Monika Halan is Editor Mint Money, and part of the leadership team at Mint. A Certified Financial Planner, she has a Masters in Economics from the Delhi School of Economics and a second Masters in Journalism Studies from College of Cardiff, University of Wales, UK. She has worked earlier across media organisations in India including Editing Outlook Money. She has run four successful TV series around personal finance advice in NDTV, Zee and Bloomberg India and is a regular speaker on financial literacy, regulation and consumer issues in retail finance. She has public policy experience working with the Government of India as an advisor to the Swarup Committee in 2009. She has served as a member on the Ministry of Finance Committee on Incentives (Bose Committee) and is a member on the Sebi Mutual Fund Committee. She is a member of the Task Force set up by the Government of India to put in place the Financial Redressal Agency. She was an expert invitee to a Ministry of Commerce Committee on the Service Price Index. She is a director on the board of FPSB and FPSF India. She is the author of a published academic paper that estimates the loss to investors on mis-sold insurance policies. She is based in New Delhi and was chosen as a Yale World Fellow in 2011.
The PNB fraud has left many of us feeling cheated although no money has gone out of our pockets directly. We feel cheated because the rich and the well-connected once again appear to have managed to get away after stealing a large amount of money. The pictures of smug high lifers seem to be mocking those who play by the rules.
We feel cheated because we are made to feel like criminals when we intersect with the financial sector—each of us, every few years, has to redo our KYC details. The linking of Aadhaar to various services has now reached a level where a corporate chemist chain is sending texts to customers to link Aadhaar to the account. When we seek a loan, the due diligence process is exhausting; the contracts are not really two people agreeing, it is the weaker party (us) just signing what the stronger party (bank) shoves across the table. Miss one EMI or get behind your credit card payment and the hounding begins relentlessly. A friend’s sister is a senior bank manager in a state-run bank in a small town in middle India. A part of her territory is also the nearby rural clusters and some of her work is loan recovery. As details of the Nirav Modi theft emerged, her sense of disbelief grew. She said that when sometimes people defaulted on loans, she has actually threatened to walk off with a cow or a goat as collateral to make good the bank’s loss. For the poor people, who will surely be even less able to pay their debt with their asset gone, the loss would be mind numbing. But the rich get away with it because of political patronage, collusion and greed. Fraud of this kind corrodes the overall value system of a nation when people feel justified in cheating and not paying taxes.
I’m the salt and pepper hair woman who you may notice walking into one of your hangout joints and exiting quickly for the fear of raising the average age of the room. You must know that I occasionally step into or past your congregations just to inhale some of the new energy, the vibrant mood, the chirpy buzz. At your age, people like me were in an India that was very different. I remember sitting in a pub with my friends in the UK, post my Masters and just days before I returned home to Delhi. This was in 1994. Not that long ago. But two decades is indeed a long time. We were going around the table talking about what we will miss about life in Cardiff. We were a bunch of girls having a drink and I remember saying that I will miss the freedom of sitting in a public place having a drink without being judged or propositioned when I’m in Delhi. So, pardon my thinly concealed joy at seeing you girls out there at all hours without giving a damn.
It is not often that Indian residents want to on-board a scheme for Bharat. If the Rs 5 lakh sum insured under Modicare for 500 million Indian poor reaches its potential, middle India will clamour to be allowed entry and will be willing to pay for the scheme. What costs India an average of 2% of sum insured for individual covers is costing an average of 1.3% to the government currently, and has the potential to drop down further under Modicare.
In announcing Modicare or the National Health Protection Scheme as a government funded secondary and tertiary care (health services that usually require hospitalisation) plan, India has signalled its healthcare direction where the State does not provide free or subsidised medical care but funds insurance companies to reimburse empanelled hospitals (both private and public) that do. We can argue that the State has abdicated its responsibility. We would be technically right but practically wrong. The current public health system is largely dysfunctional not because money is not being spent but because of the structure that has a hub and spoke model. The bottleneck is not the availability of money, but that of doctors and nursing staff. Available doctors are a fraction of the sanctioned doctors, which are a fraction of the required doctors. Throwing more money at the same system is not likely to yield results, hence this approach that builds on the Rashtriya Swasthya Bima Yojana (RSBY) experience.
Every time people who have defined benefit retirement plans make rules for the market, their lack of understanding comes across clearly. Take people in the Ministry of Finance for instance, and then look at what subsequent Budgets have put in place. Not only is there arbitrage between asset classes on the definition of long term, there is arbitrage within an asset class too on the basis of which product you choose to buy. If tax policy is used to nudge behaviour, there is some serious malfunction in the Indian policy that is nudging in all the wrong directions and all the wrong products.
In India we answer the question, ‘How many years does it take for an asset to become long-term?’ in different ways depending on the asset. You have to hold equity for 1 year, real estate for 2 years and debt for 3 years for the profit made to become ‘long term’. This classification of assets is against Finance 101, since both equity and real estate are asset classes that cook slowly over time. They give their best performance over a long period of time. How long is long? Data analysis done by my colleague Kayezad E. Adajania (read it here) shows that it takes about a 7-year holding period to iron out volatility in equity. The thumb rule for real estate puts the cycle at about 10 years. Market-linked debt (as opposed to relatively fixed-return debt products such as bank deposits) as an asset class for retail investors is mostly used for short-term purposes for emergency funds, for near-term cash needs and for income generation. It would be more logical to make debt go long term at 1 year and keep a 5-year threshold for long term for both equity and real estate. At the very least, policymakers need to equalize the definition of long term across asset classes.
There were few happy faces in India after the Budget speech got over, except for the senior citizens. Since we don’t have representatives of Bharat in the TV studios or as talking heads, their reaction does not get captured. Budget 2019 has given a big push to Bharat and tightened India a bit more. Senior citizens should be happy. The morning laughing club should be laughing harder tomorrow. They have reason to because they are possibly the only middle India cohort that gets to take home more money. Interest income for them will be exempt from tax up to Rs 50,000, up from Rs 10,000. This means that if a 60-plus person had an income of, say, Rs 10 lakh as interest, she will now be taxed on R s9.5 lakh, other exemptions and deductions remaining the same. The deduction on premiums on health insurance is up from Rs 30,000 to Rs 50,000. This is good because privately bought health covers for senior citizens are very expensive. The Pradhan Mantri Vaya Vandana Yojana has been extended till March 2020, and the Rs 7.5 lakh-limit is doubled. A 60-plus person can now get an assured 8.3% annual return on Rs 15 lakh of investment. A couple that has invested Rs 30 lakh, can earn an interest of Rs 2.49 lakh a year from it.