Gross National Happiness (GNH) : An Inane Concept

Have you ever wondered what happiness is? Happiness is quite often equated with money. The gross domestic product, or GDP, is routinely used as shorthand for the well-being of a nation. But the tiny Himalayan kingdom of Bhutan has been toying with a completely different idea for a while. King Wangchuck has decided to make his nation’s priority not its GDP but its GNH. And believe it or not but the most unlikely place on earth for the birth of an international trend is emerging as a global leader in the promotion of this whole new concept of the 'Gross National Happiness.'

According to Wiki, Gross National Happiness (GNH) is an attempt to define quality of life in more holistic and psychological terms than GDP. The concept of GNH is based on the premise that true development of human society takes place when material and spiritual development occur side by side to complement and reinforce each other.

I am sure we all will agree that happiness is a feeling, a subjective experience. I may say “I am happy” just as I may say “I am rich.” The two statements sound similar but these statements are qualitatively different. There is an objective validity to the statement “I am rich” because my wealth can be measured. But happiness is subjective and does not allow interpersonal comparisons, while richness does. We can definitely say how A’s wealth compares to B’s wealth but cannot say how A’s happiness compares to B’s happiness.

GDP is a measure of the annual production of final goods and services in an economy denominated in monetary terms. GDP does not aggregate cows. Thus saying that the GDP does not accurately tell me anything about how many cows are in the economy is as silly as saying that GDP does not tell me whether the people in the country are happy or not!

I have never considered the GDP to be the end-all and be-all of an economy any more than I consider the monthly income to be the only relevant characteristic of a person. Those who complain that GDP is not all that matters are making a valid but rather trivial complaint. What I don’t understand is the attempt by the detractors of GDP aping a metric which they have perhaps misunderstood. They are in effect saying that GDP does not measure happiness. So we must come up with an alternate aggregate measure we will call Gross National Happiness which will be more appropriate. That is GNS - Gross National Stupidity ;-) Tomorrow they may say that GDP does not give a count of the number of cows so we should come up with some kind of Gross National Cow index!

Taxing ESOPs - RIDICULOUS!!

Chidambaram seems to have completely gone wrong on the issue of the Fringe Benefit Tax assessment of Employee Stock Ownership Plans, or ESOPs. This could be one of the most regressive steps in the disappointing Union Budget 2007-08. FM has included ESOPs in the Fringe Benefit Taxes' ambit.

ESOPs are a capital asset. Technically speaking, an ESOP is a transfer of remuneration from the company via a capital asset. They are a wealth-creating asset and FM is taxing them like income. Which canon of economic thinking can EVER justify that?? In an interview to CNN-IBN, Chidambaram said that ESOPs are fringe benefits, so they need to be taxed. Are ESOPs really fringe benefits? ESOPs are not a like a car, or a house or gardener a company provides its employees. It's much more than that. ESOPs are a way to include the employees in the growth of an organisation. It's a participatory or an inclusive way of running an organisation. Actually, what the FM has done is to tax those professionally run companies who believe in offering ESOPs. So by including ESOPs in the FBT regime, FM is penalising such companies. It's a highly regressive step, and will kill the entrepreneurial and start-up culture. It's not too late to get the FM roll back such a measure. If the media and the industry associations like Nasscom and CII put pressure on FM, he may just roll back.

Budget 07 - Not Good, Too Bad, And Seriously Ugly!

10 years ago, a guy named Palaniappan Chidambaram rose to present a budget. People hailed it as a "Dream Budget". Now the same guy presented another budget. Forget dreams, this is a budget that is disappointing, unimaginative and seriously sad. Everything was in place for the Finance Minister to present another dream, this time though he chose to present a nightmare for us. So what actually makes the nightmare budget so nightmarish?

Instead of trying to help the so-called "aam aadmi" by reducing the taxes, the minister chose to increase the government's expenses by Rs 100,000 crore!

• Education came first with a whopping 34.5% increase. Now that sure is a welcome step, if you decide to overlook the fact that most of this will go into providing reservations and very little will actually help the education of the "general quota". (An article on reservations - Coming soon! ;-) ) The 2% education cess has been increased to 3% and many experts believe that this is NOT going to help education at all (Read article).
• Next came the farm sector. A proposal for Rs 2,25,000 crore for farm credit and a target to bring 5 million more farmers under farm credit. Also a promise of 100 per cent subsidy to small farmers and 50 per cent subsidy to other farmers. Dear minister, when will you realize the fact that you are putting all that money into a black hole. Agriculture in India, in its present form is unviable. Farming on tiny individual plots is never a good idea (much less an efficient way of agriculture). The minister ought to have encouraged farm consolidation, but nothing of the sort happened.
• Rural India dominated with hiked outlays under the Rajiv Gandhi Drinking Mission, the Bharat Nirmal Housing Programme, the National Rural Health Mission. Now our dear minister seems to have forgotten that people live in urban areas too. While the cost of health services in the urban areas has been rising, our minister chose to ignore the fact. With the infrastructure crumling in our urban areas, attention to urban infrastructure would not have hurt. While its good that our minister has tried to help the rural area, the complete lack of focus on urban areas is disappointing and unfortunate.
• The budget proposes to include any sweat equity shares allotted by a company to its existing or former employees within the ambit of fringe benefits for the purpose of taxation. So with the ESOPs now under the FBT regime, employees stand to lose (I'll write more about it in my next article).
• Of course, the finance minister did not forget to bring IT companies under MAT or the minimum alternative tax. India’s export-oriented enterprises such as in the thriving software outsourcing industry were brought back under the tax net. Now they have to pay 11.33 percent of the adjusted book profits as MAT.

Some questions that came to my mind while listening to the boring and unimaginative budget:

• While I appreciate the focus on rural development, the fact is that people live in urban areas too, and they too need infrastructure. Btw, do you think the urban middle class is just about a hundred people or so? (the complete disregard of the urban middle class in your budget makes me think that someone told you so)
• While IT too should be taxed like any other industry, don’t you think its too early?What in the world makes you think that 11.33% MAT would hardly make any difference to the IT companies?? Sir, it can push a lot of small companies (already with razor thin margins) into loss making units?
• What the hell is this FBT thing? Yeah, I know it was introduced in the last budget because someone went brain dead but continued writing the budget. Don’t you think it should have been scrapped?
• And hey, all this cess and surcharge needs to be done away with. You ALREADY collect taxes for doing things that the government is supposed to do - like building roads, providing basic education etc. Why the hell do you have a road cess (on petrol) and an education cess (on all taxes)??

Has the dream merchant stopped daring to dream?