I am not an economist or an accountant, just a humble lawyer, a `Vakil’. Come to think of it neither Arun Jaitley, nor P Chidambaram nor Pranab Mukherjee were economists or accountants. All of them are lawyers. Yet they were our Finance Ministers. I guess as a lawyer I too have the right to comment on the Greek Crisis or Grexit.
Do you know what shocks me? How similar the Greek crisis is to what is happening in India.
I am not passing any judgement on whether India should adopt a Right wing, right of center; left of center or hard core Socialist policy to tackle, what I think is, a fast track for India towards financial doom. I am merely pointing out that, I believe, not many have understood our predicament.
Okay, after a bit of research I have a simple explanation of what caused the Greek Crisis and what the consequenses are for Greece. This is from the New York Times. The last paragraph is what is really the crux.
Greece became the epicenter of Europe’s debt crisis after Wall Street imploded in 2008. With global financial markets still reeling, Greece announced in October 2009 that it had been understating its deficit figures for years, raising alarms about the soundness of Greek finances.
Suddenly, Greece was shut out from borrowing in the financial markets. By the spring of 2010, it was veering toward bankruptcy, which threatened to set off a new financial crisis.
To avert calamity, the so-called troika — the International Monetary Fund, the European Central Bank and the European Commission — issued the first of two international bailouts for Greece, which would eventually total more than 240 billion euros, or about $264 billion at today’s exchange rates.
The bailouts came with conditions. Lenders imposed harsh austerity terms, requiring deep budget cuts and steep tax increases. They also required Greece to overhaul its economy by streamlining the government, ending tax evasion and making Greece an easier place to do business.
What are the bailout conditions mentioned in the last paragraph?
· Budget cuts.
· Tax Increases.
· Streamline government.
· End tax evasion.
· Make Greece an easier place to do business in.
Sounding familiar folks? Are several bells ringing?
On 5th of July 2015, you may recall a referendum in Greece to determine if there would be `austerity’ or not. `Austerity’ finds mention in the last paragraph above. Austerity and budget cuts include among other matters, pensions and social benefit schemes. Yes, yes I know India is a poor country and the poor need benefits. I once again stress that I express no views on the rights and wrongs of this, but, only want to point out our foolishness at not looking at the `Greek’ reality staring at us. MGNREGA, midday meals, fertilizer subsidies, schooling subsidies, children subsidies, and women subsidies and so on, all cost us money.
Austerity also includes cutting pension. You hear that Greeks stop work at 50 and live of leisure on pensions. That is supposed to be bad. Really? Did you know that by law, yes by law, Jawans or soldiers have to retire by the age of 35 - 37. The soldier/sailor/airman retires after 15 years or 17 years of service depending upon his trade. Since he is enrolled at age 17 or 18 and is "attested" (formally becomes a trained soldier/sailor/airman capable of carrying out his duties) at age 19 to 21, he retires at age 35 to 37. That is provided he does not get promoted to NCO rank. If he gets promoted to NCO rank (Naik or Havildar in the army and equivalent ranks in the navy & air force) he gets to serve for a few more years. But the huge majority of soldiers (something like 75%) retire as jawan/sailor/airman at the age of 35 to 37. All soldiers, Jawans or Generals, get pension from retirement till death. But, this goes further - A widow, regardless of the rank of her husband, gets "family pension" which is 50% of her husband's pension, until her death. Please remember India has the largest mobilized armed forces manpower after China. That is a lot of people. Add to that number all the civil servants [national and state] employees of PSU, PSB, Mumbai University, and Municipal Corporations and so on and so forth. Now add to that number the 6th Pay Commission, 7th Pay Commission, 8th Pay Commission and counting. Cherry on top, OROP. Boggles my mind. `Hamari maange poori karo’.
I am not saying that the soldiers do not deserve pension. I am saying two things. One, don’t mock the Greeks when you have the same big, if not bigger mess in your country. Two, if you want to give pensions and not become more austere, please plan and provide for it.
Tax Evasion. If you think the Greeks have a problem, think again. Forget those persons who do file Tax returns but conceal or do not disclose a lot of their income. I am referring to the tens of thousands of shopkeepers, Pav Bhaji vendors, housewives making chocolates and Salwar Khameez at home, hawkers and so on who have an income in excess of the threshold of Rs 250,000 who do not file their income tax returns. Often, these individuals have companies and firms that do business and do not file returns. So not only is non-filing a huge problem but that is compounded by mis-declaration by those who do deign to file. Sounds Greek to me.
Has our most Honourable Modiji not coined the wonderfully utopian phrase `Less Government more governance.”? Nothing has happened in that direction, again I express no opinion, however, you must understand that this idiom is simply a different way of saying - streamline government. We in India have a hugely bloated, inefficient and thoroughly corrupt government. And this is true at all levels be it the Thesildar, or the Municipality or the University or the State Government and in all parts of the country.
What has every Indian businessman, why Indian, every MNC been crying out for? Ease in doing business. Once again, Modiji’s phrase comes to mind - `Less Government more governance.” Doing business in India is extremely difficult, frustrating and prone to penalties and prosecutions. There is no stability in legislation and almost always no level playing field. Add to this is the extremely litigious nature of our people. Any new policy will be attacked in Court by a combination of vested interests, tribals, environmentalists, NGOs, RTI Activists, general do gooders and the locals where the business is to be done. Once you have tackled all this opposition you could think of starting, hoping that in the interregnum the laws have not changed.
So, I ask, is what has caused the Greek Crisis, or, is what the troika of IMF, ECB and EC prescribed as reform to Greece not exactly what the situation in India is? How are we different? The only saving grace is that our deficit is seemingly apparently being controlled. As I said I am not an economist and there may well be other cogent reasons why we will not go Greece’s way.
However, methinks we are well on the way to becoming Greek. Forget your `A’ `B’ `C’s’. Start learning Alpha Beta Delta Gama Epsilon Eta Deta Theta Iota and so on.