve on the subsidiary’s board. The subsidiary’s business of investing funds in India was handled entirely by J. Henry Schroeder Bank AG, based in Switzerland.

The sole business of the subsidiary in Mauritius was to undertake investments outside Mauritius. In fact, Mauritius laws proscribed it from acquiring property or raising funds in the country. In fact it was not allowed to engage in any kind of business activity in Mauritius. Thus, the I.T. Department found that the company’s sole motive for existence as an entity in Mauritius was to enable it to funnel investments overseas, particularly India. On the basis of its investigation, the I.T. Department’s assessment order observed that “the real control of affairs of the Mauritian company is in the hands of the holding company incorporated outside Mauritius”. It also noted that “the Mauritian subsidiary has been created with the main purpose to avoid tax”. On the basis of its investigation of 24 cases, including Cox and Kings, the I.T. Department thus issued show-cause notices to them. It pointed out that they were not eligible for benefits of the DTAC since they were “not bona fide and genuine residents of Mauritius”. The department also alleged that the abuse of the DTAC by entities from third countries amounted to “treaty shopping”.

Soon after the orders were served on the FIIs, all hell broke loose. Amidst the controversy there were also allegations that the then Union Minister for Finance Yashwant Sinha’s daughter-in-law was working for a Mauritius-based FII investing in India. The lobbies went into overdrive and there were dark hints that the stock market would collapse because FIIs would pull out of the Indian markets. On April 13, 2000, the Central Board of Direct Taxes, the apex body governing the Income Tax Department, issued Circular Number 789, which has since then been a subject of fierce litigation. The circular “clarified” that the production of a “certificate of residence” issued by the Mauritius authorities would “constitute sufficient evidence for accepting the status of residence as well as beneficial ownership for applying the DTAC accordingly”. It also clarified that FIIs and other entities based in Mauritius “should not be taxable in India on income from capital gains arising in India”.

The Joint Parliamentary Committee (JPC) probe into the 2001 stock market scam, in which the broker Ketan Parekh was the kingpin, revealed large-scale abuse of Mauritius-based entities. It revealed that Overseas Corporate Bodies (OCB), which are primarily vehicles floated by NRIs but which can act as fronts for other foreign investors, acted in concert with Ketan Parekh to siphon funds out of the country. In fact, there were allegations that Yashwant Sinha kept the Mauritius gate wide open so that speculators could avoid paying taxes in India. In fact, in his written submission to the JPC, after he was no longer Finance Minister, Sinha said that the revenue losses on account of the abuse of the Mauritius route were only “notional”. In fact, he admitted that although he was aware of the abuse of the route, he did not plug the holes in the DTAC because the inflow of foreign investments was considered more important than raising revenue.

THE CBDT circular was challenged in the Delhi High Court by public interest petitions filed by the Azadi Bachao Andolan (represented by Prashanth Bhushan) and a former Chief Commissioner of Income Tax, Shiva Kant Jha. The latter, who is also an advocate with the Supreme Court Bar, argued that the Government of Mauritius, through “reforms” undertaken in the early 1990s, had transformed its legal and financial system into a veritable tax haven (see interview). He said that third-country entities were using the provisions of the DTAC to establish “conduit companies” in Mauritius and using them as vehicles to invest in India with the sole objective of dodging tax in India. Shiva Kant Jha pointed out that the CBDT circular, by asking I.T. officers to accept at face value the “certificate of residence” provided by the Mauritian authorities, effectively curtailed their ability to investigate whether they were really residents of Mauritius. He pointed out that the circular prevented officers from discharging their duties by “investigating the matrix of facts to determine whether a company seeking benefits under the convention was really a Mauritian resident”. Shiva Kant Jha pointed out that the Mauritius-based entities were not paying any capital gains tax either in India or in Mauritius. He said that although Section 90 of the Income Tax Act provided the government with the authority to enter into agreements with other countries, these powers were specifically for entering into agreements on double taxation, that is, the elimination of a similar tax on the same set of entities for identical transactions in two different locations. Jha pointed out that the DTAC was meant to prevent double taxation, not tax evasion or avoidance. He also said that the government had failed to discharge its duties by causing wrongful revenue losses.

In May 2002, the Delhi High Court struck down circular 789. It observed that it was the duty of the I.T. Department to find out whether an assessee was taking shelter under the DTAC to avoid tax. In this, it was well within its right to make every endeavour to lift the corporate veil to find the true intent of these entities. It also observed that the abuse of a treaty or “treaty shopping” to “be illegal and thus necessarily forbidden”.

The government filed an appeal against the High Court order in the Supreme Court in October 2002. A consortium of international investors, represented by the Global Business Institute (GBI), joined the government in filing the appeal. Interestingly, in February 2003, Arun Jaitley, currently Union Minister for Law and Justice and Commerce and Industry, who at that time was not a member of the Cabinet, donned his lawyer’s robes to appear on behalf of the GBI. In its judgment, the Supreme Court ruled that it was the sovereign right of the state to enter into treaties with other countries. By taking a technical approach, the court ruled that Mauritius-based companies were liable to pay tax in Mauritius; it just so happens that they are not levied taxes there. It also ruled that the certificate of residence could not be disputed because as a sovereign state Mauritius had the power to determine who ought to be a resident of that nation. However, the Supreme Court observed that the Indo-Mauritius DTAC was in marked contrast to the Indo-U.S. DTAC. Shiva Kant Jha had pointed out that the Indo-U.S. DTAC provided for credits for taxes paid in either country, but had a specific provision that barred third-country entities from taking advantage of the bilateral treaty.

HOW much has the Indian state lost in revenues? Data are hard to come by to make an accurate estimate. However, one can hazard a guess on the basis of the value of securities sold by FIIs. The long-term capital gains tax, applicable on investments sold after holding them for more than a year, is at the rate of 10 per cent. Short-term rates are applied at the rate of 30 per cent when investments are liquidated. It is well known that the bulk of the FII investments are routed through Mauritius. Applying a uniform rate of 10 per cent capital gains tax on the gross sales made by FIIs would give at the very least a ballpark figure. Although it can be argued that this would overestimate the extent of lost revenue because it would not account for losses that FIIs made when they made sales, the fact that short-term capital gains are not being factored into the estimate offsets this reasonably.

On the basis of the figures presented in the table the losses to the exchequer on account of lost capital gains tax in the last decade would amount to a whopping Rs.28,139 crores. Even if it is an admitted policy of the state to woo foreign capital at any cost, the question is whether losses of this kind are acceptable to the polity at large. The average annual loss to the exchequer amounts to over Rs.2,300 crores. To get some idea of the magnitude of these losses in relation to the Union Budget, these magnitudes amount to roughly 10 per cent of the gross tax revenues of the Union projected for 2003-04. To put it more provocatively, in the context of the ongoing controversy surrounding the privatisation programme, the extent of lost revenues could easily have saved companies such as Balco, VSNL, IPCL and several others from being sold off to private parties; indeed, privatisation as an option would appear irrational if the executive chose not to forgo these taxes.

Tax havens are an important feature of the globalised world of financial speculation. Shiva Kant Jha believes that there is tension between the needs of the globalised system and the sovereignty of nation states. While financial entities want to move funds across a seamless world at will, nation states are finding that their traditionally accepted sovereign right to tax any economic entities active within their frontiers is increasingly coming under pressure from powerful players in the financial world. The rise of Mauritius as a tax haven in the 1990s, specialising in funnelling investments into India, reflects this reality. It is obvious that successive Indian governments have chosen to let this happen while creating two sets of tax payers within India – a privileged set of foreign entities who pay no taxes even as they engage in speculative excesses and ordinary Indians who have to pay taxes. Some would even regard the “notional” tax losses as subsidies paid to the well-heeled.V. SRIDHAR, Front Line, November, 08 – 21, 2003

More to read on the subject

http://indiandiaspora.nic.in/diasporapdf/chapter5.pdf

http://economix.u-paris10.fr/pdf/colloques/2006_India/Hay.pdf 

http://frontlineonnet.com/fl2311/stories/20060616004900900.htm