Thursday, December 27, 2012

Cashing on the cash

Direct cash transfer schemes are still quite perforated

After series of debates and arguments, over the decades, the incumbent government has finally realised the flaws of direct subsidy and thus announced their intentions of implementing direct cash transfers to the people. There is not even an iota of doubt that the subsidies were always vague in nature and rarely reach the actual beneficiaries, these are meant for. Most of the time, the subsidies meant for the bottom of the pyramid trickle up and reach to those who are at the top of the pyramid. There are innumerable examples of government employees and rich villagers carrying BPL cards and thus availing the benefits meant for the poor and needy popula. This is a major reason for the money collected as annual taxes from common Indians got redirected to the coffers of the rich and not for who it was collected from and the real poor. Eventually, the band of bottom of pyramid kept on widening and never saw any breakthrough. In spite of several economic measures, the gap between rich and poor never got bridged. Be it fertilizer subsidy, gas subsidy or oil subsidy, most of these services were majorly availed by those who had enough and by those who belonged to the upper category of haves and not by those who struggled as have-nots and are lingering in poverty!

After six decades of policy making, the policy makers adopted the globally practised direct cash transfer scheme. No doubt, this very scheme is million times better than the currently practised subsidy scheme. At least, the money paid by tax payers would reach the families. If one goes by global examples, cash transfers have helped many nations reach their target audience directly. For instance, a huge paradigm shift was brought in Sierra Leone through cash transfers to farmers with an intention of aiding them to purchase agricultural tools and inputs.

However, there are lot of misses between the cups and lips when it comes to implementation of the said policy. Firstly, there are still hundreds of villages where banking facility is not inclusive. As per the latest Census, merely 60 per cent of all households have access to banking services and the formal banking system. Still, more than 60 per cent of the rural population does not have bank account and only 25 per cent of rural dwellers uses banks for availing credit facility. In such a bleak scenario, direct cash transfers through bank transfers would fall flat. Thus the first and foremost challenge to the policy makers is to bring these villagers under the ambit of conventional banking system ensuring that every single individual has bank account. Moreover, there still exists a huge task of opening a bank account for all these villagers and even before that providing them with relevant documents (read: identity and address proofs) to do the same. Further, every village, through numerous channels, have to be educated about the benefits of banking system and thus have to be roped into the concept of ‘financial inclusion.’

The next issue with direct cash transfer is in the access to cash itself. Most of the households in villages are male dominated. In simple words, the financial decisions are sole proprietary of the males in the family. This would not only become victim of gender discrimination but also may dilute the very objective of cash transfer. It has been widely seen that if cash handling by men is quite skewed as compared to women. Even in NREGA schemes, the cash disbursed to workers are used more for household by women and more for alcohol and tobacco by men. In a classic case of Malawi (published in a paper titled, ‘Cash Transfers in the Context of Pro-Poor Growth’), it was found that “the value of cash transfers was undermined by the exceptional increase in maize prices during the 2001-2002 season: in May 2001, the monthly cash transfer purchased 70 kg of maize, but only 16 kg by February 2002. As a general lesson, cash transfers are likely to be inadequate in the absence of measures to address wider economic instability.” Going by various precedence, there is a huge probability of the money being used for anti-social and non-essential purposes. This may lead to alcohol abuses and other form of misuse and thus leading to incidences of domestic violence too.

The scheme on the hindsight looks quite promising, but then there are numerous perforations in its practicality and applicability. Thus to make it foolproof, along with widening the banking system and increasing financial inclusion, the policy-makers need to draft clauses that would ensure more judicial usage of hard-earned money.
Thus as solutions, cash can be disbursed in the form of debit card that can be swiped only for listed commodities at authorized outlets or there should be applied mechanism to ensure relevant usage of the money. This will solve two purposes. One it will keep track on prices charged by the traders and would keep checks on dummy transactions. Even remittance slips can be offered which can be used as cash coupons or promissory notes (in lieu of currency, like Sodexo passes) at any outlet. These two steps are obviously not a foolproof steps but will put a capping on misuse of funds and above all provide government with more time to make the policy better and educate people on importance of savings and proper investments. Else it will get reduced to a vote bank politics in the veil of populist agendas, as always.


Thursday, December 20, 2012


Satellite towns are more expensive than metros!

The opportunities that the metropolises offer are often off set by the rising living expenses, which have a cooling effect on happiness level of the dwellers, in the long run. The exceeding household budgets often influence the middle class to head towards the satellite townships at the periphery of the metropolises as a destination for settling down. The entire concept of satellite was devised to reduce overcrowding of main metros and trim down migration to mega cities. However, the entire objective of city planning went down the drain, as government failed to provide a metro-like life style at an affordable price to the satellite towns’ dwellers. On the contrary, it’s the residents of metros who are finding it cheap to lead their lives in so-perceived expensive cities.

Gurgaon which was a barren wasteland till about 30 years ago and was developed to push corporate and executives out of the capital city, has surpassed Delhi in Consumer Price Index. According to Numbeo, consumer prices in Gurgaon are advanced by 12.52 per cent compared to Delhi. Consumer Prices including Rent is higher by 15.40 per cent, housing and commercial rent by 25.37 per cent and grocery prices by 13.35 per cent. The rent in Gurgaon is higher by miles. One BHK in the downtown that cost the buyer Rs.10,000 in Delhi would be Rs. 15,000 in Gurgaon, a gap of 50 per cent, while a same apartment in the interior is pegged around Rs.7,000 for Delhi and Rs. 9,500 for Gurgaon, the latter being up by almost 36 per cent. Even transportation costs more in Gurgaon with local transport being higher by 25 per cent and taxis by 42 per cent.

Delhi’s next neighbor, Noida, too is expensive on many criteria’s. The meals in a mid-range restaurant in Noida would cost about 30 per cent more than in Delhi. Some of the most important essential commodities in Noida exceed their cost in Delhi viz. rice (up by 33 per cent) and chicken (3 per cent). Thus the myth is busted that Delhi is costlier than its peripheral satellite towns, a major driver for migration into the dwelling units of those zones.

The picture in the greater Mumbai zone portrays a similar trend line. The Mumbai’s adjacent town Thane recorded an 11 per cent higher consumer prices than Mumbai, as well as higher grocery price by the same margin. The transportation cost difference is a massive 108 per cent in favour of Thane for local transports, 3 per cent for taxi fare, and 10 per cent for gasoline price. The higher Thane-Mumbai price ratio extends with higher electricity, cooking gas, water and garbage by considerable 59 per cent. These commodities are major differentiators in determining monthly household budgets. Navi Mumbai is even costlier than Thane. While the rate per square foot for 2 BHK flat in Thane costs up to Rs. 20,000 it is cut above in Navi Mumbai ranging up to Rs. 30,000. In Kolkata too, its Satellite town of Salt Lake is one of the most expensive localities and upcoming Rajarhat is the hottest real estate market with one of the highest appreciation of prices.

It can be ascertained that satellite towns, in no way, a cheaper sanctuary, rather a more costly prospect. This reason alone is silently casting a reversal of trend of what is called reverse migration. Disillusioned by the expansive budget that the middle-class households thought they would be able to curtail in outskirts of the metros – they are tiptoeing back to where they migrated from. As the goes, failing to plan is planning to fail. The government urgently needs to draft policies to reduce prices of basic commodities in all satellite towns or else damage would become irreparable!


Thursday, December 13, 2012


Introducing cyber laws in school curriculum is imperative!

Today cybercrimes are not only the most misunderstood Criminal Act but also are the one which is being executed from the ease of one’s living room. Going by reports and media compilations, cybercrimes is emerging as the most-practiced criminal activities among educated youths and also among school-going teenagers. With internet offering all the ways of committing these crimes on platter, anyone with even little proficiency in computing tries his hands at one or the other version of cybercrime. Most of these criminals are first-timer who on the outset does not even realise that their actions are actually felonies.

Be it juveniles or grown up youths, most of these people try their hand on identity theft , hacking, spreading viruses, downloading illegal music/movies, posting derogatory content, defaming users and many other such acts. Most of these crimes are treated as fun-element and a matter of elitism amongst the peers which is the underline reason at the first place. For instance, some hacking for the first time has no knowledge about the trap he/she is falling into and the repercussion that it would bring with itself. Most of the time, it is done to impress friends or attracts applauds of the peers. Unlike other conventional crimes, cybercrimes is still deemed unconventional as most of the cyber users fancy hacking and other related activities and treats these as entertainment rather than an offence. The basic difference between cybercrimes and other similar crimes is the fact that unlike other crimes, cybercrimes is introduced to kids by their friends or by the some virtual user. Even today, when IT and internet has become an important part of school curriculum, cybercrimes are still to see a dawn.

With cybercrimes being attempted at every other home, it’s imperative to introduce the same at age (and in the way), schools introduce other criminal and unethical behaviours. Around 1,630 arrests were made for cybercrimes (under the Information Technology Act, 2000) in 2011 alone, which is a sharp increase from 2010 by almost 100 per cent. With emergence of smart phones and mobile telephony, cybercrimes have seen a paradigm shift . A flip through any national daily would be enough to gauge the spread of such crimes. According to the TCS GenY survey 2011-12, comprising over 12,000 school students, between the age group of 12 and 18, found that around 85 per cent of students possess FB accounts. The survey further found that, “the average time spent online by 33 per cent of children surveyed is about 60 minutes, while around 6 per cent say they spend more than six hours on the Internet.” Most of these users today access the internet through their smart phones, which are at their disposal at their convenience and demands virtually no checks and authentication.

At the disposal of the government wonks to curb problem are certain laid down cyber laws circling Information Technology Act, 2000. The IT laws in the country are protected by harshest of punishments sweeping through the legal bindings for anybody daring to flout it, including children and juvenile students. The measure up of the legal actions that can be initiated against the perpetrators of cybercrimes can be with a fine up to Rs 1 crore or up to 10 years of imprisonment. Th at talks as loudly as possible of imminent danger that young students are susceptible to regarding their misadventure that is often a figment of young blood verve than cold-blooded crime endeavour. Therefore introducing and comprehensive explaining of cyber laws’ details should be the first priority of education bureaucrats to insulate the adolescent sorcery with internet rather than ruining their career.


Thursday, December 6, 2012


Third-party outsourcing can create mayhem in banking sector

It is often said that frauds with financial and personal details of customers in banking operations take higher dimensions when the service is outsourced to a third party. This new consumer hazard is becoming a way of fast money for call centre executives! It is especially gaining ground after the Standard Chartered and Citibank fraud revelations. Standard Chartered outsourced money laundering violations to third parties in US resulting in massive embarrassment for the company of having to deal with huge flow of cash entering Iran in violation of US laws. Although, it didn’t involve loss of personal funds of the consumers through their stolen information, but it did vindicate the vulnerability of the banking system and its pressing problem of outsourcing data. The disappointment was more direct to consumers in the Citibank case, which involved specifically to security issues. It was a classic case of credit card cloning that took place in April 2005 involving a sum of $350,000.

The expression of risk in banking/financial fraud is as grave, if not more, in India as in other developed countries like US and UK. It is because of loopholes in our regulations and greater propensity to outsource services by our banks. For instance, allotment of bank account, credit/debit cards, cheque books, ATM PIN And other such details are dispatched to the customers through outsourced sources increasing the risk of misuse. Further, while sharing the ATM network by the banks SPDI (Sensitive Personal Data or Information) is shared with outsourced executives. Also, the personal information is often shared with other banks or vendors in calculating reward points in credit cards. Last but not the least; SDPI is also pooled in case of Internet banking with the BPO employees.

The government of late has resorted to recovery work by enacting statutes that will protect customers’ interest. Some lukewarm regulations were enacted under Information Technology Act, 2000 to monitor over the online financial fraudulent, and later on Reserve Bank of India introduced guidelines in 2001 emphasizing the consumer data confidentiality could not alleviate their security related fears to a large extent. This corroborated the attempted introduction of “Personal Data Protection Bill 2006” in a proposal to enhance the privacy of the consumers. But the bill did not see the light of the day then and in 2008, certain acts of the bill were amended to safeguard personal information and SPDI. Even though the sharing of data is not prohibited altogether because that will jeopardize the progress of banking industry but certain procedures are laid down regarding data collection, data transfer and data disposal. Under the act in case of “wrongful loss or gain” for an individual because of breach of data protection, the victim can claim to the adjudicating officer a compensation sum up to Rs. 5 crores. Also, a formal note of consent must be derived from the consumers before sharing his information by the banks.

However, in retail banking (where the threat of legal entanglement is lower because of the lower capacity of a single retailer to successfully prosecute a bank) it’s a mix of captive banking and outsourcing. Still, banks and financial institutes resort to third party for their banking needs, thus giving the keys of one’s bank account to several persons. In this age of internet banking, its important for these banks to inform the consumers with the details of all those who have the keys of his/her accounts. This may not completely eradicate the problem but would also share some accountability with the end-consumer too!