Top 12 Challenges Facing India in the Decades Ahead – 09 – Taxation

India has a lot of challenges ahead of it whose solution requires capital. Lots of capital. This capital is going to have to come from taxes. But in this regards, India also has a lot of challenges. The most significant of which are:

  • Poverty
    Despite rapid economic growth in recent years, India is still one of the poorest countries in the world as only 15 countries have a lower gross national income per capita. Officially, 30% of the population is below the poverty line as defined by the Tendulkar Committee Report (2009) which clarified the official poverty estimation methodology and set the poverty line at Rs 32 per person per day in urban areas and Rs 26 per person per day in rural areas at 2011 prices, which is approximately 52 US cents in Urban areas and 46 US cents in Rural areas at the end of 2013. This line is so low that it is actually a destitution line that does not ensure anything above bare subsistence. If we use the international poverty line of $1.25 US per day as defined by the World Bank, then almost 33% of the population is below the poverty line and if we define the poverty line at $2.00 US per day, which is barely above subsistence levels in many of the bigger urban areas, then almost 69% of the population is poor!
  • Unequal Wealth Distribution
    The top 1% own 16% of the country’s wealth, and the top 10% own 53%. India has three of the 100 richest men in the world, and the richest man in India is worth almost 22B, while the second and third richest men are worth about 17B and over 11B, respectively. This says the three richest men are worth about 50B in a country with only 1.8 Trillion in GDP and that they alone represent a net worth that is about 2.8% of the overall economy.
  • Import Duties
    India does not charge, or often forgives, import duties on certain types of materials and products that could provide a considerable contribution to the economy, even if the duties were kept low with respect to the rest of the world, and it does a poor job of collecting import duties on some categories that it has stated it will make an effort to collect import duties on. For example, the annual “Revenue Foregone” statement released by the Finance Ministry estimates that India lost RS 529,432 crore (97 Billion) in 2011-2012, or more than 5% of India’s GDP and nearly 67% of total tax collections in India in 2011-2012! (Source: IndiaSpend) This included almost Rs 66,000 crores of customs duties foregone on “diamonds and gold” alone. Any one, or any business, that can afford to buy diamonds and gold can certainly afford to pay a small import duty! And the duty is small — in India, the import duty on gold is a mere 2%! (In the US, the duty and taxes for gold jewelry can be up to 5.5%.)

In other words, India has the situation where:

  • Approximately 2/3rds of its population cannot afford to pay tax.
  • Almost 1/3rd of the remaining population that can afford to pay tax is extremely wealthy, influential, and able to influence the government that sets the tax rates.
  • The government, unwilling to deal with intense complaints or publicity when it tries to collect, or raise, import duties is giving up over 40% of its potential current tax base.

For a country that can’t even address the basic needs of its population, how is it ever going to address its infrastructure, energy, and global economic challenges if it doesn’t stand up and collect taxes where taxes are due?

Don’t blame the lawyers. Blame the bankers!

Recently, listosaur posted the list of the 10 Most Despised Professions in America. According to the list, the most hated profession in America are Members of Congress. SI has to agree with this one as anyone who would shut down a whole country for almost a month over petty party differences deserves a bad reputation, but doesn’t agree with Lawyers being in third place while Wall Street Traders are in tenth. While even the doctor can sympathize with William Shakespeare when he said the first thing we do, let’s kill all the lawyers, the lawyers are not responsible for the current state of the global economy and are definitely not responsible for three of the top four risks as identified in the 2014 Annual Global Risks Report put out by the World Economic Forum.

The people responsible for three of the top four risks, directly and indirectly, are the bankers. According to the 2014 World Economic Forum Global Risks Report, the top four risks are:

  1. Fiscal Crises in Key Economies
  2. Structurally High Unemployment/Underemployment
  3. Water Crises
  4. Severe Income Disparity

1. Fiscal Crises in Key Economies

Many of the fiscal crises playing out around the world are the result of a stock market collapse of one kind or another. Hedge funds, (sub-prime) housing markets, commodity markets, etc. All of which are controlled, and manipulated, by bankers.

2. Structurally High Unemployment/Underemployment

What are the causes of unemployment? While we like to blame job outsourcing, technological advancement, or other trends that tend to displace jobs, the reality is that as old industries decline new industries emerge. In reality, GDP drives employment and unemployment more than other factors that usually get the blame. But the reality is, in the private sector, bankers influence employment and unemployment more than anything else. In a recession, or a slow economy, every hire cuts into profit margins and quarterly numbers, and a company is penalized by the bankers on Wall Street for every penny it is off in its quarterly earnings call. And even as the economy recovers, fearful of hiring too fast and getting penalized by Wall Street, a company will hold off on hiring as long as possible. So even though it is up to the company whether or not it will hire when it has the cash to do so, the fear the bankers install in the company is typically enough to make it hold off as long as possible. Yet again, the bankers’ manipulations of a market are putting us all at risk.

4. Severe Income Disparity

The gaps between the rich and poor are widening every day, and this is threatening social and political stability as well as economic development the world over. And who are the richest people? Typically, wealthy industrialists and bankers. Where do the industrialists keep most of their money? In banks, where it can be manipulated by the bankers to earn those wealthy industrialists even more money. The bankers are making the rich richer and the poor poorer every day.

the doctor will be the first to admit that this is a very simplified view of the matter at hand, but the reality is that, directly and indirectly, the banks have a lot more control over the global economic situation than we should like and their greed is doing more damage and good. We don’t need to be able to measure precisely to tell good from bad. So even if you hate them (and hate them with good reason), don’t blame the lawyers. Blame the bankers. When all is said and done, the lawyers are just a royal pain the in @ss. Bankers, on the other hand …

130 Years Ago Today

Oxford gave us the English Dictionary. Well, it gave us the first volume thereof and we knew the meaning of every word from “a” to “ant”. So, as long as you were anchoring aardvarks to alligators, you were ok but try to alter an appetite, and you were out of luck. And if you wanted to be a zealot for zebras, you had to wait 45 years until the final volume of the first edition was complete! In all, it took 76 years to finish the first edition.

Work has not sped up much since the the third edition of the Oxford English Dictionary began in 1990. Current estimates are that the third edition will no be completed until 2037, 47 years after it began. Updates are being made every quarter to the OED online, with information on the most recent update available on the OED site, and, as per current estimates, will continue to be made quarterly for the next 23 years.

And you thought your Supply Chain Projects took a long time …

Machine-to-Machine Networking Can Take Predictive Analytics a Long Way

… but the day the machines can figure out that sunlight through a window is causing the machine to malfunction is the day the machines take over and kill us all!*

What brought on this rant? A recent piece over on ThomasNet on “Machine-to-Machine Networking” that said thanks to predictive analytics, BMW found that the bug wasn’t in the machinery; sunlight coming through a window in one facility was slowly heating up machinery to temperatures beyond optimum range and affecting the components being produced. While this is correct, it is misleading. The reality is that thanks to embedded sensors and M2M networking, the analytic software that powered the predictive analytic engine noticed that the core temperature in part of the machinery producing cylinders on one production line increased during the day while the core temperature of the same machinery on an identical production line (in another plant) stayed constant once the machine heated up. Since it’s generally a bad thing when a machine overheats, the software alerted the production manager that the machine was running too hot late in the day and probably needed to be serviced.

At this point, the production manager would assign an engineer to inspect the machine and run some basic tests, only to find that everything was working fine. However, armed with the data that the machine was overheating, upon finding no probable internal causes, the engineer would examine the surroundings, particularly at the time when the machine typically overheated, and notice that it was in the direct path of sunlight later in the day. Since engineers know that light is a heat source and that metal observes heat, especially when it is in the path of direct sun for hours, the engineer would conclude that at least part of the problem was the direct sunlight, shield the machine, and monitor the performance, and core temperature, for the next few days. At this point, the engineer would notice that the core temperature and production quality stayed constant and would then be able to conclude that the sunlight was the cause of the problem.

All the M2M-enabled predictive analytics package for preventive maintenance is able to determine is that something is not operating at typical performance levels, be it heat, throughput, energy usage, etc. It points you to the source of the problem, not the root cause. You’ll still need a smart engineer to figure out why the machine is overheating, why the energy usage has shot up, why the defect rate is increasing, etc. In a few cases, the software will be able to determine that a sensor is broken, a connection is down, or a part is broken when data cannot be retrieved, checksums are incorrect, or scans come back with known error types. But this is not the typical behaviour. On average, the best you’ll be able to figure out is that a part needs to be replaced, but not what’s wrong with it. In many cases, it will be cheaper to just swap out the part then to try and diagnose and fix it, so you’ll do just that and not worry about what went wrong. It’s a valid approach, as it keeps the machine up, costs down, and saves you money in the long run — but not one that helps you figure out why the part wore out. Was it a defect in the part or a problem with the machinery it’s embedded in? If the former, you don’t care what the defect was — only that the supplier replace it under warranty. If it’s a problem in your machinery (such as voltage spikes causing the part to burn out early), then you’ll (eventually) suffer multiple part failures and want to know the root cause (but you won’t be able to even suspect the machinery until you have the 3rd such failure).

the doctor is all for predictive maintenance and using sensors and machine-to-machine networking to be efficient and cost-effective about it, but wants all providers and promoters of such technology to be very clear about what it can, and can’t do. It can detect variances (and abnormal operational conditions) and correlate them to patterns that suggest potential problems and a need for part replacement, but it can’t say for certain why those problems exist. In the hands of a smart engineer, it will help to diagnose the machine or part that is source of a rare or difficult problem much faster than the engineer could track the source machine or part on her own, but it won’t be able to identify the root cause. That will still require brainpower. The machines can’t replace us yet. Remember that before you get oversold.

* Unless the machines need us to power The Matrix. The scary thing is that the day of dread may not be too far off! The NSA is building Skynet, Amazon is building autonomous drones, GE and Boeing are trying to make everything smart, and 3-D printing is at the point where we can now make primitive replicators. And everyone seems to have forgotten about Asimov’s three laws of robotics, thinking AI is still decades off when you can buy a GPU on a high-end PC graphics card that can do over 4 Trillion instructions per second. (In comparison, peak performance of the Intel 8088 processor was a mere 1 Million Instructions Per Second.) The computational power exists — all that is missing is the algorithm.

Join the doctor at ProcureCon Canada!


ProcureCon Canada will take place from March 17 through March 19, 2014 at the Hyatt Regency in Toronto. Attend and join over 100 leading practitioners in Sourcing and Procurement to share insights, best practices, and case studies to drive your Supply Management in 2014. Sourcing Innovation readers save 25% when registering with code PCA14SI.

Through months of research, ProcureCon Canada has identified a Supply Manager’s top priorities for 2014 and has speakers and sessions to address the identified topics, including:

  • Increasing automation and centralization in your processes to enhance productivity, cost savings, and value
  • Creating lifelong value in procurement
  • Minimizing risk in the supply chain
  • Optimizing supplier performance and relationship management
  • Leveraging the latest procurement technologies for better business results

So join ProcureCon Canada and the doctor who will be moderating the panel on Optimizing Spend Analysis and Visibility to Maintain Cost Reductions at 11:55 am on Tuesday, March 18, 2014.

If you’re looking to start a spend analysis effort or improve the returns from your current effort, this is a chance to get some of your questions answered. In addition the e-Book Spend Visibility: An Implementation Guide, co-authored by the doctor and Bernard Gunther (of Lexington Analytics, which was acquired by Opera Solutions), is still free and available. This e-book, which has been downloaded over 10,000 times, provides detailed guidance on how to start your spend analysis and visibility journey.

Looking forward to seeing you at ProcureCon! And remember to register with the “PCA14SI” code.