Friday, January 27, 2017

What Healthcare sector is expecting from Union Budget 2017

This article was first published in Business Today on January 25, 2017;

It takes a healthy nation to build a wealthy nation. Focus on ease of doing business, creating jobs, building houses, putting more disposable income in the hands of people are all appreciated and needed. Yet, the importance of health cannot be undermined because all of the above will be meaningful only when the people who reap the benefits of such reforms are healthy enough to enjoy the benefits. Healthy citizens also improve the efficiency and effectiveness in the economy, thereby contributing much more to the nation.

India has one of the lowest health expenditure ratios in the world in terms of the government spending on health as a percent of GDP. This is lower than that of the low income countries as well. India is a lower middle income country as per the World Bank classification. Similarly, India also has one of the highest out-of-pocket health expenditure in the world, which is higher than the out-of-pocket health expenditure (as a % of total expenditure on health) of the lower income, lower-middle income, as well as the middle income countries (see Exhibit, Data Source: World Development Indicators).

The author asked a few renowned doctors in the city of Hyderabad, one of the major healthcare hubs of the country, regarding their expectation from the forthcoming union budget.

Budget Allocation
Dr. V.P. Jyotsna, Obstetrician, Expert in Gynecological Endoscopy and High Risk Pregnancy, the Birthplace, says that the first step should be to substantially increase the budget for healthcare. “In the last two budgets, while the absolute amounts have gone up, as a percentage of GDP, the expenditure has remained more or less stagnant”, she said.

Spending of the budget effectively
Dr Lavanya Kannaiyan, Consultant Paediatric Surgeon, Continental Hospital, says that even the budget that is allocated is poorly spent. “There are hospitals which build the infrastructure with the budget allocated to them but not enough thought goes into aspects like sanitation and staffing. While the number of beds increases, the care providers do not. The backbone of any health system is not the doctors but the nursing staff and technicians”.

Dr. Jyotsna suggested that all Community Health Centres (CHCs) in the country should be upgraded. She said that every small scale hospital, nursing home and clinic should have a basic level of facilities. “There are instances of a cesarean being undertaken without an Ambu bag and resuscitation kit for emergency. Accountability mechanism in the event of negligence or procedural lapses has to go up”.

Dr. Lavanya also points out that the number of government funded institutions has not kept pace with the rising population. “The backbone of our health infrastructure dates to the colonial period and the immediate post-independence period. There is only one government children's hospital per state while ideally there should be one or more per district”, she said.

Dr Tarjani Vivek Dave, Consultant, Oculoplasty, Ocular Oncology, Orbit, Facial Aesthetics, L V Prasad Eye Institute adds that access to healthcare in India is severely limited by inadequate infrastructure. “Inadequacy is not only in terms of equipment but also manpower”, she said.

Dr. Jyotsna felt that the budget should focus on specific allocation for continuous updating of skills and knowledge not just for doctors but nurses and paramedical workers too. “We need more well trained nurses and paramedical staff. Improving medical education for all categories of medical staff will probably help the country a generation later, but it must be undertaken now!” Dr. Tarjani further emphasized the need for improvement in the quality of medical care that's provided. “Continuous medical education and certification of doctors is definitely the need of the hour”, she added.

Dr. Nitasha Bagga, Paediatrician and Neonatologist, Rainbow Children’s Hospitals said, “Medical teaching is the most important aspect to nurturing a good healthcare system. If the government is serious about improving healthcare in India, it must strengthen the government hospitals and the medical colleges, in terms of equipment, trained doctors and retaining trained doctors and staff”.

Dr. Jyotsna added that manpower was needed not just for providing healthcare services, but for analytics, administration and increasing the reach of services! Budget allocations should keep all these in mind. To attract good talent, the hospitals need to pay at par with the market rates.

Urban Rural Divide
Dr Lavanya said, “Most health professionals are in the urban centres. They shun rural areas because of the poor pay and hardships. Doctors must be incentivized to serve in remote areas. Government doctors’ pay has not increased proportionally compared to inflation”.

Dr. Jyotsna adds that by the time Doctors finish their post-graduation, they have a family. Accepting a rural posting, where access to good schools and basic facilities may not be available, is a difficult proposition. The only way out is for the rural areas to be well connected and sanitary conditions to improve. And maybe fixed period contract jobs where doctors have to show up actually and not just sign attendance once a week. That way doctors wouldn't mind a temporary stint for a few months in rotation.                       

In Australia and USA doctors posted in rural areas get paid a lot more than their urban colleagues. The Christian mission hospitals pay for the children's education at some of the best boarding schools.

Dr. Nitasha said that if government hospitals or health centers, especially in the rural areas, have ambulances with transport ventilators, it will be very useful for the rural population. The sick people can be taken to the nearest well equipped hospital with minimum casualty.

Dr. Saumya Dikshit, Radiologist, Tesla Diagnostics, said that awareness about healthcare is the key to improving healthcare in India, especially in rural and suburban areas.

Rising costs
Rising healthcare costs is a big challenge for the patients. Dr. Saumya said, “a significant cost is the cost of medical equipment and implants which ultimately get transferred to the patients. Most of the medical equipment and implants are manufactured abroad. There should be a huge incentive, either in terms of taxes, subsidies or grants to promote “Make in India” of medical devices”.

She adds that generic medicines are highly underrated at times and doctors sometime prescribe expensive imported medicines. Even though in the previous budget, it was announced that the government would open pharmacies to enable the public to access cheaper drugs, the effect has been negligible.

Even though the Indian pharma industry is a large player in the generics business, they still need to step up the value chain and endeavor to be a significant player in drugs discovery. The budget should encourage the pharma companies to increase their efforts towards research activities.

Dr. Nitasha points out that while there are many state and centre sponsored health insurance schemes, there are still many poor people who are either not covered or are not aware of the schemes. As a result, they are devoid of the treatment. Each and every Indian should have an equal right to be treated irrespective of their social and economic standing. Till the gap between the private and government sector remains as wide as it is now, in terms of quality of treatment, health cannot be universal. A universal health cover must be worked out by the government sooner rather than later!

Concluding remarks
All the five doctors that the author spoke to also concluded that in the end every penny that goes into laying roads, highways, sanitation, clean drinking water and food subsidies, contribute to improving healthcare in some way or the other.

Sufficient allocation of funds and its effective utilization; impetus to education and ‘effective’ training; investments in quality assurance; building infrastructure; containing rising costs and bridging the urban rural divide should be foundations on which Mr. Jaitley should base the health budget for a healthy India!

Tuesday, January 24, 2017

Income tax returns- From fiction to fact

“Income tax returns are the most imaginative fiction being written today.”–Herman Wouk, a Pulitzer Prize winning American author, who is more than 100 years old now!

We know that this quotation is quite apt for India. Prime Minister Narendra Modi said in his address to the nation on December 31st 2016 that only about 24 lakh people declare income more than Rs10 lakhs in India. “Can we digest this? Look at the big bungalows and big cars around you. If we look at any big city, it would have lakhs of people with annual income of more than 10 lakh”, he said.

He was of course right in expressing his anger towards people who either don’t declare any taxable income or under declare taxable income, with the aim to evade tax. All the honest tax paying citizens of the country feel the same anger.

In the recent weeks, there have been a lot of indications from ‘sources in the know of things’ that there may be some incentive for more people to pay taxes. These could be in the form of lower tax rates, broadened tax slabs, bringing in standard deduction and increased exemption limits. As per many media reports that quote ‘officials involved in the budget making process’, the focus would be on widening the tax net.

Direct taxes are the sole jurisdiction of the Central government. Yet, no government has taken any radical steps to simplify the income tax act or to crack down on non-compliance in a major way. In the 1970’s the income tax rates in India were draconian with the highest tax slab resulting in more than 90% effective tax rate. In the decades of 1980s and 1990s the direct taxes started to get rationalized. In the FY 1997-98, the highest tax slab was brought down to 30%. Direct Tax to GDP Ratio was 3.25% in Financial Year (FY) 2000-01. It improved to 5.55% in FY 2014-15. Was it due to the ‘Laffer curve’ effect?

‘Laffer curve’ theorizes that at 0% tax rate, there will be no tax collection and at 100% tax rate, nobody will pay tax; meaning no tax collection. The theory implies that there is an optimal tax rate at which the tax revenue will be maximized. There is an arithmetic effect of a change in tax rate and a counter economic effect. For example, if the tax rate is decreased, the arithmetic would imply that the tax revenues will decrease. But the economics will imply that more people will pay taxes at lower rates and hence the revenue may be higher. Similarly, if the tax rate is increased, the tax revenue will increase based on simple arithmetic, but the economics would imply that more people may look for ways to evade and avoid tax thereby reducing the revenue. There is an equilibrium rate at which the tax collections get maximized.

So did the lowering of tax rate in late 1990s result in higher tax collection over the years (these things generally take a long time; 5-10 years or more to show results)? Or did the Direct Tax to GDP Ratio improve due to high economic growth during the last decade?  If we see this in the perspective of India’s GDP per capita, we find that while Direct Tax to GDP Ratio became 1.7 times from FY2001 to FY2015, the GDP per capita increased 5 times during the same period. It may be reasonable to conclude that the increase in direct tax collection was due to improving economy, albeit at a much slower pace than the economy!

So would a reduction in tax rates, as is widely expected from the forthcoming budget, result in widening the tax net and increase in tax revenues? If there is scope for people to escape the scrutiny of the tax men by either bribing them or by remaining below their radar, the answer would be No! Both may happen in India as corruption is rampant and the scrutiny is limited! The tax administration or the tax men are simply not geared up to take up the task of scrutinizing people at a mammoth scale that is warranted in the case of India where only about 4% of the population file tax returns.

So how will lowering the tax rates help the government? Well, it will be a goodwill gesture with a prayer in their heart that the lower tax rates result in inducing more people to start filing tax returns. The inconveniences suffered by the public through the process of demonetization might appear to be worthwhile (especially for those who pay taxes honestly) if they see some savings in terms of taxes. It will appease the honest taxpayers to some extent.

This move will work in improving the fiscal situation of the government if effective use of technology is made to crack down on people who have been totally outside the tax net so far, as also those who have been under-declaring income. A lot of this data will now be available with the Income Tax department thanks to ‘demonetization’ and reporting of deposits by banks to the tax authorities. The momentum should not be lost and without harassing the citizens, explanations must be sought regarding sources of income and mismatch of declared income versus deposits in banks. For most ordinary citizens, a query from the income tax department would be enough to put their house in order.

This is an opportunity for the government to de-fictionalize the income tax returns of people and get them to face reality! 

Demonetization: The Longer Term

This article was first published in the Global Association for Risk Professionals on January 19, 2017

Beyond India’s near-term dislocations are possibilities for a wider and fairer tax net, financial inclusion and economic growth.

Little else has been on the minds of Indians since Prime Minister Narendra Modi announced the demonetization policy on November 8, 2016. It was undertaken primarily to curb black money and corruption in the Indian economy, a sweeping move with numerous intended and unintended impacts. A few positives are growth in cashless transactions, curtailment of counterfeit notes and terrorism financing, and creating a blip in the minds of tax avoiders. The negatives include the inconvenience to the public and short-term slowdown in many sectors, especially those that are heavily dependent on cash, a large portion of which are believed to be black money, like real estate and jewelry, loss of jobs, etc.

The prime minister asked the population to bear with the inconveniences for 50 days – but when that time passed, no magic wand was waved. What is clear is that the government pulled off an unprecedented gargantuan project and is in no mood to relent to the opposition. “We cannot allow this fight against black money and corruption to stop or slow down,” Modi said in a December 31 address to the nation.

In an earlier speech, the prime minister had said, “Demonetization is not the end, but beginning of a long, deep and constant battle against black money and corruption. It will benefit the poor and the common man. The poor and the lower and middle classes have suffered the most due to black money, counterfeit currency and corruption.”

The battle against black money is expected to be extended beyond cash, to properties, jewelry and gold, and foreign currency, in due course. A sizable parallel economy accentuates income inequality and is a deterrent for honest taxpayers. Hence there can be no question about the intent to curb it.

Success or Failure?
The Rs500 and Rs1,000 notes that were demonetized constituted about 86% of all currency in circulation. As per State Bank of India estimates, on November 9, the total value amounted to Rs 15,440 billion. It is further estimated that more than 90% of the demonetized currency has found its way back to the banks. (Please note that these are the estimates at the time of writing and may not be the final numbers. The government has raised concerns that there may have been double counting of the currency deposited in the banks and has asked the central bank, the Reserve Bank of India [RBI], to check the data again.)

Figure 1
Source: Hermes Investment Management, World Economic Forum

Further, many economists and politicians have argued that cash accounted for a very small percent of the overall black economy in India – 12% according to India Ratings and Research, a credit rating agency. The other 88% is in the form of real estate, jewelry, foreign currency, etc. In effect, only a small percent of the black money has been eradicated.

So was the entire exercise justified? Should the government have taken such a step for just about Rs1,000 billion, or even less?

That cannot be answered now. A couple of years from now, we may be in a better position to make more informed pronouncements rather than conjectures, with the benefit of data and hindsight. There are many far-reaching implications whose impact on the economy and lives of the people is thus far difficult to ascertain.

Hermes Investment Management’s emerging markets team, headed by Gary Greenberg, in a first-quarter Gemologist newsletter, looked beyond the immediate shocks in assessing a range of “Modinisation” reforms including demonetization: “Modi’s moves are excellent from a long-term perspective but the evidence suggests that some of the reforms will continue to have an adverse impact on earnings in the near term. Nevertheless, they create solid foundations for long-term sustainable growth driven by higher productivity – and this is what really matters, in economies everywhere.”

Long-Term Implications
Cashless economy: This will not happen overnight. India will not become a cashless society. However, a less-cash society is a possibility, and never before has India or any other country seen the kind of thrust towards digital payments that has resulted – a huge spurt in plastic card, online banking and e-wallet transactions since the ban was announced. There are infrastructural and cultural issues that must be overcome. Yet, with 65% of the population below the age of 35, change is possible.

Taxation: The prime minister mentioned in his December 31 speech that only 2.4 million people declare income of over Rs 1 million. This cannot be realistic. The number of luxury cars sold in India, the number of premium apartments sold each year, and the number of people going on foreign holidays all point towards the fact that many of those who earn more than Rs 1 million either don’t file tax returns or declare lesser income to avoid tax.

The government has said that about Rs 7,000 billion was deposited in 6 million accounts, and these will be scrutinized by the income tax department to find out if the deposits matched with the tax returns filed by these account holders. This action will definitely result in bringing more people into the tax net in the future.

Cash-less transactions have the added benefit of leaving audit trail that tax authorities can track. A broadened tax net would hopefully result in lower tax rates over time. Many smaller businesses that do not want to be a part of the formal economy due to high tax rates may then voluntarily consider being a part of it.

Economy and Banking
GDP: The parallel economy results in underestimation of gross domestic product. Former Prime Minister Manmohan Singh, a prominent economist himself, criticized demonetization and said that the GDP may decline by as much as 2%.

While this might be true in the near term, research has shown that corruption and black money have a negative impact on GDP and its growth rate. In the long run, reduction in corruption and black money should result in an increase in GDP, everything else being equal. Also, more cashless transactions will bring more small and medium-size enterprises into the formal economy.

Cost of capital: The banks are flooded with cash deposits and as a result have begun to lower interest rates. State Bank of India, the largest in the country, cut its lending rates by 90 basis points on January 1, and many other banks followed suit. While the RBI did not change the repo rate in its December policy review, the banks have still chosen to lower the rates. This indicates that the banks have decided to cut their margins and hope for volumes. The deposits will also have a multiplier effect in terms of stimulating investment.

Financial inclusion: The government used the opportunity to push financial inclusion by asking employers to open bank accounts for all their employees, including contract workers. Prasanna Tantri of the Indian School of Business, based on research published in top economic and finance journals, writes in Live Mint that moving money from home to the bank can have “enormous first-order benefits for the poor: The benefits would include increase in income, business investment and health spending, among other things.”

Prime Minister Modi stressed in his speech that re-monetization and bringing the banks to normalcy is the priority now. He also reiterated that demonetization was just the beginning of the battle to purify the nation of corruption and black money.

The story is still unfolding, so let’s not write off demonetization as a failed exercise quite yet. With appropriate use of technology and continued political will, it might just be what was needed.

Friday, January 13, 2017

Buying a Used Vehicle? Check your gaadi first!

Co-author- Saumya Rastogi

The used vehicle market in India is growing leaps and bounds – For cars alone the overall market size is close to $15 Billion and is expected to touch $45 Billion in next 4 years. While the growth projections are certainly encouraging, most of this market is still dominated by unorganized players. Consider this – Out of approximately 15000 used-car dealers in India only about 1000 are organized. A whopping 84% of the car transactions happen either between two unknown people (C2C) or through unorganized car dealers. In such a scenario, how does one ensure the quality of the vehicle?

The seller knows everything about the vehicle whereas a buyer has no clue! Information asymmetry between the buyer and seller has been the biggest drawback of used car market or popularly termed as “market for lemons”. With the growing consumer interest in second hand vehicles, players are entering this space to bridge this information gap. is one such startup that aims to reduce asymmetric information between buyers and sellers in the used vehicle transactions with the use of technology. is positioned as a truly independent vehicle inspection startup that avoids any conflict of interest by not getting involved in the buying or selling process.

Founded by Amit Nigam, is an early entrant in this untapped domain. Amit holds MBA from IIM Calcutta prior to which he studied B. Tech at NITK Surathkal. He has an experience of 15 years in software products development. Like many other customers, Amit also suffered from the problem of incomplete information in buying a car for himself and it was then that he felt the need for a solution to this problem. Amit’s experience at Bosch (largest supplier of automotive components) served as a base to equip him with domain expertise for this industry.

Here is the story of from its founder Amit Nigam. is a very different kind of startup. Would you like to tell us about it? What are the services offered? is a year-old startup committed to bringing transparency in the purchase/sale of used vehicles. It works as an e-commerce platform; providing on-demand services to customers from the convenience of their homes or offices.  You can call it an online marketplace which provides prospective buyers with expert technical opinion about vehicle quality and advice when purchasing vehicles, thus helping them in making informed decisions at fair prices. The inspection is provided at a nominal fee of Rs 999/- for cars and Rs. 649/- for bikes.

Do you only offer inspection service or you also have collaboration with Repair & Servicing Centers? If not, are there any plans for expanding your network with Service Centers?
We operate via co-branded B2B partnerships as well as direct B2C channels.
We also have quite ambitious plans to serve the customers at every step of vehicle ownership value chain. At present we are conducting a number of pilots and working towards establishing a repeatable model.

How do you incorporate technology in your business?
This space is largely unorganized and has been traditionally served by local garage mechanics. We are trying to bring transparency in multiple dimensions – service quality, pricing, customer interactions, process standardization, predictable output formats etc. Technology takes the center stage in delivering all these promises; everything that can be automated is automated at

We have developed a proprietary technology called “mini-ERP” which helps us achieve the best in class efficiencies at scale, while making the complete process transparent to all stakeholders. Vehicle inspections are core to our business and we have demonstrated it by investing in this technology. While almost everyone in this business uses “pencil above the ear” approach to vehicle inspections, we have led from the front to deliver the quality and transparency that the customers deserve.

Your website shows Bike Inspection “51 Point Check” and “106 Point Check” for Car Inspection. Can you explain this?
We offer “51 Point Check” for Bikes, that is, 51 point check across all critical areas of 2-wheeler like Engine, Exhaust, Brakes, Suspension, Sprocket, Tires, Bearings, Electricals and all other subsystems. Similarly, for cars we offer 106 point check across all critical areas of a 4-wheeler like Engine, Brakes, Transmission, Suspension, Tires, HVAC, Electricals and all other subsystems.

In which city do you currently offer service? Are there any plans for expansion?
We currently service 6 cities (+5 in NCR) – Bengaluru, Delhi & NCR, Mumbai, Chennai, Pune and Hyderabad. We are looking to add 4 more cities in our list in the short term.

How is different from its competitors? We believe the market is not too penetrated in this area. What is your view on the same?
We are India’s first fully independent vehicle inspection services provider serving both 2-wheelers and 4-wheelers of all brands under a single umbrella. Our “independence” puts us in the position of strength – we don’t get involved in the vehicle buying or selling process and hence can focus on our core offering, i.e., vehicle inspections. Independence and our first-in-class technology led approach is the USP of

In your business, customers need trust on your inspection service, as their future decision is solely based on your judgment. How do you built that trust and confidence in the customer?
There are enough checks and balances right from the time we recruit the technicians, train them on the do’s and don’ts, continuously taking customer feedback on them and most importantly, incorporating severe disincentives for any deviation from the process.

What are the kinds of employee roles available at  What is the background preferred for those roles?
We mainly hire for operational roles such as Operations Managers, Operations Executives of varied experiences, BPO executives, automotive domain experts etc. In order to ensure candidates of proven credentials we prefer to hire via referrals; either the candidates should have demonstrable on-the-job experience or should possess relevant technical background (ITI, Diploma, etc.).

How is funded? Are you looking at raising funds in the future?
We are boot-strapped as of now but in advanced stages of closing our first round of funding.

What according to you has been the Eureka! Moment in your journey so far?

We were recently chosen in top 1% of the startups across India amongst those who participated in LetsIgnite – India’s largest Angel conference.

Monday, January 9, 2017

Our World Class Aspirations

This article was first published in the Times of India, January 07, 2017; Co-author- Kavil Ramachandran

The sprawling Cyber Towers, Hussain Sagar and the Buddha statue, riding around Kasu Brahmananda Reddy (KBR) National Park- the 5km stretch, street food and biryani, and numerous movie theatres; endear Hyderabad to any new comer. The 158kms 8 lane ring road, beautiful landscaping near and around the GMR Hyderabad International Airport, and the median greenery all through the Outer Ring Road, encircling the city of Hyderabad, makes everyone chuckle with delight, “Is this India?” The blend of ancient and modern lends it a charm that is unique. Hyderabad has something for everyone.

Hyderabad has come a long way from being a city marred with communal riots, dust and dirt. The transformation really began around the mid-1980s when Nandamuri Taraka Rama Rao (NTR) served as the Chief Minister of the state of Andhra Pradesh (the pre 2014 combined State of Andhra Pradesh and Telangana). NTR put an end to the communal riots and undertook initiatives for the image makeover of the city. Notable amongst them was the beautification of the Tank Bund area. By the early 1990s, the effects of the initiatives were visible.

N. Chandrababu Naidu’s government from the year 1995 to 2004 worked towards making Hyderabad a ‘world class’ city. One of the initiatives to achieve this objective was to ‘clean up’ the city. Various policies, regulations and investments were made to broaden the roads, ramp up the infrastructure, attract educational institutions, develop parks and green areas and focus on sanitation and cleanliness.
Privatisation of Municipal services, viz., sweeping and garbage collection, was one of the steps taken to ensure timely collection of garbage. Initially only 10 percent of the city was covered by the private contractors. Slowly the percent increased to cover majority of the city, with MCH covering the balance.

In 1999, the Municipal Corporation of Hyderabad (MCH) became the first corporation in the country to adopt a unique “Unit System” to privatize the sweeping and garbage collection services. The entire city was divided into units of approximately 8kms stretch. These units were then allotted to pre-qualified contractors. This arrangement has resulted in significant cost savings for the MCH (Now GHMC- Greater Hyderabad Municipal Corporation). Resident welfare associations (RWAs) were also involved by introducing a voluntary garbage disposal scheme, wherein, the MCH provided three wheeled auto rickshaws to RWAs for the collection of door to door garbage. The entry of the private sector visibly improved the cleanliness levels in the city.

The current Government of Telangana, led by Kalvakuntla Chandrashekar Rao (KCR), has been taking steps to take the city of Hyderabad to global standards in terms of cleanliness. Mechanised sweeping of main roads in the city takes place in the early hours of the day. This is again done on a contract basis by private players.

In addition, the Government has recently proactively planned to set up a clean air authority for Hyderabad. As per Minister for Municipal Administration and Urban Development K.T. Rama Rao, Hyderabad has “relatively better air quality index than many other Indian cities”. Yet, measures are being taken by the government to control pollution.

Hyderabad was ranked as the best Indian city to live in by Mercer, the global human resources consulting firm in the year 2016, leaving behind cities like Mumbai, Delhi, Bangalore, Kolkata, Chennai and Pune. Hyderabad was also ranked as the 19th cleanest city in India, out of a total of 73 cities with a population more than a million, under the Swachh Sarvekshan 2016.

Most people who come from other parts of the country and make Hyderabad their home are very fond of the city. Apart from friendly people, quality of living, being relatively safe with lower crime rates, having world class education and healthcare facilities and cheaper real estate compared to its counterparts like Bangalore and Chennai, what does stand out about Hyderabad is its cleanliness compared to the other cities in India!