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Issue 16

In the year of the crypto-creators raking it in, what about the energy bill?

Photo by Old Money on Unsplash

More than a decade had passed since American writer Blake Butler tried to sell his novel. Ironically titled Decade.

In February 2021, he sold it as an NFT for 5 ETH (short for cryptocurrency Ethereum). At the time, 5 ETH was worth approximately $7,570 (INR 5.5 lakh). It was more money than what his previous books, published the traditional way, had made together. Value is up since. This one in GIF mode is downloadable to read as a PDF. 

In an interview with Literary Hub, Butler says of NFT, “It feels like a moment for reinvention, where the field is as wide open as you could want,” But before getting to what it means for the environment let’s see, what in internet heaven is an NFT? Here is a hypothetical story to explain this.

Give me those cards,” says the teacher while snatching the action superhero cards from the students in the classroom. She then locks up the cards (not the kids)It’s not fair,” one student cribs to the other. “I wish nobody stole our own cards from us,” says another, ready to howl.

In 2021, digital versions of these cards or books can be kept as Non-Fungible-Tokens or NFTs. These are unique digital files you cannot touch or put in your bag but just see on a screen. So, no teacher can take away a superhero action card, if it is in the form of an NFT. But how does someone own one?

One student feels that the other student has a card they want. They exchange cards. Many others follow suit. Now, to avoid confusion, everyone writes down who owns which cards in each of their notebooks. They keep updating their notebooks real-time. This notebook is a ledger. 

When a student tries to cheat by showing more cards in their notebook than they actually have, it simply does not match with the other notebooks. So no cheating. But what if a student without any cards wants to get their first one?“Those who update the notebooks will get yellow coins,” a smart chap puts an idea forward, “people can use these coins to buy the superhero action cards.” 

Those writing on notebooks may find it boring to maintain, but cryptocurrency is the reward for those who maintain a ledger. You get it? This is not just child’s play, but an internet model for buying and selling things, in a virtual marketplace worth millions. A collection of such notebooks, action hero cards and children, online is like a blockchain network in operation. 

Every computer is constantly creating copies and maintaining such ledgers in a decentralised way. While regarded as low on error, this system is heavy on energy use. Harvard Business Review says, “Bitcoin (the most common cryptocurrency) currently consumes around 110 Terawatt Hours per year — 0.55% of global electricity production, or roughly equivalent to the annual energy draw of small countries like Malaysia or Sweden.” Yet, people are increasingly using it

Writers like Indian self-help author Arun Batish, published EKA, as a paperback in 2019. It is available as an NFT too. In 2020, N.E Carlisle published a young adult book, Mermaid Eclipse. In the same year, she announced it as the first NFT Novel in collaboration with cyber artist, Lori Hammond.  They have launched this magic tale as an NFT with the book’s manuscript and a signed copy of the original artwork. An Indian and a global example, but you get the drift? NFT is helping writers.

Continuing with the student analogy, what happens next? One student puts forth a demand, “Everyone has to write this condition in their notebooks, I will pay for this action card only if it allows me to win the card competition tomorrow.” The seller can choose to sell the card if the other party agrees to this condition. The buyer too knows the terms. A condition like this is called a smart contract.

RVRS, one instance of a cryptocurrency, is using such a smart contract. When someone is buying or selling using this token, they are asking its users to agree on a condition. Which in their case is, “we will be using a tenth of your transaction amount to remove carbon dioxide from the atmosphere.” RVRS says they support tree planting projects around the globe.“Does anybody need a shovel?”, asks a volunteer, in their PR tree-planting drive video

As the first year of a new decade wind down, NFT sales and creativity for its collaborators will define the upcoming decade. But so will the uncryptic truth that Terms and Conditions are the only major superhero action card the industry has authored, in exchange for its carbon footprint. So far.

Cefil is a student of Mathematics and Environmental Studies at Ashoka University. 

We publish all articles under a Creative Commons Attribution-NoDerivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis). 

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Issue 12

Delineating the Consumption of Luxury Goods in a COVID-hit World

For its 100th  year celebration in 2021, GUCCI under the creative direction of Alessandro Michele, rolled out its ‘Beloved’ campaign, strategically designed to strengthen the sales of their bags. Initiated on 22nd April 2021, the campaign featured four of GUCCI’s globally beloved bags namely Dionysus, the GG Marmont, Jackie 1961 and the GUCCI Horsebit 1955. The campaign, designed in the form of a late night talk show, had a star-studded lineup which included James Cordon, Dakota Johnson, Harry Styles, Awkwafina, Serena Williams, Sienna Miller and Diane Keaton. The campaign creates a nostalgic talk-show feeling of the 90s where the stars of the show were GUCCI’s four all-time iconic bags themselves.

Luxury brands like Yves Saint Laurent, Cartier, IWC, GUCCI saw a staggering fall in their sales, due to the COVID-19 pandemic. The coronavirus first hit China, spreading to Italy and other European nations (home to many luxury labels). This resulted in a steep fall in the sales of luxury goods, due to Chinese customers accounting for a 35%  share in luxury purchases globally. With the pandemic hitting the luxury goods industry all around the world, the impact is expected to be long lasting.

The sales for GUCCI specifically were amongst the worst hit by the virus outbreak due to closure of stores, since China serves as a big market for the luxury brand. In the first quarter of the outbreak in 2020, the sales for the fashion label fell by 23.2%, which makes up for the major revenue for Kering, causing a total fall in its overall sales by 15.4%. However, with its strategic launch of the ‘Beloved’ campaign at the time of ‘unlock’ in Europe, the fashion label is looking to rebound its sales in 2021. 

The year 2021 was expected to bring many more opportunities for these luxury labels in terms of rebounding their sales and launching limited seasonal collections. However, the national lockdowns in the UK and other European nations like Germany, Italy and France during the Spring/Easter season, which brings in a plethora of customers for these luxury brands, continued to create anxiety around the sales of goods. Compared to 2020, these luxury brands were better braced to tackle the 2021 lockdown, due to sales and purchases moving to digital platforms. The lockdown also cut down tourist shoppers that contributed massively towards the sales revenue. Moreover, as per VOGUE Business, these international tourists are not expected to return before mid 2022, and the latest lockdowns do not show any improvements in these forecasts. 

Empty Via Montenapoleone (Milan’s largest luxury shopping street) in Italy
Image Courtesy: Bloomberg Quint

Since the outset of the pandemic last year, there have also been dramatic and accelerating changes in consumer behaviour and consumption in regards to luxury shopping. Simultaneously, as a result, fashion labels have had to customize products and campaigns to keep up with the market trends and consumer behavior catering to the needs of their loyal clientele.

More and more shoppers have been turning to online shopping in place of in-person visits to physical stores, given the perturbations of contracting the virus. Moreover, according to the Boston Consulting Group, the pandemic has made apparent the deep economic and social inequalities that exist within the society, making less people comfortable with the show of conspicuous affluence and resources, thereby altering their shopping patterns and habits.

Though the pandemic has affected the sales of all luxury brands, certain categories of goods have not seen any decline but rather a spike in their sales. The classic and signature timepieces from luxury labels have been continuing to sell out. This can also be attested by the fact that GUCCI decided to dedicate an entire star-studded campaign to advertise its four all-time classic handbags, that have contributed massively to the label’s revenue. 

The increased sales in signature and classic goods can also be credited to the surge in digital shopping which has made these goods accessible to people globally without having to travel. Moreover, these goods are also perceived as great profitable economic investments, with specific products like Hermes Birkin Bags having a 34% Return on Investment as of 2020. Consumers of luxury products are now buying them more with the purpose of investment than mere consumption. 

To ensure rebound in sales, luxury brands like Dior, GUCCI, Chanel, YSL have also launched makeup and skincare lines, especially for Spring 2021. This is because makeup and skincare are the two categories of products that have a consistent demand all throughout the year and are more than often remain uninfluenced by seasons and/or holidays.

Looking at the volatile nature of the market given the pandemic, luxury brands will have to globally revamp and strategise the products they plan to release. The few trends that companies will have to look into are sustainable and vegan products, subtle and simple designer wear with less emphasis on gaudy embellishments and logos, inculcating more culturally inclusive and diverse designs and designers in their products as well as in the workforce respectively. 

The pandemic, in many ways, has shook luxury brands from their comfort zones, breaking their bubble of consistent revenue and loyal clientele. It has not only challenged them economically but also culturally and socially to produce and create goods by keeping up with the trends in time. Although the pandemic in 2020 might have impacted these luxury brands negatively – especially their revenue and financial stability, it has also pushed them to create more and more culturally inclusive products. 

Image Courtesy: GUCCI

Muskaan Kanodia is a junior at Ashoka University, double majoring in English and Sociology. When she is not drowning in books, you can find her drawing and smiling at strangers on the ghats of Benaras.

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

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Issue 12 Issue 13

It is the ‘Tax-the-Rich’ hour!

On 31st March 2021, The Guardian reported that New Zealand was raising its top rate tax for the country’s highest earners to 39% and also raising its minimum wage to $20 an hour. On 9th April, the New York Times reported that the budget for the coming fiscal year includes a long-overdue increment in the income-tax cuts of people making more than $1.078 million. Back in April of 2020, Landais, Saez and Zucman proposed a Progressive European wealth tax to fund Europe’s COVID response. However, the idea of taxing the rich started reappearing in mainstream media a little before the pandemic itself hit. In the recent US Presidential race, two candidates, namely Bernie Sanders and Elizabeth Warren, proposed two separate models of progressive wealth taxation as a policy suggestion in their campaigns. These models were also designed by UC Berkeley Economists Emmanuel Saez and Gabriel Zucman. But despite Europe’s failure with the wealth taxation system, one may ask the very obvious question, ‘Why expend time, effort and resources on a failed policy?’

The progressive wealth tax model presented by Saez & Zucman is widely lauded for its striking approach towards countering the flaws persistent in the European system and coming up with a more effective system suitable for the USA. They argue that a wealth tax is a potentially more powerful tool than income, estate, or corporate tax when it comes to addressing the issue of wealth concentration. This is because the wealth tax goes after the stock rather than the flow, i.e., it does not target the annual income, but rather the accumulated wealth of the individuals. The two striking features of their model are that a) they propose a fairly high threshold, beyond which wealth will be taxed, which ensures that it doesn’t lead to the problems of illiquidity (as was the case in many European countries) and b) they can find ways to counter tax evasion, which was one of the main reasons behind the failure of European countries’ wealth taxation systems. They argue that since the USA’s taxation system is citizenship-based, it makes the USA’s system much less vulnerable to mobility threats than other countries.

One of the major contentions against any sort of wealth tax or taxation targeted on the rich is that it disincentivizes them from working hard and/or innovating. However, Smith et al., argues that most top earners derive their income from human capital rather than financial capital. And while credit constraints could perhaps be a problem, a wealth taxation model with a high exemption threshold like the one presented by Saez & Zucman, by definition, spares the credit constraint. Moreover, they also argue that it is the established businesses that gate-keep innovation in their industries by fighting any new competition in order to maintain their dominant position. Moreover, it has a significant impact on income inequality, because wealth taxation prevents maintenance and growth of people’s existing accumulated wealth, and specifically reduces consumption inequality.

Although wealth taxation may seem like a good idea on a solely altruistic basis as well, it might actually be very instrumental in poverty targeting policies, especially for countries that face a severe lack of resources, like developing countries. In fact, a targeted and strictly enforced wealth taxation model could be very helpful for a country like India. Saez & Zucman argue that tax evasion depends only on the design of the taxation system and the strength of enforcement, both of which are active policy choices. The long-run revenue-maximizing wealth tax rate according to their model is about 6.25%, which they categorize as a fairly high rate. According to S Subramaniam, if India’s top richest 935 families’ wealth was taxed at a flat rate of 4%, it would be able to generate revenue that is equivalent to 1% of India’s GDP. This money could then be used to fund more targeted schemes such as a Quasi-Universal Basic Income (QUBI). There could be various QUBIs like ones that provide a guaranteed income to women or one that seeks to provide a basic income to people that have lost their jobs owing to the pandemic, or even to automation.

It is certainly no coincidence that policies targeted at taxing the rich are making a comeback, it has taken relentless effort on part of activists around the globe to bring this up to the forefront. The New York Times reports, about the increment in income taxation on rich in New York, that: “In January, 170 grassroots organizations along with dozens of legislators formed the Invest in Our New York coalition, which in the subsequent months made close to one million calls to lawmakers, sent more than 260,000 texts to residents across the state, held 100 teach-ins and placed hanging cards declaring “Tax the Rich” on 120,000 doors.” And while the debate about taxing the rich has been around for long enough, it does seem like the world is finally ready to embrace radical measures to reduce inequality and make the world a more equal place to live in (at least in economic terms).

This article has been republished from LiveWire with permission of the author.

Ishita is currently pursuing her postgraduate diploma in Entrepreneurial Leadership & Strategy, and has recently completed her undergraduate studies in Economics & Finance, from Ashoka University. When she’s not stressing about the next thing and over-planning her coming activities, she can be found discussing issues related to politics, managing her page @angrybrowngal.

We publish all articles under a Creative Commons Attribution-NoDerivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

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Issue 11

Issue XI: Editors’ Note

The past year saw COVID-19 and lockdowns as the only issues one extensively engaged with, both in their personal and professional lives. The question, “how has the pandemic been treating you?” slipped into every catch-up conversation with peers, friends, family and colleagues. With the current surge of cases in India once again, it is safe to say that even with the vaccine, the pandemic still continues to dominate a major part of our lives. We are constantly reminded of it every time we have to step outside our homes or log in to an online meeting or a Zoom birthday call. 

With this issue, we aim to provide our readers with a ‘pandemic-break’ and delve into stories that are equally important but may have been sidelined with constant COVID updates from newsrooms. 

To begin with, Madhulika Agarwal addresses an essential question revolving around what makes an event ‘newsworthy’ in the first place? And who has the authority on prioritising which news is worth the consumers’ attention? With Amazon’s Twitter antics having grabbed the attention of the media, Samyukta Prabhu and Rohan Pai use this opportunity to highlight the gig workers’ rights that have been sidelined by tech giants such as Amazon, specifically during the course of the pandemic. 

Akanksha Mishra covers the consequences of the Afghanistan peace deal on the country’s population, revealing a critical understanding of the negotiations between three stakeholders – the Taliban, the Afghan government and the United States. Speaking of the United States, Karantaj Singh analyses 100 days of Biden administration by critiquing as well as applauding his contribution towards restoring America’s identity in the global community. With New Zealand’s recently passed miscarriages bereavement leave law, Advaita Singh captures the reader’s attention by examining the relationship between workplaces, the economy and personal grief.

Closer to home, Saaransh Mishra confronts the structure of quasi-federalism in India and its exploitation by the ruling central government in implementing controversial laws such as the recent GNCTD Bill. Furthermore, Muskaan Kanodia explores the vote-bank anxieties behind the intense dedication of political parties towards temple beautification, which appears to complement the rise of religious politics in the country. Ridhima Manocha analyses the ruling government’s contradictory campaign attitudes towards CAA-NRC when contesting the current Assam Assembly elections. Meanwhile, Vaibhav Parik questions India’s Election Commission’s decision to hold the ongoing Assembly elections in multiple phases in the state of West Bengal.

Aarohi Sharma brings back the essential climate change debate and delves into why individuals continue to deny its existence and widespread impact. For our sports enthusiasts, Kavya Satish explores the possible reasons for the increasing loss of viewership and sponsorship in F1 and what it means for the future of the sport. 

To emphasise the immense strain that Coivd-19 has placed on our global healthcare systems, Saman Fatima explores how this has resulted in the marginalisation of treatments of other prevalent diseases among several populations. 

While other stories may continue to struggle to win the fight for our attention with the intensity of the pandemic, we hope our readers are able to take a step back and keep themselves updated with events beyond rising Covid-19 cases and vaccinations. 

-Ariba, Ashana Mathur, Harshita Bedi, Rujuta Singh

Picture Credits: REUTERS/Athit Perawongmetha

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Issue 11

To Have Loved and Lost

Trigger Warning: mentions of death, mental health issues

“Grief is a most peculiar thing; we’re so helpless in the face of it. It’s like a window that will simply open of its own accord. The room grows cold, and we can do nothing but shiver. But it opens a little less each time, and a little less; and one day we wonder what has become of it.”  

Arthur Golden, Memoirs of a Geisha

Death is inevitable. Ultimate. Irreversible. As the fundamental truth of life, we are bound to encounter death. Unfortunately, to grieve is a matter of privilege; to allow yourself the time to break down and build back up again is a luxury not many can afford. In the past, people have returned to the workplace after demises, pushing against the inner storm of despair. Barring the few designated days of mourning, grief never became a strong reason for seeking paid leave, thereby, forcing employees to resume work within days of such life-altering tragedies. 

New Zealand recently became the second country to implement miscarriage bereavement laws — granting women and men the right to paid leave after miscarriages and stillbirths. India already had a similar legislation in place that entitled women to a six-week paid leave under the Maternity Benefit Act, 1961, in such cases. These governments have recognised the soul-crushing pain experienced by parents by passing such legislation. Hence, these acts are symbols of our humanity; our understanding of life and loss. 

While they are certainly socially evolved and humane, given their intrinsic link to the labour market, these laws provoke questions about their economic impacts. The impact of grief on productivity and employment raises some important questions: What are the economic consequences of paid leaves? Is grief a good enough reason for granting days off work? 

Productivity Pause

Grief is more than just a fleeting emotional state — it is the source of psychological and physical stress that can range from depression to anxiety and hopelessness. In fact, a medical side effect of bereavement is an impaired immune system. Since mental and physical health are integral parts of human capital, when emotions and grief run wild, productivity takes a severe hit. 

Despite realising their inability to work, workers feel the pressures of presenteeism.  If you have ever been to work even though you did not feel up to it, you understand presenteeism. A recently studied phenomenon, it refers to employees still habitually working long hours/attending work even though they are not fully functioning well (mostly due to medical reasons and even other concerns) ultimately leading to lower productivity. Workers who are insecure about their jobs often display presenteeism.

Presenteeism is harming businesses as the illusion of efficiency prevents managers from planning better. When six  workers are on the job but two are working at reduced capacity, information asymmetry prevents the manager/owner from efficiently allocating the workload because presenteeism is not apparent. Hence, the quality of output suffers and average efficiency is dragged down. In contrast, if the unproductive workers were on leave, the reduction in team size and efficiency would be glaringly visible and the managers would be able to better plan the tasks knowing fully well that they are working with a smaller, but productive team. 

Given that long bereavement breaks are not normalised, and their medical impacts are not understood, many workers feel insecure about their job status while considering taking time off work. Hence, employees are ultimately faced with the unfair choice of either resuming work with a diminished ability to perform or quitting the labour force. 

Workers deciding to quit the labour force would imply forgoing a source of income. The absence of financial stability can further reinforce any depression or anxiety felt by the employees. They might also lose out on new skills by being out of work for long periods which, in turn, would reduce their human capital relative to the rest of the workforce. With lower human capital, their employment prospects would further decrease. These consequences for workers translate into bigger problems for the economy as unemployment leads to wastage of resources and lower economic output. 

In this lose-lose situation, data estimates the economic cost of bereavement in the UK workplaces to be nearly £23bn a year. This renders a loss in tax revenue estimated to be around £8bn a year. Behind these massive figures, the study indicates that “the majority of the economic cost arises from lost productivity in the workplace (presenteeism), rather than from time away from work.”

A viable solution? 

Neither declining productivity nor workers’ exits from the labour force are optimal cases for the economy. Therefore, a solution would include retaining workers or preventing productivity dips. By providing paid bereavement leaves, firms ensure that workers have the option of staying employed. In a way, paid leave lifts the pressure of ‘showing up’ at work and allows workers to recuperate emotionally without worrying about economic welfare and finances. Once workers do finally return to work, they are relatively more emotionally stable and will be able to perform better, preventing any problems caused by presenteeism. Paid leaves also foster a stronger attachment to the labour force with workers more committed to working and staying in employment. With a more dedicated and stronger labour force, the national output  is expected to increase. 

Understanding the merits of paid leaves, the miscarriage bereavement laws passed by the New Zealand government are a giant leap forward. They recognise the significant emotional implications of stillbirths and miscarriages — losing a child has been ‘classified as one of the most extreme stressors a human can face’ which causes the parents’ productivity to reduce to a quarter of what it was before. Most importantly, these laws standardise access to paid-leave and propagate equality. Given that all workers do not have the financial background to quit their jobs, the legislation ensures that despite varied working conditions, workers have the ability to avail the option of paid leaves. Hence, it fosters an environment of equality while prioritising workers’ welfare. 

At its core, such laws recognise that workers’ welfare need not be at odds with the economic well-being of the country. Workers are 13% more productive when they are happy. Hence, it is difficult to isolate economic growth from the emotional welfare of the workforce. By providing adequate time and opportunity for employees to process their loss, these paid leaves act as a safeguard for the interests of the workforce against the tragedies of miscarriages and stillbirths. 

Picture Perfect? 

Despite their merits, these laws come with strings attached. Paid leave is a controversial issue amongst employers since they are paying the employees for essentially no work. Some firms might prefer workers showing up at offices despite the recent deaths of loved ones. By availing paid leaves, a worker’s contribution to output is zero. By using the logic of ‘something is better than nothing,’ employers would still prefer to enforce their older methods. 

Paid leaves for parents after stillbirths or miscarriages are certainly a social issue. However, the effects of grief on productivity make it an economic issue in tandem. This gives the opportunity for inclusive legislation that can improve economic conditions and boost economic growth. The unpredictability of death makes it all the more important to recognise the various losses humankind shares and subsequently address them in legislation. Because let’s face it, for someone still reeling from the shocks of the death of their loved ones; for someone still braving that gush of grief blowing through the window in that frigid room; even a few days off work mean everything. 

Advaita Singh is a second-year student of Economics at Ashoka University. She is also the President of the Economics Society at Ashoka. 

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

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Issue 11

100 Days of Biden

It has been over 100 days since President Joe Biden took charge of his administrative duties in the United States. The Biden administration has been highly optimistic by promising to meet an expansive agenda that includes controlling the coronavirus pandemic, enabling economic recovery, revising US climate policy and reviewing their health care system. Biden has also taken active steps to reverse Trump’s isolationist policies and his decisions, alongside  catalysing the process of restoring America’s place in the international community. With only 100 days of his term completed, Biden has taken some notable steps to meet his agendas. 

Within his first few days at the White House, Biden rejoined the Paris Agreement and the World Health Organisation. He rescinded Trump’s Muslim ban, which restricted immigration from a host of Muslim-majority countries. He took the liberty to address US-China relations by getting on a call with President Xi Jinping to discuss climate change, human rights violations, and trade relations. The President has made it clear to the Americans and the world that he plans on restoring America’s position in the global community and that he is determined to get rid of the isolationist policies introduced by his predecessor. 

The Biden administration fulfilled their 100-day promise of providing 100 M COVID vaccinations within its first 50 days. Biden’s timing could not have been better – as infections were peaking and America’s vaccines were coming online because of Trump’s funding of Operation Warp Speed,  Biden utilised the opportunity to play the hero without having to put in all the work. Moreover, he recently announced that all adults in the US will be eligible for the COVID vaccine by April 19th. 

Biden is firing on all cylinders to ensure that repercussions of the pandemic can be contained, singing a $1.9 trillion relief package to fight the pandemic and restore the US economy. The relief package, currently Biden’s top priority, plans to send direct payments of up to $1,400 to most Americans. The bill also includes a $300 per week unemployment insurance boost until 6th September 2021 and steps ahead to expand the child tax credit for a year. The relief plan also allocates $25 billion into rental and utility assistance, and $350 billion into state, local and tribal relief. It puts nearly $20 billion into Covid-19 vaccinations. 

Biden’s plan to reverse Trump’s tax cuts on corporations has been championed by the Left, but the effectiveness of implementing this policy needs to be carefully considered.  Biden’s tax policy wants to raise the top income tax rate to 39.6% from 37% and the top corporate income tax rate to 28% from 21%. This move will allow the government to collect a tax revenue of approximately $4 trillion by 2030. President Biden claims that his administration will ensure American companies  contribute tax dollars to help invest in the country’s roads, bridges, water pipes and other parts of his economic agenda. The plan detailed by the Treasury Department would make it harder for companies to avoid paying taxes on both U.S. income and profits stashed abroad. 

While this move sounds good on paper, its effective implementation has several obstacles. Corporates with major accounting teams and an army of lawyers have continued to find safe havens and loopholes in tax laws to legally avoid paying taxes. A tax hike of this rate also increases the probability of tax evasion and tax fraud, which will undoubtedly lead to the creation of a larger shadow economy. Additionally, in a post covid world that has witnessed large scale unemployment, increasing taxes on corporations and high bracket earners is going to  push firms to cut costs, thereby creating disincentives for hiring. The increase in taxation may also push firms to switch gears and focus more on international markets such as Hong Kong or Singapore that offer lower corporate tax rates. While progressive taxation is ideally the way to go, the Biden government must ensure that its implementation takes into account all the limitations of the current system. 

The Trump administration focused on deregulation in the manufacturing sector to ensure productivity and economic efficiency, whereas Biden  promises to focus on sustainable development. As part of his election campaign, Biden had released a 10-year, $1.3 trillion infrastructure plan. The plan aims to move the U.S. to net-zero greenhouse gas emissions. Biden’s climate change plan in total would cost the US approximately 2 trillion dollars, which he aims to fund by reversing Trump’s excess tax cuts on corporations and putting an end to subsidies for fossil fuels. While Trump focused on short-term economic efficiency, Biden’s plan is for the future. Switching to sustainable means of manufacturing is going to undoubtedly drive up costs for the American economy, but has the potential to  create middle-class jobs and ensure environmental conservation. 

Biden has had over 100 successful days since being sworn in, mainly because the bar set by his predecessor was quite low to begin with, but also because of his constructive policies. He envisions an America that will not be easy or cheap to achieve. While Biden’s plans cease to be as optimistic as “Mexico will pay for it,” they still are overreaching. The policies and infrastructural changes that Biden aims to implement would likely add to the 28 trillion dollar debt, but as long as the economy is developed in a constructive manner, there is hope for Biden’s America.

Karantaj Singh finished his undergraduate in History and International Relations. He is now pursuing a minor in Media Studies and Politics during his time at the Ashoka Scholars Program. He enjoys gaming and comics in his free time. 

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

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Issue 9

All Bets Are Off: Trust and Antitrust Among Large-Scale Corporations

Despite the economic turmoil caused by the pandemic, large companies such as Amazon and Facebook have managed to make sizable profits despite ordinary employees having undergone immense financial suffering. These circumstances have increased public interest in the manner of operation of large firms – and the mechanisms by which they become so large in the first place. Emergent questions pertaining to monopoly problems within economic systems are not new – rather point towards a set of laws that lie at the core of the issue – called Antitrust Laws. What are Antitrust Laws – and why are they so important? 

Antitrust Laws were first introduced by the US Congress legislation in 1890 to reduce artificial barriers in economic competition. The idea behind the laws was to make monopolization of power illegal and to ensure free and open markets for trade. It serves to protect the country’s consumers and smaller companies, ensuring a level playing field for all without the dominance of a few or singular businesses in the market share. This is achieved by regulating how companies manage their operations, and preventing large scale profits being made by a handful firms. 

At its core, the enforcement  of  antitrust laws determines the agency that consumers and small businesses possess within an economic system . The stricter the laws, the more difficult will it be for a giant firm to merge and buy over smaller companies or purchase their  competition. Antitrust  laws, hence,  push companies  to depend on earning profits on the basis of their merit, which can only be done by offering consumers quality products at competitive prices. It changes the focus from a single firm dominating the market to research and development on creating better products and services which ultimately will benefit the economy for the whole. 

From the perspective of small companies, the absence of these laws can have three large scale impacts. Firstly, the large firms interfere in the competitive market by suppressing potential businesses by replicating their ideas. For example, Instagram’s integration of Snapchat’s stories and filters has pushed Snapchat to become a secondary app. Secondly, there is no market stability as the control of the industry becomes concentrated in the hands of a few. Thirdly, the smaller company has two ultimate ends: being bought over by the large firm or having no scope for individuality in the project. There is a loss of the patent ownership, which gave the company a creative edge in the market. But once they can no longer compete with the giant, they have to succumb to being bought over due to the losses or eventually die out. 

On the other hand for consumers, there are three major impacts. Firstly, there is a lack of choice. The parent company owning each and every type of brand presents a false sense of choice to the consumers. Secondly, if a single company controls most of the different avenues of the market, chances are that it also has information over the consumers’ data and creating advertising models that are specifically curated, leaving no room for the privacy of data. Thirdly, these companies have the potential of becoming a means for political agendas to be carried out. As the company becomes powerful  due to the concentration of wealth it has accumulated from every sector, it becomes a potential foundation contributing to the country’s Gross Domestic Product. This can lead to the company wielding political influence over crucial policies, which have a considerable impact on the nation’s progress and development. Extending the previous point of privacy, governments can also feel incentivized to involve private firms within its functioning in a manner that allows the use of this data of its citizens.

When it comes to examining the domestic field, India’s first antitrust law, called the Monopolies and Restrictive Trade Practices Act (MRTP), was established in 1969. It came into frequent use after the economy’s liberalisation in 1991 and has been amended since, being replaced by consolidated legislation known as the Competition Act (2002). There is also an established committee to oversee and enforce the Antitrust Laws known as the Competition Committee of India (CCI)  but it has been extremely ineffective since its inception.

Taking a look at India’s industries, a contemporary case in point is that of Reliance Industries Limited. Business Today states that the company has bought major stakes in almost every single avenue. From purchasing the stakes in the Rs. 27,000 crore valued Future Group, it has also invested in Urban Ladder, Milk Basket, Netmeds and Zivame, to name a few. With the coronavirus pandemic crossing bigger numbers everyday, smaller businesses in India have had to succumb to the economic damage due to lack of stability in the market. Moreover, consumption patterns in retail, technology, household products have been changing, making the consumers more reliant on the services provided by a few large scale companies. 

Reliance is planning on rebranding itself from a petrochemical and refining company to a technological consumer based brand. Having sold over 49% shares from its oil section to a British oil giant Petroleum Company, it plans on building a stronger hold in the digital world. This has been clear from its mammoth telecom project, Jio which launched in 2016. Moreover, the company is also planning on becoming a singular social media platform for India, including the functions of Facebook, Amazon, Apple, Netflix, Google and Zoom. This is quite similar to Jack Ma’s Alibaba, which does the same for China. 

Reliance is acquiring additional companies on top of having several footholds in retail, social media, groceries, furniture, medicine, telecommunication, petrochemicals, pharmaceuticals, to name a few. This could be the final red flag for India’s laws regarding Antitrust since the company now holds interests virtually in every sector, leading to the creation of an ultimate monopoly in India. In addition, its political alignments have also been working in the background. When Jio was initially launched in 2016, it was endorsed by the Prime Minister, which played a role in its quick rise to 200 million subscribers. Moreover, the chairman of the Telecom Regulatory Authority of India, who was appointed by the government, changed the rules of what market power entailed when telecom companies objected against the competitive pricing. 

The Indian government with its recent ‘Atmanirbhar’ or ‘self-reliance’ policy is seeking to make Indian firms global players. But in the process of doing so, it should not neglect the rise of domestic monopolies being created. This will only have a negative impact on consumers and smaller firms, leading to a negative impact on long term economic development in the country. Ultimately, amendments to India’s Antitrust laws will determine whether the country’s consumers and small businesses will be protected. 

Gauri Bhawkar is a second year Economics and Finance student at Ashoka University.

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Issue 8

The Economy Of Stories

‘Any story you can come up with has already been written in the Mahabharata;’ by popular consensus, this is often heralded as the truth in India. The Mahabharata, with its intricacies in plot, characterisation, details, off-shoot narratives and adaptations, could easily be considered as the mother of fiction. Christopher Booker in The Seven Basic Plots argues that any given story is bound to fall within one of his seven major plot structures. If we were to consider this true and assume that the Mahabharata encompasses all major plotlines, then every single work written in the world today would simply be an adaptation or a rewriting of an existing story.

Why then do we bother writing, re-writing, adapting and recirculating existing stories? Are we simply enabling the production of another economy, where stories, like currency, exchange hands only to be drawn on or crumpled in one’s pocket before being handed to its next owner? This brings me to a theory that I have decided to call ‘the currency of fiction’.

What happens to the currency we use on an everyday basis? The notes either exchange hands till they are torn/worn, at which point they are replaced by crisp, new ones that everyone loves to get their hands on; or, they become old enough to be worth preserving for their collectable value. I see something similar happening in the economy of stories—the basic plot is the monetary value, and the currency or the stories are the means to access this value. New notes are the rebirth of these existing stories, in the form of adaptations or re-imaginations. The stories that gain age, wisdom and stand out in some sense, then become Classics, or collectables. Any subsequent note with significant resemblance or reproduction of thought of these Classics are the ones that are the most desirable, i.e., the ones with the most exchange-value.

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Be it Enola Holmes, Maria Dahvana Headley’s feminist translation of the classic Beowulf, Chitra Banerjee Divakaruni’s The Forest of Enchantments – the tale of Sita from the Indian epic Ramayana (the Sitayan), Kamila Shamsie’s novel adaptation of Greek tragedy Antigone into present-day Britain and Pakistan—Home Fire, or even a spin-off of Hindi soap Yeh Rishta Kya Kehlata Hai to the new Yeh Rishtey Hain Pyaar Ke with the stories of the children, and grandchildren (or was it great grandchildren?…I lose count) of the previous leads, recent times see no dearth of the return of our beloved characters.

Why? Why reimagine Juliet in 2020, as opposed to creating a new Desdemona or Laila or Heer? What about these particular characters makes us want to bring them to life again, albeit in a new socio-political scenario, or a reimagined world? I argue that it is our need for familiarity.

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“Desi tadka with a fusion twist” | “Chai tea latte.”

What do you see common to both these ‘fusions’? I see the need for familiarity wrestle the desire to explore – the ‘certainty’ component of your personality in a heated debate with the ‘uncertainty’ percentage. Both these notions do just what an Enola Holmes does—brings you something you know that you like and that you trust is good, while adding some spice to it. The need to watch it, buy it, or consume it, is motivated by the same need to check your phone when a notification pops up with “Your friend ShortAttentionSpan has updated her profile,” you know the existing story is good, and you believe that if something new has been added to it, it ought to be good too.

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Stories are thought to have been born as a form of relief or a doorway to a world beyond. Be it by way of murals on cave walls that showed horses racing through the clouds to greener grass, or by way of an ‘ajji’s’ (grandmother’s) stories to her grandchild of a crow placing rocks into a thin-necked vase in order to able to drink the water inside.  All of these stories, while allowing for this momentary escape from reality, most definitely contain a component of the ‘real’ encompassed within themselves. The horses could be human beings rushing towards something and ignoring the metaphorical clouds around them; the crow could be ‘Sharma Ji’s beta’ (the ideal neighbour’s son, a prodigy who every Indian child is asked to be more like) who manages to do smart work and reap the best results.

What all of these stories do is play with the distance between you, and the world you are reading/watching/accessing. By making it appear sufficiently afar, the stories allow for a commentary on the real world, enabling you to access it without winning the assured eye-roll a moral lecture would otherwise merit.

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During theatre club meetings, we would play a game called ‘You!’ 3 characters would take their place in the centre, surrounded by a circle consisting of the other participants, or the spectators in this case. They would proceed to enact a scene—a short one, only a few minutes long. After the first performance, they would enact it a second time; the spectators were then free to clap their hands, at that  point the actors would freeze within the circle, point to one character, and yell, “you!” They would therein, take the place of said character and proceed with the scene in their stead, with one crucial change.

The aim of the game was to first understand how a single action contributes to the larger plot. The second aim was to help people understand what a good move, and a bad move, was —if the change elicited a story worse than the original, it was a bad move. And third, the real-life connotation—to be able to understand when and how your actions impact other people, and how you can think before doing something.

This game, while our little self-creation, is one that had been played on a much larger scale, a long time before us. Forum Theatre, a creation of Brazilian theatre practitioner Augusto Boal is motivated by similar goals, with the only difference being that the scene performed would be one of oppression, or societal harm, that could be averted through the tiniest of actions – one single action, that could contribute to, or help stop oppression.

In a similar manner, the economy of stories, in its distancing and temporary suspension of reality allows you to re-think the actions of a character, while also giving you the chance to step in with the whole, “why didn’t Rose simply move over and give Jack some space on the plank?” criticism. Stories provide us with an alternate space where we can think about the actions of characters, their motivations and aspirations, without directly realising that while so doing, we are also questioning and tugging at the loose ends of similar questions that arise around us on a daily basis. Stories thereby become powerful tools for critique, for questioning, for dialogue, and thus, for civic action.

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In the economy of stories, as we recycle tales making a few crucial changes, we ‘adapt’ them to suit our present conditions. We play with the ‘distance’ of the story from its consumer, awarding the latter either the discomfort of reading about something too close to home, or the pleasure of an imaginary universe with a hidden resemblance to reality. We bring the reader/watcher/consumer to the right distance from our story in order to be able to comment on reality in the manner of our choosing. All of this while preserving the familiarity of existing characters, broad plot design, and the ambit of criticism that the root story fell under, in case of direct adaptations.

This ‘replaying of the same scene’, or ‘recycling of currency’, with a few crucial changes, shows the reader the light of the world of Forum Theatre, or ‘You!’ The potential to affect some real-world outcome; some civic change. The paranoia of ruling bodies about seditious fiction, crowd-exciting theatre, anti-establishment fictional narratives, suddenly makes a lot of sense, doesn’t it? Imagine a large puzzle, with each piece being a currency note—the economy of stories produces a larger picture. The notes are connected by strings. That, if you sufficiently step back to look at, make up a compelling image. It is up to you to be able to decipher this image, make changes, provide new decisive shapes to the notes in order to elicit a different picture.

The economy of stories has immense power. As does art. Be it with a single currency note, the larger narrative, or the need for relief from reality, stories rule our world, as they should. The economy of stories is here to stay, and you are a part of it, either as a spectator or a motivated spect-actor. All you need to do is choose. And choose wisely, as Krishna tells Arjuna in the Bhagavad Gita, at the beginning of the Great War, a.k.a., the Mahabharata.

Varsha Ramachandran is currently an Editorial Associate at Agents of Ishq. She graduated from Ashoka University in 2018 with a degree in English Literature. 

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Issue 8

Wages for Housework: Giving Wives Their Due?

What do Kamal Haasan, Charlize Theron and Julianne Moore have in common? One proposes salary for housewives in India and the other two support a Marshall Plan for Moms in the US. Very similar ideas, prima facie laudable and progressive.

First of all, in India, several women who get counted as “not working” actually contribute substantially to household economic activities (farming, livestock, kirana shops, workshops etc): work that is unrecognized and unpaid. For this work, women need to be recognized legitimately as workers. They need to be seen as equal partners whose labour allows the household to earn a livelihood. 

Turning to domestic chores, everywhere in the world, the burden falls disproportionately on women, regardless of whether they are “housewives” or not. The enormous weight of endless and repetitive housework leads women to either drop out of paid employment altogether (or temporarily), or to seek part-time work. Women who manage to re-enter paid employment after a childcare break typically enter as juniors of, and earn less than, men comparable to them in age, education and qualifications. In other words, collectively as a society we want children, for which mothers pay a penalty, but not fathers.  

Feminists have highlighted the sexual division of “reproductive labour”, where women disproportionately bear the load of domestic chores, care and nurturing responsibilities, which eases male participation in “productive labour” and allows the productive economy to continue running smoothly. A typical picture of a standard early 20th century family, where the man is the breadwinner and the woman the housekeeper and caregiver. 

The Covid-19 pandemic has sharpened this divide: women did more housework than men before the pandemic; they do even more now. Even though the sheer volume of this work is enormous, it is undervalued, invisible and completely taken for granted. Globally, the monetary value of this work (calculated at minimum wage) is estimated to be USD 10.9 trillion

Then what is wrong with explicitly recognizing this and paying women for their massive contribution to the household? The short answer is: everything

The salary-for-housewives proposal takes the “male breadwinner” heteronormative family structure as a given. It completely solidifies the boundaries and divisions that have kept women in the kitchen and/or taking care of the kids, and/or caring for the elderly, and/or maintaining the house, and/or be responsible for nurture of family members. 

Over the last 70 years, all over the world, these boundaries have gradually begun to blur as the movement towards greater sharing of the reproductive labour has gained momentum and voice. While the division is far from fair or equal anywhere in the world, there are green shoots of gender equality that, until Covid-19 hit, were gaining strength, albeit not fast enough. 

Covid-19 hit and those lucky enough to have jobs to work from home found themselves stuck with demands of both domestic work and their paid jobs. The immense pressure of childcare and home schooling has led to women dropping out of the workforce in greater numbers than men.

The gender gap in paid employment has markedly worsened due to the pandemic. To fix this, women need enabling conditions to get back to work. Instead, the pay-the-moms/wives proposal is arguing for the exact opposite. It has nothing to say about sharing the load. 

South Asia in general, India and Pakistan in particular, have among the most unequal division of domestic chores, where women spend as much as 10 times more hours compared to men. In India, this is the key social norm that hinders women’s participation in the labour force. The lack of economic independence also lowers women’s position within the household in terms of decision making and mobility. Often even women who work outside and earn a salary have limited control over their hard-earned money.

In this scenario, what would payment to women – most likely controlled by the husband — for domestic chores result in? Greater respect? More equality? Greater decision-making abilities? Higher mobility? More control over their own lives and choices? 

None of the above. 

It would result in greater dependence, reduced status, enhanced burden, with a shift to paid employment even more difficult than earlier. We can only imagine how many Indian families might sack their domestic maids and nannies if they had to pay their wives for the same work. (PS: How would this work in families with same-sex couples?)

The Covid-19 pandemic has revealed that women’s unpaid reproductive labour is the biggest social safety net that allows the wheels of the paid economy to continue moving. This work has to be shared equally within the household, instead of pushing women back into the 1950s-style traditional stereotypes. 

Since the suggestion is about valuing women’s work in India, a good starting point would be to explicitly recognize their contribution to household enterprises as workers, on the same footing as the men, and share the earnings from the household enterprise fairly. 

And stop thinking of domestic chores as women’s work. 

Ashwini Deshpande is an Indian economist who specially works with topics concerning poverty, inequality, regional disparities and gender discrimination. She is currently an Economics professor at Ashoka University.

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Issue 8

Budget 2021 and Fiscal Deficit: The Good, the Bad and the Ugly

Finance Minister Nirmala Sitharaman presented the Union Budget for Financial Year 2021-22 on 1st of February 2021. Announcements regarding privatization and asset monetization attracted attention while the accounting treatment of fiscal deficit raised eyebrows even as it found approval from experts.

Fiscal deficit is the difference between the government’s total income and total expenditure. More accurately, fiscal deficit occurs when the government’s expenditure exceeds its income. In the Revised Estimates for FY 2020-21, the headline fiscal deficit number was announced as 9.5 percent of GDP. In the previous budget (for FY 2020-21), the fiscal deficit was targeted at 3.5 percent. This steep revision in fiscal deficit estimates for the current financial year (2020-21) as one of the highlights of the Budget. If we take a closer look at fiscal deficit revision and the path the government wants to take in the future, we find three important points to underline.

The Good

The Revised Estimate for fiscal deficit for 2020-21 actually found approval from experts. Why was it so? This was because of the FM’s announcement regarding how food subsidies are accounted for. The Food Corporation of India (FCI) procures wheat and rice from farmers at Minimum Support Price (MSP) and then sells them at a loss through the Public Distribution System (PDS). The loss that the FCI suffers is on account of the food subsidy that the government provides. Ideally, the Union government is required to allocate funds for this shortfall in the budget, but this was not the case so far. For example, while the FCI suffered losses of over Rs 3 lakh crore in 2019-20, the budget only allocated Rs 75,000 cr. The FCI was forced to borrow the difference from other sources like the National Small Savings Fund. This helped the government exclude the actual food subsidy numbers from its accounts and this shored up the fiscal deficit number. However, the problem was that this made the fiscal deficit numbers suspect. With the announcement this year, the FM has made budgetary provisions for payments to FCI for this financial year on account of food subsidy. In return, the actual subsidy numbers are now reflected in the accounts and this is one of the reasons (but hardly the only reason) for the sharp jump in fiscal deficit for 2020-21 in Revised Estimate. This transparency in accounting is a refreshing change and can be called a good thing in Budget 2021.

The Bad

The Fiscal Responsibility and Budget Management Act (FRBM Act), 2003 was introduced to bring transparency and discipline to India’s fiscal policy. The Act stipulated that the Union government will reduce its fiscal deficit to 3 percent of GDP by the end of FY2020-21. Abiding by FRBM rules that have helped the governments over the years burnish their credibility among rating agencies. FRBM Act also provided the government exemptions on account of national security, calamity, etc. While announcing the Union Budget for 2020-21, the FM had invoked one of the clauses in FRBM Act to raise the fiscal deficit target for 2020-21 by 0.5 percentage points to 3.5 percent of GDP. This has now been revised to 9.5% in RE 2020-21. As pointed out by Vivek Kaul, the fiscal deficit as a percentage of government expenditure will be at 53.6% in 2020-21. The budgetary provisions for payments to FCI explain only a part of this sharp jump in fiscal deficit in this financial year. The other reasons are a shortfall in tax collection, much lower than expected receipts from disinvestment, and a shortfall in non-tax revenue. While the transparency in budgetary accounting is good, it does not hide the fact that the fiscal deficit is way above the FRBM target.

The Ugly

The FRBM Act, 2003 did not just have a fiscal deficit as its target. One of the foremost targets of the Act was the reduction and eventual elimination of the revenue deficit. This meant that the 3% target for fiscal deficit would be used to fund capital expenditure only. Revenue deficit is when the government’s total revenue expenditure exceeds its total revenue receipts. Expenditure incurred on payments of salaries, pensions etc. is classified as revenue expenditure while expenditure on building assets like roads, waterways, rail lines, factories, etc. is classified as capital expenditure. 
FRBM Act sought to eliminate revenue deficit so that any deficit would be on account of capital expenditure only. This is because capital expenditure has a 2.5 multiplier effect on the economy while the multiplier effect for revenue expenditure is only 1 (Sukanya Bose and N.R.Bhanumurthy – NIPFP). FRBM Act thus encourages the government to switch from revenue expenditure to capital expenditure. In 2018, the government stopped targeting revenue deficit. Instead of eliminating revenue deficit, the government squeezed capital expenditure to meet the fiscal deficit targets. For example, in BE 2020-21, the Union government’s capital expenditure for FY2020-21 was Rs 4,12,085 crore (Gross Budgetary Support) while the in RE 2020-21, this figure has actually gone up to Rs 4,39,163 crore (Budget at a Glance, Page 8). In RE 2020-21, the revenue deficit is projected to climb to 7.5%. For FY 2021-22 (according to Budget Estimates 2021-22), capital expenditure (Gross Budgetary Support) is projected to increase by 26.2%.

Source: Union Budget 2021

This squeeze on capital expenditure while not targeting revenue deficit as laid down in the FRBM Act is the ugly part of how fiscal deficit numbers have played out over the last few years.

To be fair, the government has increased the budgetary support for capital expenditure for FY21-22 to Rs 5,54,236 crore (BE 2021-22). This would take total capital expenditure for 2021-22 to Rs 11,37,067 crore. To put things in perspective, the revenue deficit estimate (BE 2021-22) is Rs 11,40,576 crore and this situation can hardly be called comforting.

Ankur Bhardwaj is Editor, Centre for Economic Data and Analysis (CEDA.) Previously, he was Associate Editor – Web at Business Standard.

Picture Credits: Canva

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