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Black Money – “Economics is not a moral subject”

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BLack Money
Photo: http://rashtriyaujala.com

Back in 2008, when the whole world was in a financial ruckus, India was not as affected as rather seems to be the fact. Altogether the country was extraordinarily afloat throughout the whole incident and started recovering just in a year.

And all of that was the blessing of ‘black money’.

Yes, that is what the chief economist of the World Bank and former head adviser to the Indian government, Kaushik Basu claims in his new book, An Economist in the Real world.

What is the deal?

The deal is simply that when all the nations and their banks were busy tackling the overburden of subprime loans (one that is given to people who have a previous record of difficulty in maintaining the repayment schedule) crisis. Indian almost suffered from none.

  • It is evident from the instance of 2005 to 2008, when the economic growth of India was an astounding 9% per annum.
  • But the underlining trick was in the scenery of housing and property pricing boom which had gone up to the rate of 16% between 2002 and 2006; more than the average income of India and even more than that of USA.

All because unlike most parts of the world, in India one will not find the price of the house or that of the property listed in the real estate agent’s office. The amount of the land is fixed by the seller and the person can easily demand the first half in the form of formal payment while the rest in cash. And this latter mode of payment is what constitutes the ‘black money’.

A bit more of the deal –

First up is that the moderate the payment is on the official papers, the less the risk of receiving a hefty capital gains tax bill. While the second one is that, it also benefits the buyer as they have to pay much less of the property tax.

While the UK and the USA did start charging as much as 110% more mortgage at the peak of the property boom, in India the mortgage amount has always been much lower than the actual cost of the property.

That’s why when the prices of the houses and lands fell in India back in 2008 and 2009, the

banks were still comfortably within the range of the property values.

How to solve the problem, according to Mr. Basu?

Some time back, Mr. Basu famously advised the government to criminalize the bribe-takers instead of the givers.

It will be interesting to see if the law is implemented then how the equation will affect the whole dynamics.

Though, he laments that the Indian law has not taken his suggestion into the account. It is likely that if it is ever sanctioned then the bribe-givers, freed from the threat of prosecution will automatically want to resist and be reluctant to take part in the bribe cycle again.

Ultimately, it can be concluded that his whole explanation is sound enough as proved by the fact that India’s economic growth was 7.4% in the third quarter of 2015. Apparently the fastest growth of any major nation in the world.

Kaushik Basu was talking to BBC

Next Story

Overall Hiring Activity in India Declines by 18%

Recruitment activities across all experience levels saw a negative growth

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Job
Recruitment activities across all experience levels saw a negative growth. Pixabay

Overall hiring activity in India declined by 18 per cent in March, with travel and airlines, hospitality and retail industries witnessing a massive 56 per cent drop in offering jobs as compared to March last year, leading job portal Naukri.com said on Tuesday.

The retail sector saw 50 per cent drop in hiring, followed by auto/ancillary (38 per cent), pharma (26 per cent), insurance (11 per cent), accounting/finance (10 per cent), IT-software (9 per cent) and BFSI (9 per cent), according to the ‘Naukri JobSpeak Index’ for March 2020.

According to Pawan Goyal, Chief Business Officer at Naukri.com, the hiring activity for the first 20 days on March 2020 saw only a 5 per cent decline. “However, due to the nationwide lockdown, there was a substantial drop in recruitment activity in the last 10 days, which resulted in overall drop of 18 per cent in hiring,” said Goyal.

The hiring activity showed early signs of slowdown starting from January where the index grew by only 5.75 per cent, followed by no growth in February. The job market across cities registered a dip in hiring activity.

The decline was led by metros, wherein Delhi declined by 26 per cent, followed by Chennai and Hyderabad at 24 per cent and 18 per cent, respectively. In Delhi/NCR, pharma industry saw a dip in hiring by 66 per cent and 43 per cent, respectively.

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Recruitment activities across all experience levels saw a negative growth. The demand for professionals in hospitality (63 per cent), banking (28 per cent), accounting (23 per cent) and IT-Hardware (22 per cent) sectors marked a substantial negative growth in the Capital.

Overall, there was an across the board decline in hiring activity at experience levels as well with senior experience bands (over 13 years of experience) witnessing the sharpest decline of 29 per cent while the entry-level experience band (0 to 7 years) saw a decline of 16 per cent.

Some of the key industries like IT, BPO/ITES, BFSI and accounting/finance that form a significant base of hiring activity in India within the white collar segment have shown a lesser decline during these unprecedented times.

Naukri
Overall hiring activity in India declined by 18 per cent in March, with travel and airlines, hospitality and retail industries witnessing a massive 56 per cent drop in offering jobs as compared to March last year, leading job portal Naukri.com said on Tuesday. Wikimedia Commons

As compared to the overall ‘JobSpeak’ index decline of 18 per cent during March 2020, the hiring activity in IT-software industry declined by 9 per cent, IT-hardware by 7 per cent, accounting/finance by 10 per cent, BFSI by 9 per cent and BPO/ITES by 1 per cent.

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New jobs for professionals in the hotel/restaurants, ticketing/travel/airlines and marketing/advertising/MR/PR sectors witnessed a dip of 51 per cent, 48 per cent and 33 per cent, respectively. Functional roles in HR/administration (29 per cent), banking/insurance (23 per cent), sales/business development (20 per cent) and IT-software (16 per cent) also witnessed a decline.

“It is a great time for jobseekers to upskill themselves be leveraging e-learning,” said Goyal. (IANS)