The US had made it clear that visa fraud charges against Khobragade will not be dropped
The US has rejected India’s contention that it has misconstrued the salary details in the visa application of senior Indian diplomat Devyani Khobragade’s domestic help. The US has asserted that there was no goof up and that the case against her is on a firm footing.
Making it clear that visa fraud charges against Khobragade will not be dropped, US sources has been quoted as saying, “The strength of the fraud in the case is very strong. The case will be there against her, it will not be dropped. The charges will remain,” the sources said, adding that if the 39-year-old diplomat gets full diplomatic immunity, she can travel outside the country.
However, if she were to return to the US later on a visit and if she then does not have the immunity, she could face arrest on the charges against her and be prosecuted.
On the allegation made by Khobargade’s lawyer that the $4,500 amount written in the visa application was Khobragade’s salary and not the amount promised to be paid to the domestic worker Sangeeta Richard, sources have said that Khobragade did not understand the form correctly.
“No federal agent goofed up in reading the form,” sources said, rubbishing allegations made by Khobragade’s lawyer Dan Arshack.
“It is clear that the salary details required on the visa application form are that of the employee and not the employer,” they said.
There is no question of apology to India over the arrest of Khobragade, the then Deputy Consul General of India, in New York on 12th December which has led to strong protests by the Indian Government and widespread indignation in India.
Khobragade was later released on a $250,000 bond after pleading not guilty in court. The Indian Government has demanded withdrawal of the case and an apology for the treatment meted out to the diplomat.
Sources also added that Khobragade’s domestic help Sangeeta’s family was evacuated to the US because the Justice Department was compelled to make sure that victims, witnesses and their families were safe and secure while the cases were pending.
Looking at the issues faced by MSMEs in borrowing money from banks, one really wonders why this happens when there is a code of banks commitment to micro and small enterprises
Micro, Small and Medium Enterprises (MSMEs) are often hailed as the pillars of Indian economy. Their contribution both in terms of production of goods and services and employment generation is immense. Surprisingly, success achieved by most of the MSMEs is because of their own endeavours, and there is very limited support from the system in which they operate. MSMEs face problems at all stages right from the setting up of a business entity to the selling of goods in the market.
However, the toughest task for MSMEs today is to get a loan approved from a bank to fund their project. In absence of collateral, raising loans is impossible for a small enterprise. This happens in spite of the fact that a popular government scheme called as, ‘Credit Guarantee Fund Trust for Micro and Small Enterprises’ is in place to help borrowers, who do not have the collateral to offer. This is not the only issue. Getting a loan application acknowledged is also a gigantic task. Looking at the issues faced by MSMEs in borrowing money from banks, one really wonders as to why this happens, when there is a code of banks’ commitment to micro and small enterprises. These codes are set by Banking Codes and Standards Board of India (BCSBI).
Let us look at some of these codes to see how seriously these codes are followed by the banks:
Code on Lending
We will inform you about salient features including benefits available and charges payable and terms of Credit Guarantee Scheme of CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES which is extended by eligible banks and is popularly known as CGTMSE guarantee scheme for MSEs and which is available at present to new as well as existing Micro and Small Enterprises including Service Enterprises with a maximum credit cap of Rs100 lakh (Rupees One hundred lakh) per borrower, excluding retail trade, educational institutions, training institutes and Self Help Groups (SHGs) as per the said Scheme.
Reality: Most of the MSMEs crib that bank officials very rarely talk about the scheme. Even dedicated SME branches of banks discourage lending under the scheme. This happens even in cases, when the scheme is advertised by a bank. The RBI data below shows it all. Considering that India has more than three crore MSMEs, the number of loans sanctioned is miniscule.
Code for loan application:
Acknowledge, in writing, the receipt of your loan application, whether submitted manually or online, indicating therein the time frame within which the application will be disposed of.
Reality: Banks rarely acknowledge a loan application. Acknowledgement for loan application is given only in such cases where banks found some scope for granting of loans. If a small or medium enterprise comes up for a loan proposal which has some new ideas, banks tend to reject the loan application on the grounds of viability without acknowledging the loan application.
Code for credit assessment:
Reality: As mentioned above collateral free loan remains a dream for MSME borrowers. While there are risk perceptions of lending to MSMEs, the fact remains that banks have agreed to promote MSME business by adopting this code. Hence non-adherence to the code raises questions about the bank’s seriousness about the code.
There is a need to empower MSMEs with respect to their rights and duties when they deal with banks. It is true that loans cannot be disbursed in a callous way by the banks without following due diligence. But the fact remains that MSMEs need financial help which can be provided only through institutional framework of financing. While approval of disbursement of loans come only at a very advanced stage, banks do need to share the details of banking codes so that MSMEs understand their rights and also ensure that they follow duties that this code expects them to do.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
Even for the same task, different people would demand a different level of wage. There is no way a government can decide what is the 'right' wage for a job. A uniform amount that applies to all the jobs is even more illogical
Strange as it may seem, one reason for the tepid recovery of the US economy may be found in the Devyani Khobragade controversy. While the US courts decide on the facts of the case, it would be worthwhile for us to look at the economics of Minimum Wage Laws; and what they do to the welfare of the people they seek to protect.
What are wages?
Wages are the price of service a person produces. Like bananas sold in the neighbourhood market, the cost of labour is determined by the free forces of demand and supply. For a housemaid’s job for example, the number of persons willing to work as maids constitutes the supply. Potential employers such as Devyani, who need their services, constitute the demand. Other things remaining constant, every housemaid would like to work for the highest possible wage, while every employer would like to pay the lowest possible amount. These free forces of demand & supply would determine the market level of wages for a housemaid’s job.
What the Minimum Wage Law does?
What happens when a law specifies that no maid be paid a wage lower than the one it specifies? To start with, anyone who thinks a maid’s job is not worth the amount specified, and can manage without one, will not employ a maid at all. Thus, the immediate impact of such a law is to render some of the maids jobless! Higher the ‘minimum’ wage the law says must be paid to the maids; more will be the maids who will be rendered jobless. The law harms the very people it seeks to protect. “Minimum wage law…” writes noted libertarian Henry Hazlitt in ‘The Conquest of Poverty’ “has condemned to unemployment all the workers incapable of earning that minimum”.
What happens if, to avoid this, the minimum wage specified is kept very “low”? There are problems with this too.
Firstly, if the specified wage is lower than what would have been determined by free forces of demand and supply, the maids would anyway get the ‘market rate’. In that case, the law is redundant, and serves no purpose at all.
Secondly, how does the government decide what is the “appropriate” wage for a job? The price at which a person is willing to accept a job differs from person to person. Some have a large family to support, others are single. Some have earning spouses; others are the sole bread earners in the household. Some stay in inherited accommodation, others pay rents or have mortgages. Some stay closer to their places of employment; others spend large amounts of time and money to travel to their place of work. Even for the same task, different people would demand a different level of wage. There is no way a government can decide what the ‘right’ wage for a job is. A uniform amount that applies to all the jobs is even more illogical.
Thirdly, even from the point of view of personal freedom, the state has no business to prevent an individual from taking up a job at a wage that is acceptable to him or her, but not to the state.
Maids vs waiters & taxi drivers?
It is often overlooked what happens to the money “saved” when say, maids are paid “less”. If an employer pays less to a maid, for example, he may buy an extra pair of garments or footwear, or spend more on eating out, tip his waiters more liberally or take a taxi home instead of public transport. Even if the entire money is saved, the bank in turn would lend it to industry or individuals, who would put it to productive use or buy homes or cars. What is loss for the maids is thus gain for the waiters or taxi drivers. I see no reason why a government policy should benefit one over the other. All that the Minimum Wage Law does is to distort the markets.
So, what should the government do to “protect” say, the housemaids as in this case? Precisely nothing! If employers offer wages that are too low, some of housemaids would leave the job market and look for alternative employments. It would make housemaids more difficult to find, making them pricier and raise their wages.
In ‘Economics in One Lesson’, Hazlitt devotes an entire chapter to Minimum Wage Laws and how they increase poverty. He says, “You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn; while you deprive the community even of the moderate services he is capable of rendering. In brief, for a low wage, you substitute unemployment”.
Hazlitt also points out that bad as the wages may seem for those who were willing to take up jobs at pay lower than what the government thought the minimum should be, the very fact that they were willing to take them up shows they were unable to earn more anywhere else. Hence letting them earn whatever best they are willing to earn actually does them a lot of good, and keeps them out of the unemployment dole. He concludes by saying that “… there is no escape from the conclusion that the minimum wage will increase unemployment”.
Minimum Wage Laws are a legacy of the past, when labour was bonded for life and exploited in inhuman conditions. They have no place in a modern democratic society, where human life and dignity is well protected through other means. They serve no purpose other than shutting off potential employees from offering their services at a lower cost. If anything, they interfere in a person’s dignified living by pushing her out of employment and into unemployment dole.
Why else would Devyani need to import a housemaid when thousands of Americans are looking for jobs?
(Chandragupta Acharya holds an MBA in Finance and also a degree in Banking from the Indian Institute of Bankers. He has more than 15 years of experience in working with mutual funds, banks and technology companies.)