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Archive for the ‘India’ Category

The welfare state is bad news for both taxpayers and recipients.

Pervasive handouts also are a mistake because they create incentives for very bad behavior.

And I’m not just talking about the incentive not to work. Welfare enables and encourages utterly horrifying examples of misbehavior.

But there’s a new example that probably would win the prize if there was a contest for the most sickening behavior enabled by governments giveaways.

People in India apparently are feeding their older relatives to tigers is order to get cash payments from the government.

I’m not joking. India Today has a story on the matter.

What if suddenly a lot of elderly folks start dying because of fatal tiger attacks? Either the tigers have targeted the old people especially or something is just not right. …Authorities surmise that people are sending older members of the family into the tiger reserve for them to become a prey. Once killed, their bodies are relocated to fields, and staged as victims of a tiger attack, so that the respective family can claim lakhs in compensation from the government.

Here are some added details from the Times of India.

Authorities suspect local families are sending older members into the forest as tiger prey, and their bodies then relocated to fields, to feign attacks and claim lakhs in compensation from the government. Villagers aren’t entitled to compensation if their kin die in the reserve. There has been a string of recent fatal tiger attacks on the elderly, with seven deaths reported in the proximity of the Mala forest range alone since February 16. …Locals, however, say family elders were willing participants in the whole affair. “They think that since they can’t get resources from the forest, this is the only way their families can escape poverty,” farmer Jarnail Singh, 60, told TOI.

And the U.K.-based Daily Mail also has a report on this bizarre situation.

Elderly relatives are being sent into tiger reserves to be killed so that families can claim compensation in a horrifying new trend in India. Younger family members appear to be targeting Pilibhit Tiger Reserve in Uttar Pradesh by sending their elders into the forest to be mauled to death before dumping their bodies in nearby fields. Villagers are not entitled to claim compensation if they die in the reserve, but if they are killed in a tiger attack outside the reserve, they can cash in on government money. …The revelation that this is a deliberate ploy to cash in on compensation money was triggered by Kalim Athar of the Wildlife Crime Control Bureau (WCCB).

Wow. I’m almost at a loss for words.

Imagine the conversation around the dinner table. “Good news, Granny, we’ve arranged an overnight trip for you to the nature preserve.”

It’s even more chilling if the old people are actually willing participants. “Son, make sure to make the scene look realistic after you move my body out of the preserve.”

In some sense, this is actually a broader story about bigger issues such as the degree to which the burden of government is reduced to enable more economic growth in India, including in rural areas. Or the proper balance between environmental stewardship and the needs of the surrounding community.

But it’s hard to focus on those big-picture issues when old people are being sacrificed to tigers to get loot from the government. Somebody – either the families or the willing old people – deserves induction in the Moocher Hall of Fame.

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As part of yesterday’s column about global growth, poverty, and inequality, I realized that I’ve written several columns about economic policy in China, but never once focused on overall policy in India.

Indeed, a quick look through the archives reveals only three columns that even addressed specific policies in India. And all of them were negative.

So it’s time to assess overall economic policy in India, which means this is an opportunity to point out that there are some positive developments in the world’s second-most populous nation.

One of my Cato colleagues, Swaminathan S. Anklesaria Aiyar, wrote an exhaustive study on India’s economy last year. The bottom line is that there’s been some progress, most of which took place in the 1990s.

India’s economic reforms over 25 years have transformed it from a low-income country to a middle-income one. But to become a high-income country, India must liberalize the economy much further.

At the risk of oversimplification, India has gone through three phases since its independence after World War II.

It began with a long period of statism and socialism.

Here are some additional excerpts from the study describing that grim period. And I’ve augmented those passages with India’s awful score from Economic Freedom of the World in 1975, when it only scored 4.33 on a 0-10 scale.

…until 1990, India was…hamstrung by a million controls, imposed in the holy name of socialism and then used by politicians to create patronage networks and line their pockets. …The public sector was supposed to gain the commanding heights of the economy. Nothing could be manufactured without an industrial license or imported without an import license, and those licenses were scarce and difficult to get. Any producers who exceeded their licensed capacity faced possible imprisonment for the sin of violating the government’s sacred plan targets. …Indian socialism reached its zenith in the 1970s, when the banks and several major industries were nationalized. The top income tax rate rose to 97.75 percent, and the wealth tax to 3.5 percent. …India’s poverty ratio did not improve at all between independence in 1947 and 1983; it remained a bit under 60 percent. Meanwhile, the population virtually doubled, meaning the absolute number of poor people doubled.

Now let’s look at some good news.

There was a small amount of reform in the 1980s, which became much more significant amount of reform in the 1990s.

In 1991 India embarked on major reforms to liberalize its economy after three decades of socialism… P. V. Narasimha Rao became prime minister in 1991. The Soviet Union was collapsing at the time, proving that more socialism could not be the solution for India’s ills. Meanwhile, Deng Xiaoping had revolutionized China with market-friendly reforms. And so Indian politicians turned in the direction of the market too. …After 1991 direct tax rates gradually came down substantially… The wealth tax on shares was abolished, making it possible to raise shareholder value without being penalized for it. …The corporate tax was cut from a maximum of 58 percent to 30 percent, yet corporate tax collections increased from 1 percent of GDP to almost 6 percent at one point. …Personal income tax rates also fell from 50 percent to 30 percent, but once again collections rose, from 1 percent of GDP to almost 2 percent.

Notice, by the way, that lower tax rates led to more tax receipts. Yet another piece of evidence for the Laffer Curve.

Though I’m much more interested in whether people benefited, not whether politicians collected more money.

And the paper reveals that the reform era generated significant dividends.

Twenty-five years later, the outcome has been an outstanding economic success. India has gone from being a poor, slow growing country to the fastest-growing major economy in the world in 2016. …Per capita income is up from $375 per year in 1991 to $1,700 today. India has long ceased to be a low-income country as defined by the World Bank, which uses a threshold of $1,045, and has become a middle-income country. …areas that were comprehensively liberalized saw the disappearance of corruption. Before 1991, bribes were needed for industrial licenses, import licenses, foreign exchange allotments, credit allotments, and much else. But economic reform ended industrial and import licensing, and foreign exchange became freely available. Lower import and excise duties ended most smuggling and excise tax evasion

There’s even been good news on poverty.

Now let’s shift to bad news. Simply stated, India needs a lot more reform, but it doesn’t seem to be happening.

As illustrated by this chart showing the country’s annual scores from Economic Freedom of the World, India is mired in a modern era of policy stagnation.

In other words, so much more is needed to help India become a rich nation. Yet the reform agenda has been spotty in the past two decades, or even nonexistent.

Here are some final excerpts, accompanied by India’s most-recent EFW scores.

Many old price and quantitative controls should be abolished, and yet more are being enacted. Extensive controls permeate the entire chain of agricultural inputs, outputs, and processed agricultural goods (notably sugar). New price controls have been clamped on seeds and even on royalties paid by seed companies to suppliers of technology. The tax regime is uncertain, and many cases of retrospective taxation have tarnished the investment climate. …Even as old controls have been liberalized, dozens of new regulations are issued every year relating to new areas like the environment, health and safety standards, forests, and tribal areas. As with the old controls, the new controls are issued in the name of the public good and are then used by politicians and inspectors to line their pockets. …The bureaucracy is notoriously corrupt and slow moving… Public-sector corporations remain large, wasteful, and unreformed. Government banks still control 70 percent of bank lending, have the worst record of bad loans and financial losses, and yet are such convenient cash cows for politicians that no party wants to privatize them. …To reach high-income status, India must become a much better governed country that opens markets much further.

The good news, if you compare the 1975 and 2014 EFW scores, is that India now enjoys much more freedom than it did at the peak of the socialist era.

That being said, there are 111 nations with more economic freedom, so there is a lot of room for improvement.

Let’s close with a very powerful factoid. America has many immigrant populations that earn above-average incomes. But, by far, Indian-Americans are the most successful.

Just imagine, then, how fast India would grow and how rich the people would be with Hong Kong-style economic liberty?

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