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On Saturday, the government announced a new tax regime that offers much lower tax rates for individuals who are willing to forego all deductions and exemptions. In the first segment, Udit Misra explains how this will affect individual savings and impact the economy. Next, Abantika Ghosh talks about the measures that the government is taking to prevent the novel Coronavirus from spreading further (10:40). And last, Karishma Mehrotra talks about the first use of facial recognition in Indian elections. (19:45)
Shashank Bhargava: Hi, I’m Shashank Bhargava and you’re listening to 3 Things, The Indian Express news show.
In today’s episode, we will talk about the novel Coronavirus. We will also talk about the use of facial recognition in elections. But first, we talk about income tax.
On Saturday, during the budget, the government announced a new tax regime for individuals. A system that offers much lower tax rates for those who are willing to forego all deductions and exemptions including those are currently available say on EPF contribution, tuition fee payment, medical insurance premium and interest outgo on home loans.
In this segment, Udit Misra, who writes on the economy for the Indian Express, joins us to talk about how this new regime will affect individual savings and potential government schemes.
Udit could you first talk about the new reforms that have been proposed for personal income tax. What does the new system involve? How is it different from the earlier system?
Udit Misra: So what the finance minister has done this time is that there is obviously a well known structure of income tax that we have in the country. We have well known slabs, everybody knows where they are, but what the finance minister has done is that she’s introduced a new system which is, as of now, a choice. If you want, you can shift to it. And the main feature of the system is that, a) it will have lower rates of income tax. So to bring that about, she has introduced new slabs within the existing slabs. And the second feature key feature is that while you pay lower rate of income tax, you will not be able to avail of any exemptions or deductions to taxable income.Typically, you used to say that, ‘Listen, I bought a house, I’ve taken a bank loan for that house and so the interest I pay on that loan will get deducted from my total income’, your total income used to come down to that extent and your total taxable income was lower. So even though you were at a higher rate of income tax slab, taxable income was a different calculation.
Shashank Bhargava: Right? You have your gross income, and then you have HRA, you have medical insurance, there’s PPF, you have all those things on which you don’t pay tax.
Udit Misra: Right.. So that was this thing. So there is now a very clear difference between these two schemes. And as of now, you can shift to this one, but from what I know, I don’t think you can shift back. If you once shift to a no deductions, lower income tax regime, you will not be able to shift back the very next year or so to get back into the deduction scheme. In fact, the finance minister said that they are looking ahead to a scenario where they will actually phase out all deductions and exemptions.
Shashank Bhargava: So let’s say you’re forgoing all those deductions, which are essentially your long term savings, then you will be charged tax at a much lower rate. But does that mean I’ll overall be paying less tax with the government?
Udit Misra: The funny thing is that if you were to, and some of these analysis has been done in the pages, if you were to use the deductions well, then the total tax outgo would be lower. So, in hard cash or in an absolute number, you’d be paying lower amount of tax to the government. Whereas in the new system with lower income tax rates, you would actually be paying higher absolute amount of tax. But there is a flip side to this also. What the government has done is that in this new system because the deductions and everything are out, there is more in hand income in that sense. So say, somebody who earns seven and a half lakhs would have, well, seven and a half lakhs and the tax would be applied accordingly. And that amount would be bigger than, if he had seven and a half lakhs and knocked off two lakhs from that, and so his taxable income was only 5.5 and then applied tax to it. So the total amount there would be lower, in the second case. In the first case, he’s still paying a higher amount. But in the first case, that amount suppose turns out to be 18,000 or 20000 or 40000, he still has seven lakhs left. You know, 7,10,000 still left and he can buy a motorcycle if he wants and take a foreign trip if he wants.
Shashank Bhargava: In hand he has a lot money.
Udit Misra: …a lot of more choice, a lot more money in hand. Whereas in the original exisiting scheme, there was a certain element of being forced into some amount of savings.
Shashank Bhargava: So I’m guessing the government is also doing this for people to have more income in hand because consumption is low, spending is low. Now, in a way you are incentivized people not to make those savings that they were making earlier. Right? The fact that you will get a tax rebate on a PPF. With the new system that incentive is not there. Let’s talk about it from the individual point of view. How does it change things for the individual? And eventually, how does that impact the economy?
Udit Misra: So saving as a culture is a very important and interesting thing for an economy and equally for an individual. In your 20s, your propensity to consume is more. You want more cash in hand for a lot of expenses that you want to because you’re sort of consuming more. But as you grow older, you want to look at more savings. Your incomes rise and you want to save more and you grow aware of what the requirements might be for your retirement. You start planning ahead. You are no longer alone. Most probably you have a family, you have kids, responsibilities, parents are dependent on you and stuff. You understand that you need to, in any case, save. The good thing with the first system was that it encouraged saving. It helps you. In fact, it rewards you for saving. So it really depends where you are, at which stage in your life you are, and how much do you want. It’s a bit like the discussion or the decision you and I might have to make when we are choosing a salary structure in a new job. Whether we want more deductions, which can later be paid to us at the end of our tenure. Or do we want more of a salary straight into our hand and we’ll decide what we want. Right? So it’s a bit like that.
Shashank Bhargava: Okay, so now with the government eventually planning to forego the mechanism that people can save and enabling people to have money in hand, I’m guessing all that money the government was using for various investments, various government projects, government schemes. So what will happen now that people won’t invest in those things long term?
Udit Misra: So this is a bit of a quandary for the government and this is a very striking challenge that India is facing right now because of the growth slowdown. That the nature of the growth slowdown is that the consumption has dipped, which is typically not the case in India’s history. Consumption, because we are a huge country, was never such a big problem. There used to be a certain basic amount of consumption and that demand has been slipping. And this has happened at a time when our savings rate has also been falling in the economy. So, it sort of coincided at such a time. And how can both the things happen? It’s essentially because incomes have got depressed, out of which both savings and consumption come. So, now the government is facing a quandary where it can either boost consumption. But boosting consumption will typically come at the cost of some amount of savings. It could have alternatively gone ahead and boosted savings also.
Suppose the government had come out with infrastructure bonds. Tax free infrastructure bonds. Said that, we’d give you 9% interest rate on the 100 rupees that we take from you and the 109 that you will get at the end of the term, we will not tax a single penny on it. There was a chance that people would save more money in those infrastructure bonds and government would have tapped on to that resource and employed that to build a road. And through that measure, kick started the economy. That was another approach. But what the government has done is that, perhaps because they’re conscious of their lack of state capacity, ability to spend it efficiently, they’ve taken the other route where they’ve tried to leave more money with people and hope that people will buy more. And through that virtuous cycle will start, where the demand will pick up, investments will respond to this demand pick up and the economy will get boosted.
But this particular thing, which is the income tax thing, has this element where you knocked off deductions and that if everybody were to shift, it’s not as if people will not still save some money, but yes, there will be a hit on the overall savings rate. And which is a serious problem right now, because India savings rate has been coming down. And without India having a substantial savings rate, typically we need around 36% to 40% of our GDP should be savings, because that becomes then the pool for the next round of investments. Right now, we are at 30% financial savings, which is a part of the overall savings, are even lower. In fact, the financial savings in this country right now are not even large enough to pay for government borrowing. So even the government’s borrowing, both on the books and off the books, what it does directly and what it asks say an LIC or some other PSU to do, even that money is not there in the market. There’s not enough savings in the market. So you’re reaching a point where there’ll be a scarcity of funds in the market. So if tomorrow, somebody wanted to start a business, the cost…that is why we are seeing interest rates so high. We are seeing the interest rate so high despite RBI bringing down its benchmark rates. And their interest rates are still not falling. The 10 year government yields are still much higher than the benchmark interest rates that RBI sets. Basically, the cost of money is very high because there’s very little money and that’s showing up. And if people move away from deductions, which was a way of savings, then that pressure will only mount and that could not be more conducive for economic recovery.
Shashank Bhargava: Next, we talk about Coronavirus. On Monday, Kerala reported a third case of the novel Coronavirus and declared the outbreak as a “state calamity”. The central government has now set up a Group of Ministers to monitor measures taken across the country to prevent the virus from spreading further. Abantika Ghosh, who reports on health, joins us to talk about these measures.
Abantika, the first case of Coronavirus in India was detected on the 30th, last Thursday, in Kerala. It had been an Indian student from Wuhan. Since then we’ve had two more cases of the virus been detected. Could you first talk about these cases and wherever you have found them to be connected?
Abantika Ghosh: So all of these cases had a history of travel to Wuhan. They had just come back from Wuhan and they had developed symptoms and when they went to the medical facilities. Their blood was sent for testing. It was found positive. Now, apparently, if by they were connected, if you mean if they had a history of contact with each other? Nobody has said so yet. It seems all of them must have contracted the virus during the stay in Wuhan, without any contact with each other. But it is possible that had come in contact at some point of time. That, I am not sure of that. But there has been no official confirmation of that. But what the Kerala government is doing after that is basically they have fallen back on a strategy they had developed in the wake of the Nipah infections. When they had started very elaborate contact tracing. Basically, finding out all the primary and secondary contacts of every patient to ensure that, you know, all of these people are under surveillance. So there’s a lot of people currently under community surveillance as well. These are not people technically in isolation, where basically the local medical officer gives them a call every day and says, ‘So are you okay? Have you developed any symptoms?’, those sorts of things. So that’s community surveillance.
Shashank Bhargava: What do we know about the conditions of those three patients now?
Abantika Ghosh: They are said to be stable, they’re being monitored. All of them are in hospital. There’s nothing to worry about them at this point of time.
Shashank Bhargava: Before we talk more about this, could you describe to our listeners exactly how the Coronavirus spreads?
Abantika Ghosh: The Coronavirus, it mostly spreads by touch or by coming in contact with a person who is infected. There is a problem there because..so the virus has an incubation period of 14 days. So it is possible that you develop symptoms on the 14th day, but before that for the 13 days before that, when you asymptomatic, you’re spreading the virus. So that is why this isolation, so much importance on isolation…In fact, at one point of time, the Government of India had actually…officials had told us that we will just to be safe, we will give them a double incubation – 28 days. There is no word on that again since then.
Shashank Bhargava: So, we have now had the Kerala state government declare this a ‘state calamity’. What are the kind of measures are we seeing the government take? And how big of a threat is it perceiving this to be?
Abantika Ghosh: Yesterday, the government formed a task force consisting of several ministers – the civil aviation minister, health minister, shipping minister, the MoS home – to coordinate, because of this threat of influx from outside through the sea, through the air and all of that. Those things have to be very tightly coordinated. Also, whoever is coming in, those people have to be screened. So already right now 21 airports in the country, they are screening every passenger who’s coming in from China, Singapore, Thailand and Hong Kong. Initially it was just China and Hong Kong, but after cases happened in Singapore and Thailand, they have also been included. Also, if there are any symptomatic individuals, their samples are being sent for testing. They are being monitored till there is a confirmation either way, positive or negative. Also, there is a lot of effort. In fact, I have to put this on record. I have never seen the Government of India so prompt in responding to things. Even giving out information. There are 2-3 times every day when there are government officials who are, you know, they’re issuing videos on Twitter. Saying these are the things you should do – ‘Do not trust any information that’s not verified by us’. So earlier, they used to say that, but the information outflow was not that frequent. But this time it’s been amazing, the information outflow. And the way they’ve gone about whatever information, they have either confirmed or denied it, really quickly. So that’s another thing. Also, there are other measures in place. Hospitals have been prepped. So for example, in Delhi, all the cases are being sent to RML (hospital). All of those things are already in place.
Shashank Bhargava: Now, last week you had India evacuate a number of Indian students from Wuhan, the Hubei province in China, which is the epicenter of the virus, which is still under lockdown. How many people did the government end up evacuating and where are they now?
Abantika Ghosh: The government in two batches evacuated first 324 people and in the next there were 330 people, of which 7 were Maldivian nationals. So in all that, 324 + 323 (647), those many Indians have been evacuated. They are currently lodged in army facilities in Manesar. You might have seen the videos of them dancing. And also in the ITPB facility in Chhawla. Each one of those people they are being subjected to daily medical tests and also they’ve been kept in groups. Because as I mentioned earlier, it’s very infectious. So if you keep all 300 together, if one of them develops the infection, then all of them are vulnerable. So that’s why they’ve been kept in small groups, and they are not going to be allowed to much interaction beyond their own groups.
Shashank Bhargava: And just to be clear, India only evacuated those people that were asymptomatic, right?
Abantika Ghosh: Yes. So there’s an international protocol. China couldn’t allow them to board because then they would have carried the infection. The 3 cases that we have here did leave China, but they carried the infection unknowingly. If a person is already carrying the infection, if there are chances that person is carrying the infection, there is an obligation on China as well to prevent them, sort of, from traveling.
Shashank Bhargava: Are there any warnings or precautionary measures that the government is issued? That people can follow?
Abantika Ghosh: These are basically basic hygiene. So for example, somebody asked me, ‘You know, I heard it’s not safe to eat meat’. Thing is, if you eat meat, most likely you’ll be cooking it? And if you cook it well, the virus will die. If you touch meat, basic hygiene requires you to wash your hand properly, you should do that. So basic hygiene is all you require – hand washing and basically being careful, you know. If you develop symptoms, if you have a history of contact with somebody from China, then you should immediately react. As the government, you know, the health minister, the health secretary, all of them have, in fact, the video they’ve issued, it says help us help you. So if you have any problems, they are saying that there’s a helpline number, you should not hesitate to call that number, if you require.
Shashank Bhargava: In the middle of all this. We also had the Ministry of AYUSH, which is the Ministry of Ayurveda and Homeopathy, they had issued a statement, sort of this bizarre statement, that said that homeopathy can help prevent Coronavirus and it obviously got a lot of flack, and now we understand that they have reissued a statement.
Abantika Ghosh: Right. So last week what happened was, when all of this was on and the world over there was this huge rush to, you know, find a vaccine for Corona because this is this is a novel…remember, it’s called the novel Coronavirus. The virus that we don’t know. So the Ministry of AYUSH came out with a very long as a matter of fact advisory, which said things like homeopathic medicine, Arsenicum album 30 could be taken as prophylactic medicine against possible Coronavirus infections. Then they said that there are Ayurvedic remedies that can prevent Corona infection, things like drink Shadang Paniya, Usheer, Chandan, then processed water, 10 gram powder boiled in one liter water until it reduces to half, store it in a bottle and drink it when thirsty…
Shashank Bhargava: And as we understand these don’t have any scientific backing…
Abantika Ghosh: From what the doctors that we have spoken to. They say that..see, whether this has scientific backing…the ideal way to prove it is to do all these things and keep people in the vicinity of those three patients. And see if it works. That’s how science works. That’s the idea way. Till the time you’ve done that, you cannot really say. So yesterday there was a clarification from the Ministry of AYUSH, that whatever they said was general preventive and prophylactic measures to be followed in emerging viral diseases like Corona. And they’re basically saying that, we understand that the entire world is looking for a treatment or for a vaccine. The personal hygiene measures and few herbal preparations, which may be helpful to maintain health are indicated in the advisory. It was also advised that the use of these preparations should be done in consultation with registered practitioners from respective systems of medicine.
Shashank Bhargava: So we see them, I guess, backtracking a bit
Abantika Ghosh: Slightly yeah. Not saying we’re wrong. But simply saying yeah, it was just general precaution. Same as handwashing.
Shashank Bhargava: And last, we talk about facial recognition. Last month, a facial recognition software was used for the first time during an election poll in India. It had been a pilot to test the software in the Telangana municipal elections. Karishma Mehrotra, who reported on the story, now joins us to tells us about the project and where its idea comes from.
So Karishma, Telangana, in its recent municipal elections, used facial recognition in their polls. This was the first pilot project where facial recognition was used during an election. What was the scope of this project? What was the idea behind it?
Karishma Mehrotra: So it was pretty small since it was a pilot. And you’re right, that it’s the first time in India that we’ve ever seen this technology being used in an election polling. So on January 22, there were roughly 10 polling booths that experimented with this, it led to roughly 4200 voters being photographed. And their photographs were matched up against the photos on their voter cards. So any negative matching that occurred didn’t mean that the voter couldn’t vote, but it was used just to see, ‘okay, is this feasible? Does the concept stand?’. And what they found was that there was an accuracy rate of roughly 65 to 86%. A lot of the issues occurred because of dim lighting in the polling booths, as well as old or poor quality of the voter ID photographs. All the photographs were deleted after the elections, according to the state owned Telangana State Technology Services that built the technology, that built the application. And according to the officials there, they were happy that the concept checked out and that, you know, some things need to be tweaked. But overall, they said there wasn’t any major technological glitch in the project.
Shashank Bhargava: So where did this idea come from? Why use facial recognition as opposed to normal voter ID cards and biometrics?
Karishma Mehrotra: So in a circular that the state action commission released on January 18, they discuss the problem of impersonations using voter ID cards in several polling booths. And they’ve done a couple of analysis on their voting patterns. They also think the situation, it becomes even a bigger problem because of absentee, shifted or dead voters – what are called ASD voters. So they basically are dealing with what they think is the problem of impersonations. They have seen that the Telangana State Technology Services has built an application before in the case of pensioners. So for that it’s a aliveness check. It basically checks whether or not a person is alive and makes sure that the photograph they’re submitting is not a photo of another photograph, but it’s a photograph of their face being alive. So that system had a fairly high accuracy rate of 94%. And many pensioners in this state have used the application. Other states in the central government are also interested in the application. So it was the state election commission’s idea to use a similar technology in the pollings, as an experiment. So this is to solve a problem that they see has been going on for a while.
Shashank Bhargava: So what are the concerns that have been raised regarding this? Regarding this use of facial recognition in polls?
Karishma Mehrotra: So one thing is that, as of now, there’s no regulation in the country to govern the use of this data, facial data, which is usually termed as biometric data or sensitive data. There’s no regulation governing how the government would use it or how any company would use it. The data protection bill that does have some stipulations on this is still being analyzed by a Joint Select Committee in the parliament. And even if it were to pass in its current form, and it gives wide and broad exceptions to the state to process this type of data by a citizen. So there are concerns from different stakeholders that you don’t have the proper safeguards and you don’t have the proper surveillance reform to protect. The other concern would be that is at some point this pilot were to be expanded and they would make some voters not be allowed to vote because of perhaps the technical error, would also be a concern from some people. But on the other hand, if this establishes a legitimate form of verification, then the state thinks that they have a reason to implement the technology.
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