Real life immitates reel life….No it does not!!!!

Ricciotto Canudo an Italian film theoretician has described cinema as a combination of the spatial arts and the temporal arts, in other words a film is a combination of music and dance on one hand and a suitable story supported with adequate presentation and imagery on the other. So although what we see in reel life may be true, it is substantially regulated and designed with a certain objective in mind, it is a result of concoction. Whereas real life is beyond any definition or explanation if we try to define real life it can fill hundreds and thousands of books due to its vastness, uncertainty and complexity. Hence the concepts and issues which arise in real life will outnumber those in reel life substantially. Reel life is a part of real life infact it originates from real life. One of the major functions of reel life is to portray social reality in a systematic manner, its important that reel life has to be significant in the era in which it is made and showed. A very good example in this context is the transition between films of Rajesh Khanna and Amitabh Bachan. In the Rajesh Khanna films of early seventies like Anand and Bavarcheee many socialist values get reflected, values like fairness, equity and justice are reflected in these films because at that time Nehruvian socialism was predominant. Whereas in the Amitabh Bachan films of late seventies and early eighties the concept of the “angry young man” is used to show the frustrations of the people then due to the economic crisis and the introduction of mills which lead to the exploitation of the proletariat, all this was reflected through the angry young man.

Now the rural population and people from the lower social strata may be desirous of imitating reel life, but mere desire cannot lead to imitation, imitating reel life requires monetary backing and strong economic background which is absent in the people of the lower social strata, hence imitation by a large number of people is out of question.

If we observe reel life in its totality which includes not just films but also page 3, media and the add world we find that only those things get portrayed which sell easily. For e.g., if it’s a movie it has to be  a good story, a good actor, a captivating performance if its media it has to be some sensational news and other things. Whereas real life is not just about selling or acting or presenting, real life involves real situations real people and it may not always be very interesting and worth selling.

Another very important aspect is that real is driven by several ideologies, Joseph Stiligitz former chief economist at the World Bank mentions in his book that even economic and financial decisions at the World Bank were often made on the basis of ideologies and not solely on the basis of facts. Ideology therefore is an intrinsic part of real life, whereas reel life is not based on any specific ideology, its sole purpose is to attract public attention, do better business increase TRPs etc.

Some of my learned friends made a point that many people especially the youth lust for reel life at the expense of real life, now they may desire it, but imitation is not possible because the circumstances in real and reel are different, ideologies are different, and purpose is different. They may at the most imitate the clothes, accessories and fashion, but that forms a very minuscule part of what life is, we are debating whether real life imitates reel life and just because there is imitation in terms fashion that doesn’t mean life also in these two becomes similar.

Should Indian students working abroad be taxed??….Yes why not

The subject and concept of taxation has existed since 3000 BC, early taxation has been described in the bible, in genesis ch 47 mentions that “when the crop comes in, give a fifth of it to Pharaoh the remaining you may keep for yourselves and your children” So fourth fifth becomes 20% and 20% tax was levied even in 3000 BC. The eminent jurist and economist Nani Palkhivala has said that taxes like water have a tendency to find the lowest level, almost all the taxes ultimately hit the common man. Now in 3000 BC a person earning even 5 rupees was expected to give 1 rupee as tax that time taxation was a new concept but today it is not the case, if the income of a person is below a certain level he is not required to pay any taxes. It so happens in our country that people from the lower social strata are exempt from taxes because they dont have the capacity and people from the higher social strata are given benefits under income tax act because they are contributing towards economic development or increasing exports, so eventually the entire burden of taxation comes on the common man. So this system needs a sea change where only a certain class of people are heavily taxed and the remaining are either above it or below it. Hence one of the effective methods to change this is to tax Indian studets working abroad. Through this three main objectives are achieved, one it increases revenue for the government. Because firms located in SEZs are exempted from taxes and the government has been denied revenue from the BPO’s according to the supreme court judgment in the Morgan stanley case all this has resulted in a significant loss of revenue for the government, which has lea to an increase in the fiscal deficit, hence taxing students abroad will bring in revenue and reduce the fiscal deficit. Secondly the elite institutions were established in the 60s by out ex prime minister Nehru to generate a pool of talent to furthur the technological development and eventually economic development of our country, but because of globalization and attractive job offers abroad majority of these students went abroad and continue to go abroad. So paying taxes can be a compensation for this, that they acquire world class education at a much lower price due to government subsidy and they dont give anything in return, so taxation revenue now can become the return. The third aspect is Indian students working abroad do have to pay certain taxes there, so in addition to that Indian taxes shouldn’t be very high they should be reasonable, but the very fact a tax is imposed will discourage many students from going there to “earn higher and save more” this is usually the objective. They will in fact be able to save more in India and hence a pool of talent can be retained in India it self which was the original objective of Nehru when establishing the elite institutions.

To conclude I would like to elaborate the four principles of paying taxes according to Adam Smith in his book wealth of nations, equity, convenience of tax payer, economy and certainty and clarity. If these factors are taken into account while imposing the tax then it would certainly be fair for the Indian tax payer abroad and beneficial for the common man in paying taxes in India.

Correction in global equity markets due to sub prime lending crisis in US

There has been a mild correction in global equity markets for quite some time now, the roots of this correction can be traced back to the sub prime lending crisis which started in the US in 2006. Sub prime lending refers to the practice of giving a loan to a person who has had a bad credit history. For eg: a person takes a loan from a regular bank at the prevalent rate of interest but is not able to return the money in time or has defaulted payment. Now the next time he wants a loan regular banks will refuse to give it and therefore he has to go to a sub prime lender, who will give the loan at a much higher rate of interest. In short sub prime lenders give loans to people with a bad credit history.

 

  There are several firms in the US which are into this business; New century financial corporation is the second biggest lender in the US. Now the amount of loans that these firms can give depends on the capital that they have or the liquidity or deposits which they have. Hence once a loan is issued liquidity is depleted and now for giving a new loan they require new capital, hence to raise capital these firms sell that loan which they have issued to investment banks in return for liquidity which now becomes a new loan ready to be issued. And the debtor will now re pay back the loan to the investment bank. Since the sub prime lender has sold the loan of a person with a bad credit history to the investment bank there is a risk that he may default payment of a certain amount, hence the first 5% of default payment is paid by the sub prime lender to the investment bank, this is known as Collateral debt obligation (CDO). Now the question remains what does the investment bank do with that loan?? The investment bank starts securitizing these loans, they convert it into a bond and issue it in the bond market, its a mortgage backed bond, this bond is then further converted into a derivate. Derivate is a financial instrument whose value is derived from the asset which it is backed by, in this case it is the house for which the original loan was taken.

 

   Now the problem with this entire system is that till 2005 the number of payment defaulters in the sub prime market were 5% in 2006 this has gone to 14%. This is because of the “credit boom”, a person takes a loan under two circumstances, first when he has a good income and can afford to take a loan and second when credit or loans are easily available due to the financial system. A credit boom therefore brings those people in the loan market who earlier could not have afforded to take a loan due to their inadequate income. Because the number of payment defaulters have gone up a lot of houses have been confiscated by the banks and are up for sale. Since supply of houses is more than demand the prices of these houses have gone down substantially creating problems in the housing market. Now as mentioned earlier the loan for the house was converted into a derivate and since the value of the house has gone down the value of the derivate has also been severely affected. Hence the mortgage packed and backed security market (which includes bonds, derivate etc) has been affected and this has resulted in the correction in the stock markets in the US. It is said that when the US sneezes the rest of the world catches a cold, due to the  New York stock market being affected  all the stock  markets in the world are experiencing a mild correction, because US is an important trade partner and a source of FDI and FII.