What do Income Tax Returns, Demonetization, and Fast Tag have in common?

It may help to read last Thursday’s post before you start reading this one.

Why are there such long lines at all the toll plazas across India at the moment? You may give  a lot of answers, and if you have recently passed through a toll plaza yourself, your answer may well be unprintable.

Here’s mine though: you are, currently, assumed guilty until proven innocent.

All cars must wait in line, pay cash/have the RFID tag scanned, and for each car, once the payment is done, the barrier is raised, and you may pass through. The barrier stays put until the verification is done: that’s another way of saying guilty until proven innocent.

But the cool thing, to me, about implementing Fast Tag, is that once a certain percentage of vehicles in India is equipped with Fast Tags, the barriers can stay up. We will transition to a regime in which all vehicles are assumed to be innocent.

Now, as we learnt the previous week, with a large sample, there will  be problems. In the new systems, in which vehicles just pass through because we assume all of them have Fast Tag implemented, there will be exceptions. There will be vehicles that don’t, in fact, have Fast Tag implemented, and so they may end up not paying the toll.

But the vast majority will have Fast Tag, and don’t have to pay with money and waiting time. The government will miss out on catching a few bad apples, but a lot of Indians will save a lot of time. On balance, everybody wins.

And of course, given technology, it should be possible to have notifications sent to those vehicles that pass through without paying. Yes, I know it seems a long way off right now, but the point is that as a statistician, we move to a world where we assume all vehicles are innocent until proven guilty, rather than the other way around.

Fast Tag implementation, when fully functional, will get the null hypothesis right.

And pre-filled income tax returns, sent to us by the government, with minimum of audits and notices, is exactly the same story. The government assumes innocence until proven otherwise, leading to a system in which every tax-paying Indian is assumed to be an honest tax-payer until proven otherwise. We already have a system that is closer to this ideal than was the case earlier, and hopefully, it will become better still with time.

And now that we’re on a roll, that’s the problem with demonetization, if you were to ask a statistician! All notes were presumed guilty, until proven innocent.

Here’s the point: if you are a student of statistics, struggling with the formation of the null, and wondering what the point is anyways*, the example from last Thursday and the three noted above should help make the topic more relatable.

And to the extent that it does, statistics becomes more relatable, more understandable and – dare I say it – fun!

 

*Trust me, we’ve all been there

 

India: Links for 23rd September, 2019

  1. Income tax reforms: in my opinion, an urgent necessity.
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  2. ““If we wake up a little late after there is daylight, and go to defecate in the open, the railway authorities pelt us with stones or beat us with big sticks,” said Sumanben, a migrant Adivasi woman who lives on public land near a railway track. “Sometimes there is a watchman at night. If he is there then we cannot defecate that day.”.”
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    Indiaspend, ostensibly, on the Minimum Wage stipulations – but it is about more than that.
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  3. “We must therefore recall that if the India story plays out well in the world’s capitals, boardrooms, think tanks and editorial offices today, it is because of three developments: the development of a nuclear arsenal with a no-first use doctrine, the revulsion against international terrorism after 9/11, and India’s emergence as a high-growth economy with several globally competitive sectors. In the past two decades, India has come to be seen as an engine of global economic growth, a potential counter-weight to China, and a country that has taken a liberal democratic path to prosperity. It is high economic growth that created the conditions for India to tango with the US, be taken with grudging seriousness by China, and clear the way for better relations with East Asia, Australia and Europe.”
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    High growth matters: the geopolitical argument.
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  4. Amol Agarwal reports on the proceedings of ‘The International Conference on Indian Business and Economic History’. This deserves to be widely read, and widely shared.
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  5. “What is needed is a change in the policy regime in many cross-cutting systemic issues, such as the role of politicians, stability of tenure, size and nature of Indian bureaucracy, accountability, monitoring of programmes, and civil service reforms, which will transform the individual competence of IAS officers into better collective outcomes.”
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    In a sense, a frustrating article to read, because more than the what, which is clear to all, it is the how that is important – and that is missing.