Consulting Parlour

I encountered the flattening of the world quite by accident. It was in late February of last year, and I was visiting the Indian high-tech capital, Bangalore,
I Was working on a documentary for the Discovery Times channel about outsourcing. In short order, I interviewed Indian entrepreneurs who wanted to prepare my taxes from Bangalore, read my X-rays from Bangalore, trace my lost luggage from Bangalore and write my new software from Bangalore. The longer I was there, the more upset I became -- upset at the realization that while I had been off covering the 9/11 wars, globalization had entered a whole new phase, and I had missed it. I guess the eureka moment came on a visit to the campus of Infosys Technologies, one of the crown jewels of the Indian outsourcing and software industry. Nandan Nilekani, the Infosys C.E.O., was showing me his global video-conference room, pointing with pride to a wall-size flat-screen TV, which he said was the biggest in Asia. Infosys, he explained, could hold a virtual meeting of the key players from its entire global supply chain for any project at any time on that supersize screen. So its American designers could be on the screen speaking with their Indian software writers and their Asian manufacturers all at once. That's what globalization is all about today, Nilekani said. Above the screen there were eight clocks that pretty well summed up the Infosys workday: 24/7/365. The clocks were labeled U.S. West, U.S. East, G.M.T., India, Singapore, Hong Kong, Japan, Australia.
''Outsourcing is just one dimension of a much more fundamental thing happening today in the world,'' Nilekani explained. ''What happened over the last years is that there was a massive investment in technology, especially in the bubble era, when hundreds of millions of dollars were invested in putting broadband connectivity around the world, undersea cables, all those things.'' At the same time, he added, computers became cheaper and dispersed all over the world, and there was an explosion of e-mail software, search engines like Google and proprietary software that can chop up any piece of work and send one part to Boston, one part to Bangalore and one part to Beijing, making it easy for anyone to do remote development. When all of these things suddenly came together around 2000, Nilekani said, they ''created a platform where intellectual work, intellectual capital, could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced and put back together again -- and this gave a whole new degree of freedom to the way we do work, especially work of an intellectual nature. And what you are seeing in Bangalore today is really the culmination of all these things coming together.''
At one point, summing up the implications of all this, Nilekani uttered a phrase that rang in my ear. He said to me, ''Tom, the playing field is being leveled.'' He meant that countries like India were now able to compete equally for global knowledge work as never before -- and that America had better get ready for this. As I left the Infosys campus that evening and bounced along the potholed road back to Bangalore, I kept chewing on that phrase: ''The playing field is being leveled.''
''What Nandan is saying,'' I thought, ''is that the playing field is being flattened. Flattened? Flattened? My God, he's telling me the world is flat!''
Here I was in Bangalore -- more than 500 years after Columbus sailed over the horizon, looking for a shorter route to India using the rudimentary navigational technologies of his day, and returned safely to prove definitively that the world was round -- and one of India's smartest engineers, trained at his country's top technical institute and backed by the most modern technologies of his day, was telling me that the world was flat, as flat as that screen on which he can host a meeting of his whole global supply chain. Even more interesting, he was citing this development as a new milestone in human progress and a great opportunity for India and the world -- the fact that we had made our world flat!
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This has been building for a long time. Globalization 1.0 (1492 to 1800) shrank the world from a size large to a size medium, and the dynamic force in that era was countries globalizing for resources and imperial conquest. Globalization 2.0 (1800 to 2000) shrank the world from a size medium to a size small, and it was spearheaded by companies globalizing for markets and labor. Globalization 3.0 (which started around 2000) is shrinking the world from a size small to a size tiny and flattening the playing field at the same time. And while the dynamic force in Globalization 1.0 was countries globalizing and the dynamic force in Globalization 2.0 was companies globalizing, the dynamic force in Globalization 3.0 -- the thing that gives it its unique character -- is individuals and small groups globalizing. Individuals must, and can, now ask: where do I fit into the global competition and opportunities of the day, and how can I, on my own, collaborate with others globally? But Globalization 3.0 not only differs from the previous eras in how it is shrinking and flattening the world and in how it is empowering individuals. It is also different in that Globalization 1.0 and 2.0 were driven primarily by European and American companies and countries. But going forward, this will be less and less true. Globalization 3.0 is not only going to be driven more by individuals but also by a much more diverse -- non-Western, nonwhite -- group of individuals. In Globalization 3.0, you are going to see every color of the human rainbow take part.
We are now in the process of connecting all the knowledge pools in the world together. We've tasted some of the downsides of that in the way that Osama bin Laden has connected terrorist knowledge pools together through his Qaeda network, not to mention the work of teenage hackers spinning off more and more lethal computer viruses that affect us all. But the upside is that by connecting all these knowledge pools we are on the cusp of an incredible new era of innovation, an era that will be driven from left field and right field, from West and East and from North and South. Only 30 years ago, if you had a choice of being born a B student in Boston or a genius in Bangalore or Beijing, you probably would have chosen Boston, because a genius in Beijing or Bangalore could not really take advantage of his or her talent. They could not plug and play globally. Not anymore. Not when the world is flat, and anyone with smarts, access to Google and a cheap wireless laptop can join the innovation fray.
When the world is flat, you can innovate without having to emigrate. This is going to get interesting. We are about to see creative destruction on steroids.
How did the world get flattened, and how did it happen so fast?
It was a result of 10 events and forces that all came together during the 1990's and converged right around the year 2000. Let me go through them briefly. The first event was 11/9. That's right -- not 9/11, but 11/9. Nov. 9, 1989, is the day the Berlin Wall came down, which was critically important because it allowed us to think of the world as a single space. ''The Berlin Wall was not only a symbol of keeping people inside Germany; it was a way of preventing a kind of global view of our future,'' the Nobel Prize-winning economist Amartya Sen said. And the wall went down just as the windows went up -- the breakthrough Microsoft Windows 3.0 operating system, which helped to flatten the playing field even more by creating a global computer interface, shipped six months after the wall fell.
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The second key date was 8/9. Aug. 9, 1995, is the day Netscape went public, which did two important things. First, it brought the Internet alive by giving us the browser to display images and data stored on Web sites. Second, the Netscape stock offering triggered the dot-com boom, which triggered the dot-com bubble, which triggered the massive overinvestment of billions of dollars in fiber-optic telecommunications cable. That overinvestment, by companies like Global Crossing, resulted in the willy-nilly creation of a global undersea-underground fiber network, which in turn drove down the cost of transmitting voices, data and images to practically zero, which in turn accidentally made Boston, Bangalore and Beijing next-door neighbors overnight. In sum, what the Netscape revolution did was bring people-to-people connectivity to a whole new level. Suddenly more people could connect with more other people from more different places in more different ways than ever before.
No country accidentally benefited more from the Netscape moment than India. ''India had no resources and no infrastructure,'' said Dinakar Singh, one of the most respected hedge-fund managers on Wall Street, whose parents earned doctoral degrees in biochemistry from the University of Delhi before emigrating to America. ''It produced people with quality and by quantity. But many of them rotted on the docks of India like vegetables. Only a relative few could get on ships and get out. Not anymore, because we built this ocean crosser, called fiber-optic cable. For decades you had to leave India to be a professional. Now you can plug into the world from India. You don't have to go to Yale and go to work for Goldman Sachs.'' India could never have afforded to pay for the bandwidth to connect brainy India with high-tech America, so American shareholders paid for it. Yes, crazy overinvestment can be good. The overinvestment in railroads turned out to be a great boon for the American economy. ''But the railroad overinvestment was confined to your own country and so, too, were the benefits,'' Singh said. In the case of the digital railroads, ''it was the foreigners who benefited.'' India got a free ride.
The first time this became apparent was when thousands of Indian engineers were enlisted to fix the Y2K -- the year 2000 -- computer bugs for companies from all over the world. (Y2K should be a national holiday in India. Call it ''Indian Interdependence Day,'' says Michael Mandelbaum, a foreign-policy analyst at Johns Hopkins.) The fact that the Y2K work could be outsourced to Indians was made possible by the first two flatteners, along with a third, which I call ''workflow.'' Workflow is shorthand for all the software applications, standards and electronic transmission pipes, like middleware, that connected all those computers and fiber-optic cable. To put it another way, if the Netscape moment connected people to people like never before, what the workflow revolution did was connect applications to applications so that people all over the world could work together in manipulating and shaping words, data and images on computers like never before.
Indeed, this breakthrough in people-to-people and application-to-application connectivity produced, in short order, six more flatteners -- six new ways in which individuals and companies could collaborate on work and share knowledge. One was ''outsourcing.'' When my software applications could connect seamlessly with all of your applications, it meant that all kinds of work -- from accounting to software-writing -- could be digitized, disaggregated and shifted to any place in the world where it could be done better and cheaper. The second was ''offshoring.'' I send my whole factory from Canton, Ohio, to Canton, China. The third was ''open-sourcing.'' I write the next operating system, Linux, using engineers collaborating together online and working for free. The fourth was ''insourcing.'' I let a company like UPS come inside my company and take over my whole logistics operation -- everything from filling my orders online to delivering my goods to repairing them for customers when they break. (People have no idea what UPS really does today. You'd be amazed!). The fifth was ''supply-chaining.'' This is Wal-Mart's specialty. I create a global supply chain down to the last atom of efficiency so that if I sell an item in Arkansas, another is immediately made in China. (If Wal-Mart were a country, it would be China's eighth-largest trading partner.) The last new form of collaboration I call ''informing'' -- this is Google, Yahoo and MSN Search, which now allow anyone to collaborate with, and mine, unlimited data all by themselves.
So the first three flatteners created the new platform for collaboration, and the next six are the new forms of collaboration that flattened the world even more. The 10th flattener I call ''the steroids,'' and these are wireless access and voice over Internet protocol (VoIP). What the steroids do is turbocharge all these new forms of collaboration, so you can now do any one of them, from anywhere, with any device.
The world got flat when all 10 of these flatteners converged around the year 2000. This created a global, Web-enabled playing field that allows for multiple forms of collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language. ''It is the creation of this platform, with these unique attributes, that is the truly important sustainable breakthrough that made what you call the flattening of the world possible,'' said Craig Mundie, the chief technical officer of Microsoft.
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Carly Fiorina, the former Hewlett-Packard C.E.O., who in 2004 began to declare in her public speeches that the dot-com boom and bust were just ''the end of the beginning.'' The last 25 years in technology, Fiorina said, have just been ''the warm-up act.'' Now we are going into the main event, she said, ''and by the main event, I mean an era in which technology will truly transform every aspect of business, of government, of society, of life.''
As if this flattening wasn't enough, another convergence coincidentally occurred during the 1990's that was equally important. Some three billion people who were out of the game walked, and often ran, onto the playing field. I am talking about the people of China, India, Russia, Eastern Europe, Latin America and Central Asia. Their economies and political systems all opened up during the course of the 1990's so that their people were increasingly free to join the free market. And when did these three billion people converge with the new playing field and the new business processes? Right when it was being flattened, right when millions of them could compete and collaborate more equally, more horizontally and with cheaper and more readily available tools. Indeed, thanks to the flattening of the world, many of these new entrants didn't even have to leave home to participate. Thanks to the 10 flatteners, the playing field came to them!
It is this convergence -- of new players, on a new playing field, developing new processes for horizontal collaboration -- that I believe is the most important force shaping global economics and politics in the early 21st century. Sure, not all three billion can collaborate and compete. In fact, for most people the world is not yet flat at all. But even if we're talking about only 10 percent, that's 300 million people -- about twice the size of the American work force. And be advised: the Indians and Chinese are not racing us to the bottom. They are racing us to the top. What China's leaders really want is that the next generation of underwear and airplane wings not just be ''made in China'' but also be ''designed in China.'' And that is where things are heading. So in 30 years we will have gone from ''sold in China'' to ''made in China'' to ''designed in China'' to ''dreamed up in China'' -- or from China as collaborator with the worldwide manufacturers on nothing to China as a low-cost, high-quality, hyperefficient collaborator with worldwide manufacturers on everything. Ditto India. Said Craig Barrett, the C.E.O. of Intel, ''You don't bring three billion people into the world economy overnight without huge consequences, especially from three societies'' -- like India, China and Russia -- ''with rich educational heritages.''
That is why there is nothing that guarantees that Americans or Western Europeans will continue leading the way. These new players are stepping onto the playing field legacy free, meaning that many of them were so far behind that they can leap right into the new technologies without having to worry about all the sunken costs of old systems. It means that they can move very fast to adopt new, state-of-the-art technologies, which is why there are already more cellphones in use in China today than there are people in America.
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If you want to appreciate the sort of challenge we are facing, let me share with you two conversations. One was with some of the Microsoft officials who were involved in setting up Microsoft's research center in Beijing, Microsoft Research Asia, which opened in 1998 -- after Microsoft sent teams to Chinese universities to administer I.Q. tests in order to recruit the best brains from China's 1.3 billion people. Out of the 2,000 top Chinese engineering and science students tested, Microsoft hired 20. They have a saying at Microsoft about their Asia center, which captures the intensity of competition it takes to win a job there and explains why it is already the most productive research team at Microsoft: ''Remember, in China, when you are one in a million, there are 1,300 other people just like you.''
The other is a conversation I had with Rajesh Rao, a young Indian entrepreneur who started an electronic-game company from Bangalore, which today owns the rights to Charlie Chaplin's image for mobile computer games. ''We can't relax,'' Rao said. ''I think in the case of the United States that is what happened a bit. Please look at me: I am from India. We have been at a very different level before in terms of technology and business. But once we saw we had an infrastructure that made the world a small place, we promptly tried to make the best use of it. We saw there were so many things we could do. We went ahead, and today what we are seeing is a result of that. There is no time to rest. That is gone. There are dozens of people who are doing the same thing you are doing, and they are trying to do it better. It is like water in a tray: you shake it, and it will find the path of least resistance. That is what is going to happen to so many jobs -- they will go to that corner of the world where there is the least resistance and the most opportunity. If there is a skilled person in Timbuktu, he will get work if he knows how to access the rest of the world, which is quite easy today. You can make a Web site and have an e-mail address and you are up and running. And if you are able to demonstrate your work, using the same infrastructure, and if people are comfortable giving work to you and if you are diligent and clean in your transactions, then you are in business.''
Instead of complaining about outsourcing, Rao said, Americans and Western Europeans would ''be better off thinking about how you can raise your bar and raise yourselves into doing something better. Americans have consistently led in innovation over the last century. Americans whining -- we have never seen that before.''
The long-term opportunities and challenges that the flattening of the world puts before the United States are profound. Therefore, our ability to get by doing things the way we've been doing them -- which is to say not always enriching our secret sauce -- will not suffice any more. ''For a country as wealthy we are, it is amazing how little we are doing to enhance our natural competitiveness,'' says Dinakar Singh, the Indian-American hedge-fund manager. ''We are in a world that has a system that now allows convergence among many billions of people, and we had better step back and figure out what it means. It would be a nice coincidence if all the things that were true before were still true now, but there are quite a few things you actually need to do differently. You need to have a much more thoughtful national discussion.''
The main challenge to America today is from those practicing extreme capitalism, namely China, India and South Korea. The main objective in this era is building strong individuals.
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Meeting the challenges of flatism requires as comprehensive, energetic and focused a response as did meeting the challenge of Communism. It requires a president who can summon the nation to work harder, get smarter, attract more young women and men to science and engineering and build the broadband infrastructure, portable pensions and health care that will help every American become more employable in an age in which no one can guarantee you lifetime employment.
We have been slow to rise to the challenge of flatism, in contrast to Communism, maybe because flatism doesn't involve ICBM missiles aimed at our cities. Indeed, the hot line, which used to connect the Kremlin with the White House, has been replaced by the help line, which connects everyone in America to call centers in Bangalore.
When it comes to responding to the challenges of the flat world, there is no help line we can call. We have to dig into ourselves. We in America have all the basic economic and educational tools to do that. But we have not been improving those tools as much as we should. That is why we are in what Shirley Ann Jackson, the 2004 president of the American Association for the Advancement of Science and president of Rensselaer Polytechnic Institute, calls a ''quiet crisis'' -- one that is slowly eating away at America's scientific and engineering base.
''If left unchecked,'' said Jackson, the first African-American woman to earn a Ph.D. in physics from M.I.T., ''this could challenge our pre-eminence and capacity to innovate.'' And it is our ability to constantly innovate new products, services and companies that has been the source of America's horn of plenty and steadily widening middle class for the last two centuries. This quiet crisis is a product of three gaps now plaguing American society. The first is an ''ambition gap.'' Compared with the young, energetic Indians and Chinese, too many Americans have gotten too lazy. As David Rothkopf, a former official in the Clinton Commerce Department, puts it, ''The real entitlement we need to get rid of is our sense of entitlement.'' Second, we have a serious numbers gap building. We are not producing enough engineers and scientists. We used to make up for that by importing them from India and China, but in a flat world, where people can now stay home and compete with us, and in a post-9/11 world, where we are insanely keeping out many of the first-round intellectual draft choices in the world for exaggerated security reasons, we can no longer cover the gap. That's a key reason companies are looking abroad. The numbers are not here. And finally we are developing an education gap. Here is the dirty little secret that no C.E.O. wants to tell you: they are not just outsourcing to save on salary. They are doing it because they can often get better-skilled and more productive people than their American workers.
These are some of the reasons that Bill Gates, the Microsoft chairman, warned the governors' conference in a Feb. 26 speech that American high-school education is ''obsolete.'' As Gates put it: ''When I compare our high schools to what I see when I'm traveling abroad, I am terrified for our work force of tomorrow. In math and science, our fourth graders are among the top students in the world. By eighth grade, they're in the middle of the pack. By 12th grade, U.S. students are scoring near the bottom of all industrialized nations. . . . The percentage of a population with a college degree is important, but so are sheer numbers. In 2001, India graduated almost a million more students from college than the United States did. China graduates twice as many students with bachelor's degrees as the U.S., and they have six times as many graduates majoring in engineering. In the international competition to have the biggest and best supply of knowledge workers, America is falling behind.''
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We need to get going immediately. It takes 15 years to train a good engineer, because, ladies and gentlemen, this really is rocket science. So parents, throw away the Game Boy, turn off the television and get your kids to work. There is no sugar-coating this: in a flat world, every individual is going to have to run a little faster if he or she wants to advance his or her standard of living. When I was growing up, my parents used to say to me, ''Tom, finish your dinner -- people in China are starving.'' But after sailing to the edges of the flat world for a year, I am now telling my own daughters, ''Girls, finish your homework -- people in China and India are starving for your jobs.''
Thomas L. Friedman is the author of ''The World Is Flat: A Brief History of the Twenty-First Century,'' to be published this week by Farrar, Straus & Giroux and from which this article is adapted. His column appears on the Op-Ed page of The Times, and his television documentary ''Does Europe Hate Us?'' was shown on the Discovery Channel on April 7 at 8 p.m.
Forwarded by- Mr. Srikanth Balakrishnan, Bangalore based proffessional involved in transaction taxation advisory services

These include the following:
Explicit knowledge
Tacit knowledge
Declarative knowledge
Procedural knowledge
Along the way we will touch on the meaning of the root term, knowledge, as well as a couple of related terms, specifically, implicit knowledge and strategic knowledge.
You might well ask, "Why bother?" After all, doesn’t everyone know what these terms mean? Don’t we all agree on what they mean? The answer, of course, is "No." There are different meanings at play. We will examine some of these and attempt to reconcile and integrate them.
Again, you might ask, "Why bother?" After all, what difference does it make? Well, if claims are being made that knowledge can be managed and if the term knowledge management is to have any credence, we must be clear about what we mean by the knowledge in knowledge management. For this reason, once the basic terms have been defined and related to one another, we will examine some of their implications for practice.
Knowledge
In general, we seem to mean three things by our use of the word "knowledge." First, we use it to refer to a state of knowing, by which we also mean to be acquainted or familiar with, to be aware of, to recognize or apprehend facts, methods, principles, techniques and so on. This common usage corresponds to what is often referred to as "know about." Second, we use the word "knowledge" to refer to what Peter Senge calls "the capacity for action," an understanding or grasp of facts, methods, principles and techniques sufficient to apply them in the course of making things happen. This corresponds to "know how." Third, we use the term "knowledge" to refer to codified, captured and accumulated facts, methods, principles, techniques and so on. When we use the term this way, we are referring to a body of knowledge that has been articulated and captured in the form of books, papers, formulas, procedure manuals, computer code and so on.
In Working Knowledge, Tom Davenport and Laurence Prusak (1998) draw distinctions among data, information and knowledge. Data and information fit within the third category above, that is, the notion of a body of knowledge that exists apart from people. Their view of knowledge is that it is "broader, deeper, and richer than data or information." They offer this "working definition" of knowledge:
"Knowledge is a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It originates and is applied in the minds of knowers. In organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, processes, practices, and norms."(p.5)
Thus it would appear that although Messrs. Davenport and Prusak distinguish among data, information and knowledge, their working definition of knowledge incorporates information, accommodates the notion that knowledge is a state of being and, at the same time, accommodates the view that knowledge exists apart from the knowers. It also accommodates the notion of knowledge as the capacity for action.
From all this it does seem safe to conclude that there are two basic kinds of knowledge: (1) the kind that is reflected in a person’s internal state as well as in that same person’s capacity for action and (2) the kind that has been articulated and frequently recorded. This brings us to the concepts of explicit, implicit and tacit knowledge.
Explicit, Implicit and Tacit Knowledge
Explicit Knowledge
Explicit knowledge, as the first word in the term implies, is knowledge that has been articulated and, more often than not, captured in the form of text, tables, diagrams, product specifications and so on. In a well-known and frequently cited 1991 Harvard Business Review article titled "The Knowledge Creating Company," Ikujiro Nonaka refers to explicit knowledge as "formal and systematic" and offers product specifications, scientific formulas and computer programs as examples. An example of explicit knowledge with which we are all familiar is the formula for finding the area of a rectangle (i.e., length times width). Other examples of explicit knowledge include documented best practices, the formalized standards by which an insurance claim is adjudicated and the official expectations for performance set forth in written work objectives.
Tacit Knowledge
Tacit knowledge is knowledge that cannot be articulated. As Michael Polanyi (1997), the chemist-turned-philosopher who coined the term put it, "We know more than we can tell." Polanyi used the example of being able to recognize a person’s face but being only vaguely able to describe how that is done. This is an instance of pattern recognition. What we recognize is the whole or the gestalt and decomposing it into its constituent elements so as to be able to articulate them fails to capture its essence. Reading the reaction on a customer’s face or entering text at a high rate of speed using a word processor offer other instances of situations in which we are able to perform well but unable to articulate exactly what we know or how we put it into practice. In such cases, the knowing is in the doing, a point to which we will return shortly.
Implicit Knowledge
Knowledge that can be articulated but hasn’t is implicit knowledge. Its existence is implied by or inferred from observable behavior or performance. This is the kind of knowledge that can often be teased out of a competent performer by a task analyst, knowledge engineer or other person skilled in identifying the kind of knowledge that can be articulated but hasn’t. In analyzing the task in which underwriters at an insurance company processed applications, for instance, it quickly became clear that the range of outcomes for the underwriters’ work took three basic forms: (1) they could approve the policy application, (2) they could deny it or (3) they could counter offer. Yet, not one of the underwriters articulated these as boundaries on their work at the outset of the analysis. Once these outcomes were identified, it was a comparatively simple matter to identify the criteria used to determine the response to a given application. In so doing, implicit knowledge became explicit knowledge.
Declarative, Procedural and Strategic Knowledge
The explicit, implicit, tacit categories of knowledge are not the only ones in use. Cognitive psychologists sort knowledge into two categories: declarative and procedural. Some add strategic as a third category.


Declarative Knowledge
Declarative knowledge has much in common with explicit knowledge in that declarative knowledge consists of descriptions of facts and things or of methods and procedures. The person most closely associated with the distinction between declarative and procedural knowledge is John Anderson of Carnegie-Mellon University. He has been writing about these two notions for almost 25 years (Anderson, 1976; 1993; 1995). Being able to state the cut off date for accepting applications is an example of declarative knowledge. It is also an instance of explicit knowledge. For most practical purposes, declarative knowledge and explicit knowledge may be treated as synonyms. This is because all declarative knowledge is explicit knowledge, that is, it is knowledge that can be and has been articulated.
Procedural Knowledge
This is an area where important differences of opinion exist.
One view of procedural knowledge is that it is knowledge that manifests itself in the doing of something. As such it is reflected in motor or manual skills and in cognitive or mental skills. We think, we reason, we decide, we dance, we play the piano, we ride bicycles, we read customers’ faces and moods (and our bosses’ as well), yet we cannot reduce to mere words that which we obviously know or know how to do. Attempts to do so are often recognized as little more than after-the-fact rationalizations. This knowing-is-in-the-doing view of procedural knowledge is basically the view of John Anderson, the Carnegie-Mellon professor mentioned earlier.
Another view of procedural knowledge is that it is knowledge about how to do something. This view of procedural knowledge accepts a description of the steps of a task or procedure as procedural knowledge. The obvious shortcoming of this view is that it is no different from declarative knowledge except that tasks or methods are being described instead of facts or things.
Pending the resolution of this disparity, we are left to resolve this for ourselves. On my part, I have chosen to acknowledge that some people refer to descriptions of tasks, methods and procedures as declarative knowledge and others refer to them as procedural knowledge. For my own purposes, however, I choose to classify all descriptions of knowledge as declarative and reserve procedural for application to situations in which the knowing may be said to be in the doing. Indeed, as the diagram in Figure 2 shows, declarative knowledge ties to "describing" and procedural knowledge ties to "doing." Thus, for my purposes, I am able to comfortably view all procedural knowledge as tacit just as all declarative knowledge is explicit.
Some reading this will immediately say, "Whoa there. If all procedural knowledge is tacit, that means we can’t articulate it. In turn, that means we can’t make it explicit, that is, we can’t articulate and capture it in the form of books, tables, diagrams and so on." That is exactly what I mean. When we describe a task, step by step, or when we draw a flowchart representing a process, these are representations. Describing what we do or how we do it yields declarative knowledge. A description of an act is not the act just as the map is not the territory.
Strategic Knowledge
Strategic knowledge is a term used by some to refer to what might be termed know-when and know-why. Although it seems reasonable to conceive of these as aspects of doing, it is difficult to envision them as being separate from that doing. In other words, we can separate out strategic knowledge only in the describing, not the doing. Consequently, strategic knowledge is probably best thought of as a subset of declarative knowledge instead of its own category. For this reason, strategic knowledge does not appear in any of the diagrams in this paper.
On to More Practical Matters
So what? Why are these concepts important? What are we to do with them? How can we put them to practical use? A few thoughts follow.
First off, it is important to recognize that the acquisition of declarative and procedural knowledge occurs in very different ways. Second, although tacit knowledge cannot be reduced entirely to words, it is quite possible to acquire tacit knowledge through means other than verbal descriptions. Third, if "knowledge management" is to have any meaning and any credence at all, we must say what we mean by knowledge – in all its variations and permutations – and we must do so in ways that are as free of conflict and overlap as we can make them. Otherwise, we run the distinct risk of appearing to not know what we are talking about.
Nonaka addresses the important issues of knowledge transfer and knowledge creation in his 1991 article. He cites four such transfers or creations:
Tacit to tacit. Acquiring someone else’s tacit knowledge through observation, imitation and practice. The example Nonaka uses is that of a product developer, Ikuro Tanaka, who apprentices herself to a hotel chef famous for the quality of his bread. She learns how to make bread his way, including an unusual kneading technique.
Explicit to explicit. Combining discrete pieces of explicit knowledge to form new explicit knowledge, for example, compiling data and preparing a report that analyzes and synthesizes these data. The report constitutes new explicit knowledge.
Tacit to explicit. Nonaka cites here the product developer’s subsequent conversion of her acquired tacit knowledge into specifications for a bread-making machine. However, as defined by Polanyi, who coined the term, tacit knowledge cannot be articulated. Thus, although Nonaka’s product developer was clearly able to devise a set of product specifications based on what she learned while apprenticed to the chef in question, it seems doubtful that she actually articulated the chef’s tacit knowledge or her own. It seems more likely that she articulated some rules or principles or descriptions of procedures, that is, she created some declarative knowledge that subsequently proved useful in the design and development of the bread-making machine.
Explicit to tacit. Internalizing explicit knowledge. Here, Nonaka indicates that the product development team acquired new tacit knowledge; specifically, they came to understand in an intuitive way, that products like the home bread-making machine can provide quality, that is, they can produce bread as good as that made by a professional baker. That Nonaka (or anyone else) knows of this suggests that whatever knowledge was acquired has been made explicit and that means it might have been implicit knowledge at one point but was never truly tacit knowledge because that cannot be articulated.
On my part, I will focus on three aspects of knowledge capture, sharing and transfer:
The process of capturing explicit knowledge, that is, of making implicit knowledge explicit.
The development of procedural knowledge (in the sense that the knowing is in the doing).
The transfer of tacit knowledge from one person to another without resorting to verbalization.
In all three cases, we will be talking about the systematic or facilitated acquisition of knowledge, not simply learning from experience.
Making Implicit Knowledge Explicit
This is a process of articulation, of making implicit knowledge explicit. Sometimes we are able to do this on our own and sometimes it requires the assistance of someone like a performance analyst or a knowledge engineer. When a performance analyst documents the work of insurance claims examiners in the form of adjudication algorithms, those algorithms represent implicit knowledge that has been made explicit.
Developing Procedural Knowledge
We are talking here of skill development, specifically, the acquisition of explicit, declarative knowledge as the basis for skill development. Often this works as follows:
We are presented with a description of a way to perform a task.
We practice it, perhaps haltingly at first but our proficiency improves with continued practice and it benefits from feedback.
Finally, we reach the point at which our ability to perform the task is automatic, we no longer have to think about it.
Over time, we might even forget the original task descriptions that enabled our early attempts to perform the task.
Transferring Tacit Knowledge
The key here is to remember that tacit knowledge cannot be articulated but it can be communicated or transferred. Remember Polanyi’s example of being able to pick a face out of a crowd? Although we might not be able to adequately articulate how we do that, or even to describe facial characteristics in such a way that someone unfamiliar with the face in question could pick it out of similar looking faces, we can develop the ability to recognize that face by presenting pictures and developing the ability to recognize that face from several different angles.
Conclusion
Knowledge management seeks to manage knowledge. Knowledge itself is a very slippery concept with many different variations and definitions. The nature of knowledge and what it means to know something are epistemological questions that have perplexed philosophers for centuries and no resolution looms on the horizon. Are we therefore to throw up our hands and turn away? Or do we simply acknowledge that we are in an ambiguous area and do the best we can? We must each make these choices in as informed a way as we can manage. There are no unequivocally correct answers, only theories and opinions. In the last analysis, we must decide for ourselves. Consequently, we owe it to ourselves to do two things:
Become as knowledgeable as we can about the choices and issues facing us, including the nature of knowledge and knowing and what it means when we use terms like "knowledge management."
Muster up as much clear thinking as we can because shoddy, muddy thinking will do us no good at all, whether in relation to knowledge management or any other area of endeavor.
This article represents an effort on my part to share some of what I think I know about knowledge, knowing, different categories of knowledge and how they relate to one another. I wrote it because I believe it is important for an aspiring area of professional practice such as knowledge management to develop a professional language that is as precise and stable as we can make. If we fail to do this, we are faced with the prospect of conversations dominated not by substantive issues but by repeated requests for definitions of the terms being used. If knowledge management is to become an area of professional practice, there must some traces of a standard language and I hope this article is a step in that direction.
In closing, and to turn what I’ve said on itself, this article is itself explicit and declarative in nature. Some readers might conclude that I possess some implicit knowledge and that would be consistent with what I’ve written. There is, however, not one whit of tacit knowledge contained in this paper; there can’t be because tacit knowledge can’t be articulated. Nor is there any procedural knowledge in this article, unless you are of the mind that descriptions of methods or procedures count as procedural knowledge. I don’t but you might. Nor is there any strategic knowledge in this paper; indeed, I take that construct with a large grain of salt. But, then, who’s to say? You might know better than I.

My dictionary provides two definitions of "consultant."
"A person who consults with another or others."
"An expert who is called on for professional or technical advice or opinions."
These definitions prompt two more questions:
What is meant by "consult"?
What is meant by "an expert"?
To consult means to "seek advice from," as in seek advice from an accountant or an attorney. Thus, it would seem that clients are also consultants in that they are the ones who are usually seen as seeking advice. That does not help us much with our search for the identity of a consultant, so let us move on to "expert."
An expert, or so my Webster’s informs me, is someone who is "very skillful; having much training and knowledge in a special field." We all know that there might or might not be a connection between our training and our knowledge and skills. From this, it follows that a consultant, if he or she is indeed an expert, must be an effective learner, that is, capable of acquiring knowledge and skill from experience, whether or not that experience involves training.
Expert, experience, experiential, and experiment -- these words all have a common Latin root -- expirer, meaning to try, to test, to prove. A consultant, then, is above all else empirical, that is, willing to try things to see what happens.
If you listen closely, sooner or later you will hear this definition of a consultant:
A consultant is someone who comes in, borrows your watch, and tells you what time it is, keeps the watch, and charges you an exorbitant fee.
Many view that definition as a put-down of consultants. I do not. Here's why.
A consultant is usually outside the client organization, hence the "someone who comes in" portion of the preceding definition. Consultants learn about their clients from observing them and it is what they learn about their clients that they eventually share with their clients. This accounts for the portion of the definition pertaining to "borrows your watch" and "tells you what time it is." Consultants also retain what they learn, thus "keeps the watch."
And what about "charges you an exorbitant fee"? Well, for me, that portion of the definition refers to the fact that people who can't see what's right in front of them typically downplay the value of those who succeed in getting them to see those matters. It is as though they are saying, "I should have seen that all along, so I resent having to pay your fee for pointing it out to me."
A consultant, then, is someone who helps others profit or learn from their own experience. A really good consultant also helps clients see the value of their experience and so the fees are rarely seen as "exorbitant."

1991, among amidst cheers, applaud, huge tapping on table the most historical budget got passed in the highest setting body of Indian paradoxical culture; the parliament. A beaming Finance Minister declared from dias with a thunder “time has come to drink coke, to wear Burlington, to chew Avon, to brunch Pizza. Behold, the dhotiwala marwaris should watch their malpractices, you have looted enough, time to go to Ganges and wash your sin.”

The common Indian rise from rugs started fantasizing the Park Avenue, Salwar Clad wife in Midis, churning away pizza in a lavishing mall. Enough of pakodas and dosas. India is going global; with a size of 1 billion we are going to embark imperial socialism.

Indian beauties in hoardings replaced by foreign nude clad ladies. Our girls happily singing around malls, movie surroundings, guys with flashy bikes, specks. Owo….breathtaking site. Older generation got amused, some embarrassed and some flattened. Country has rolled its dice; Pink Floyd’s dark side of the moon is no more revolving, static from oblivion and straight falling into feldspar of carpets like golden dew drop.

My personal incident in a high profile city called Bangalore-

14th May, 2005- Was busy in something, came out late from office. The cafeteria was closed by that time. Suddenly like a flashback I thought why to worry? Let’s take ride on rising economy. Picked the cell like chauvinist of liberalization, dialed like a King who just got reins from UNITED STATES. Ordered a North Pole delicacy called Pizza, some pasta salad and Uncle Sam’s water supply management a.k.a “coke”. After 45 minutes a face appears on room door. With much hesitant American smile the face echoed a voice good evening!! I watched the time, 11.45 P.M. I was wondering whether I am in different time zone. The next line was Sir your bill, 361 Indian bucks. (This is one of many incidents)

Obvious question, south Indian meal costs roughly 20 rupees. Does it mean our economy has shoots up by 18 times?? I don’t have an answer either. I am not good in economics, yet searching the much inhabitant answer of economic rise.

What we see in this country is that economic liberalization, which began in the mid 1980s, took a major leap in the 1990s. And it continues apace till today, with new rulings being introduced continuously. The first generation of economic reforms gave way to a second generation in the year 2000. There is not a sphere of the Indian economy that has been left untouched by foreign capital. Now, even the water we drink and the air we breathe is being privatized with profits siphoned away by the transnational corporations and their India accomplices.
It is estimated that every year $65 billion, or rupees three lakh crores, are drained out of the country. This amounts to a gigantic 20% of the country’s national income being drained out each and every year. Is it possible for any country, least of all an underdeveloped country like India, to develop with such a huge drain on its resources? This loot takes place from: (i) returns on accumulated FDI in the country, (i) Returns on FIIs and GDRs, (iii) Interest on foreign debt and NRI deposits, (iv) losses through foreign trade, (v) Brain drain, (vi) yearly flow of illegal money abroad, etc.
The main aim of earlier colonial rule in India was to extract its wealth in the interests of the British rulers. The British are now only replaced by the imperialists in general, and more particularly the US imperialists. Earlier the British ran the government directly; now much the same is being done by proxy. Besides, over the passed few years, the US has sought to enmesh the country in a series of military and diplomatic ties, thereby tightening its noose around the Indian administration.
Now if we go on these issues who are die hard betonies of liberalization we might ended up with spoon inside mouth. I wish there won’t be carnival debates.
Here is one of the pragmatic supporters of economic liberalization “India has struggled financially since independence, experiencing slow economic growth and economic setbacks due to climatic extremes or political disturbances. The country has been gradually transforming its economic base from agrarian to industrial and commercial. Under British rule in the 19th century, India's cottage industries and thriving trade were virtually destroyed to make way for European manufactured goods.”
I believe Burlington, Daks, Louis Philippe are all Indian brands who are set to dethrone the colonial brands!!
As Mckinsey has conducted a survey regarding the retail market in India and it estimates the volume could go up to staggering 300 US billion dollars. Mute question is how much profit is earned out of that? How many players will be in the market?
Let’s have a look at the objective statement by RBI-
India is no longer an economy of scarcity and shortages: food stocks and foreign exchange reserves are plentiful; shortages and rationing of essential goods and materials are memories of the past. In the macroeconomic and financial spheres, inflation has been contained, external debt indicators have improved, exchange rate is flexible and the country is free of financial repression. The trade account is open and India has become much more integrated with the world economy. All this has been reflected in a relatively high rate of economic growth over the decade and a significant reduction in poverty in the country. The economy has also become more resilient to shocks, both domestic and external: the twin shocks of the drought and increasing oil prices in the past year have been absorbed with relative ease.
Now this increased freedom of choice for the ordinary consumer and freedom for many having to kowtow to peons to petty clerks. People in authority seldom appreciate what this freedom from indignity and humiliation means to honest citizens. And yet, despite all these real and substantial achievements, I sense that twelve years on, the reform process has left many people with a sense of unease. I use the word unease advisably; I do not sense dissatisfaction or disenchantment.
There is unease, no doubt what so ever!!
· that microeconomic reform is accompanied by macroeconomic deterioration at least in its fiscal aspect,
· that even in regard to microeconomic reform, there is a long unfinished agenda,
· that some of the reform measures have misfired or not taken hold; and perhaps the most common among economists,
· That there is not yet a decisive impact on growth and employment generation. Personally, I would add :
· that there is no decisive impact on corruption,
· that we have frittered away our rich inheritance in higher education, and
· That we have not enlisted the support of the civil society in the service of reform.
The point about macroeconomic deterioration, at least in the fiscal sphere, is both valid and vital. There are apologists who argue that budget deficits have not had their anticipated effect. Inflation has not risen, interest rates have not gone up, and there is no foreign exchange crisis and no sign of crowding out of private investment. But there has been ruinous, continuing and increasing “crowding out”, so to say, of useful public expenditure on health, education, irrigation, agricultural research, and economic infrastructure. If budget deficits have not crowded out private investment despite hardly any increase in the rate of saving, surely the conclusion is inescapable and worrying that private investment is not buoyant.
Macroeconomic mismanagement, whether internal or external, does repress growth sooner or later. Micro reform and macro health work well together. One of the smartest things done in 1991 was that decontrol of industry and liberalization of foreign trade was accompanied by substantial devaluation. This is not often mentioned now. But it was that macroeconomic adjustment which gave industry time to adjust to more competition and made the capacity then legalized actually usable by opening better opportunities for export. The initial spurt in growth after 1991 is largely attributed to this macroeconomic reform rather than to microeconomic reforms which take time to produce growth. Without macroeconomic health, the efficiency gains of microeconomic reform cannot be large and cannot endure.

No one is not sanguine that a decisive impact on fiscal deficits will be made in the near or the medium-term future. So far, reduction in interest rates and privatization are the only routes taken to show token improvements in the financial position of the Government. Both have severe limitations. Without substantial cuts in subsidies and administration and some even in defense, there cannot be reduction in public expenditure. There are limits to better collection of taxes. Reductions in customs duties and in direct taxes do slow down the growth in revenues at least in the short and the medium term. The industrially advanced countries dealt with this problem by a superb confidence trick. They introduced a very substantial and comprehensive Value Added Tax (VAT) which is nothing but a large and proportional income-tax without practically any exemption limit. It’s questionable even the VAT, if and when introduced in India, will be rather modest and shot through with exemptions and will, therefore, invite evasion and avoidance. Without a sea-change in the political climate, the fiscal situation will remain worrisome.
On the other hand, no one share the unease of many persons about the unfinished agenda of microeconomic reform. Part of this agenda is not all that necessary in judgment and considers some suggested reforms unrealistic in a democracy. In a sense, the agenda for reform like the agenda for individual perfection will always be unfinished. We should now stop talking of an agenda of reform as if it is a laundry list. Reform rings a bell for five or ten years. After that, it is likely to ring hollow. That does not mean that we give up the fight on each individual front. By all means let us concentrate on individual tasks. But there is danger not just of creating boredom but even resentment by perfectionist sermons akin to Ten Commandments. What we need now is concentration on individual sectors rather than on some comprehensive conceptual agenda.
The democratic world is always untidy; and while untidiness must always be fought, some of it must be endured. There is much talk these days about plural societies, multicultural or multiracial societies. But all democratic societies are plural by definition as indeed they are secular by definition - even if they are not multiracial or multicultural. They are plural because they respect and recognize the rights of each individual and group. They have several objectives and several conflicting but legitimate interests to reconcile. Any peaceful reconciliation of divergent objectives and interests inevitably involves compromises.
One of the greatest disappointments with the reform process is that it has not made much impression on corruption. Reform is widely advertised as an answer to corruption. To some extent this has happened. But we know now that corruption is a much tougher nut to crack and requires action beyond economics. Much more can be done, e.g., by harnessing new technology. This has been done in respect of railway reservations. It can also be done for land records both rural and urban. But a major feasible attack can only come from a detailed and painstaking review of all laws, regulations, administrative procedures and the like to eliminate much accumulated irrelevance and discretion. A review of all regulatory authorities particularly at the State level is also necessary. Even at the Centre, where decontrol has been followed by new regulatory authorities, there is still much confusion about what is intended and who can and cannot do what. Regulation, like control, also implies some discretion. All this creates fertile ground for corruption. That is why regulatory authorities also need continuous watch and vigilance.
Our achievements may be considerable but what is crux is we shouldn’t be unrealistic. If people’s income has manifolded at the same time their savings has been dented up to a large extent. Reforms are necessary as freedom and justice but in basic sectors like infrastructures, manufacturing, containing corruption rather than fancied about pizzas, Warner Bros., Cable TV so on.
Hopefully we are gonna achieve that, till that time let’s pay another pizza bill!!
Inspired by –The Macroeconomic Reforms by I.G.Patel
RBI Objective Statement 2005-06.

Vat is a tax on consumption i.e. more you buy the more tax you pay. It is also a neutral tax on businesses, in that it should not represent a real cost to anyone but the end consumer. Everybody pays a tax to the Government whenever they purchase some goods.

Vat is first devised by a German economist during the 18th century. He envisioned a tax on goods that didn’t affect the cost of manufacture or distribution but was collected on the final price charged to the consumer. Thus is didn’t matter how many transactions the goods went through, the tax always a fixed percentage of the final price.

It was not the consumers who came to the streets opposing the implementation of Value Added Tax (VAT) as they are still quite in the dark about the consequences of VAT. It is not the protagonists of the federal structure who mobilized the people to raise their voice against the VAT. Rather it is the traders who registered their strong opposition to VAT. There were strikes all over the country by the traders. That the implementation of VAT has been deferred is only due to the opposition of the traders’ lobby. Brushing aside this opposition, the ruling classes are determined to go ahead with the implementation of VAT to please their masters. The so-called Empowered Committee, headed by none other than Ashim Kumar Dasgupta, the CPM Finance Minister of West Bengal, has submitted a white paper on VAT giving the green signal for its implementation from April 1, 2005. VAT, which was scheduled to be implemented throughout the country from April, 2001, has been repeatedly deferred not because of the people’s opposition but because of the inability of the ruling classes in arriving at a consensus. Now it seems a consensus has emerged and most of the ruling class parties are now supporting VAT implementation. The so-called ‘left’ parliamentary parties like CPI (M), CPI and their allies who pose themselves as ardent champions of the federal structure, have not only accepted the implementation of VAT but they emerged as the most vocal supporters in spite of the strong unitary features that undermines the authority of the states to levy and collect taxes at the state level. VAT, which was in the form of a proposal until now, is finally becoming a reality from the next financial year. Like every other reform, the ruling classes are talking only about the positive aspects of this dangerous tax reform, which will have a bearing on every commodity in the country. They are cleverly suppressing the serious consequences of this sweeping legislation. The Government, which is spending so much in organizing seminars, meetings and publishing so much literature to win the support of the trading and manufacturing community, is not doing anything to apprise the people as to who will be paying for its implementation. An Instrument to Liberalize the Economy Further It was Manmohan Singh, the then union finance minister, who first placed the proposal for the introduction of VAT, replacing the state sales taxes. In 1993 in his budget speech, Manmohan Singh argued in favor of VAT and expressed his concern about furthering the progress of liberalization programmes introduced by him without this. He clearly stated that the programme to liberalize the economy could not be accomplished without the introduction of VAT. Manmohan Singh, the so-called ‘left’ economist, while muting the idea was simply following the dictate of the IMF/World Bank. Later it was the top IMF official, Parthasarthi Shome, who has been the chief imperialist hachetman in India to push through VAT. Employed with the IMF since 1983 this man has been involved in destabalising Latin American economies in a big way, and was directly involved in pushing through VAT in Brazil. In May 2001 Shome chaired an expert group on tax policy and administration, which concretely planned for a "national integrated VAT". He has said that the main priority of the Indian government must be expansion of the tax net in the country. Since then, it is he who has played a major behind-the-scene role in pushing VAT through. So to understand VAT one must start with the interests of the imperialists in pushing this Act. Tax reforms are an integral part of the liberalization process. The thrust of our Tax Reforms is to reduce the direct taxes like Income Tax, Corporate Tax, Customs Duty etc., to relieve the burden on the rich people and increase the indirect taxes like sales tax, turnover tax etc. to raise the burden on common people. The ultimate objective of these reforms is to open all the gates of the Indian Economy and make it an integral part of the world market. The introduction of VAT from April 1, 2005 is an important step in this direction. Though the efforts to introduce VAT started in the early nineties, the state governments did not show that much interest in the beginning and they considered the introduction of VAT as an effort of the center to undermine the fiscal authority of the state. In spite of reticence of the state governments, the center continued to pursue it, as was directed by the World Trade Organization (WTO), that every member country would have to implement a uniform VAT throughout the country by 2005. It is this compulsion, which made all States fall in line. The White Paper by the Empowered Committee of State Finance Ministers, which is supposedly an outcome of protracted discussions with all the states is nothing but what international capital expects from the Indian market. The objective of VAT as mentioned in the White Paper is to remove all barriers to inter-state trade and commerce and create a unified national market. Its further aim is to raise the quantum of tax from the ordinary people while leaving big business untouched and thereby reduce the budget (fiscal) deficit. [The Kelkar report states that its aim is to raise the tax/GDP ratio from the existing 9% to roughly 17%.] It also talked about the cascading effect of various taxes and unhealthy Sales Tax rate "war" among the states. But its objective is to turn India into a single unified market to facilitate imperialist/comprador big bourgeois plunder.

Vat: A Multilevel Tax

The Value Added Tax (VAT) is based on the value addition to the goods. It involves taxing output at every stage. However it provides for the set-off for tax paid earlier through the concept of input tax credit. This input tax credit means setting off the amount of input tax against the output tax liability. With offsetting of tax on inputs against the tax on output, VAT does away with tax on tax i.e. the cascading effect of tax. But this claim of the FM is hollow as most commodities face a one-point sales tax — on the first sale. Claiming input tax credit under VAT requires proper invoicing and documentation at every stage. In this way it is expected to encourage disclosure of complete information on business turnover. This system is based on the self-assessment and there is a built in check in the system, which will result in automatic compliance from everyone. Implementation of VAT will widen the tax net and will help increase revenue. With the introduction of VAT both the retailers and wholesalers will have to pay sales tax. Moreover, they will have to ensure that the person, from whom they purchase the goods, has paid tax. Otherwise, they have to shoulder the entire tax burden. To avoid this extra burden they will have to collect valid records from whom they purchase the goods. Thus this system is a self-policing one, as it is claimed. Consequently it is assumed that with the introduction of VAT, the tax net will be widened and that will help increase revenue for the state. Some of the advantages being projected by the proponents are:
* a set off will be given for input tax as well as tax paid on previous purchases * other taxes such as turnover tax, surcharge, additional surcharge etc., will be abolished
* over all tax burden will be rationalized
* prices will in general fall
* there will be self-assessment by dealers
* transparency will increase
* there will be higher revenue growth
The VAT will be implemented replacing state sales tax and some other taxes, eg. work contract tax, lease tax, turnover tax and luxury tax. But they will have to pay other taxes such as octroi, central sales tax (CST), service tax and excise duties. What is going to be implemented as VAT in India, is not a full fledged destination-based VAT. It is not ‘a tax to unify all taxes’. The proposed VAT, which is a distorted one, will nullify many of its declared aims. Inter-state movement of inputs will be taxed. This means those companies who buy inputs within a state, will enjoy better advantage than those companies who have to buy their inputs from other states. This is going against the very purpose of VAT, i.e. a common market for the whole of India. The proposed VAT that the sates have agreed to implement, is based on consensus. It is not a perfect one. Ramesh Chandra, member secretary of the Empowered Committee on VAT, also, holds the same opinion, but believes that the govt. will gradually advance towards a unified VAT. He states "Let there be no doubt that this is only a first step towards the final journey of single unified VAT."
For making it simple let us consider a manufacturer who buys raw material worth 1,00,000/- on which 4,000/- (at 4%) tax is paid. If his sales are 2,00,000/- and his VAT liability on sales is 24,000 (at 12%), then he can adjust the tax credit of 4,000/- paid on his inputs against the tax liability on his sales so his ultimate tax liability is only 20,000/-.
From the above it seems that VAT is simple, logical and fool proof system of taxation. But it is not as simple as it looks. No commodity will reach the final consumer unless it is passed through many hands. This calculation and payments of VAT are required to be done at every level even if the activity is simply transportation and no value addition in a true sense. So if the final retailer sells the goods for Rs. 3,00,000 he will again have to pay VAT on the value added of Rs. 1,00,000 as lomg as he has invoices to show that VAT was paid on the initial 2 lakh. If he does not have this proof he will have to pay VAT on the full Rs. 3 lakhs. In the proposed VAT only few goods such as liquor, lottery tickets, petrol, diesel, aviation turbine fuel and other motor spirit are outside VAT and will continue to be taxed under Sales Tax or any other relevant act. Under the VAT system covering about 550 goods categories, there will be only two basic rates of 4% and 12.5%, plus a specific category of tax-exempted goods and a special VAT rate 1% only on gold and silver ornaments. Currently about 46 commodities are under the exempted category and about 270 commodities are under 4% category (including food grains, which now attracts no sales tax) and the all the remain commodities are under the general VAT rate of 12.5%.

VAT: No Fool-Proof Formula to Avoid Tax Evasion

The biggest advantage of VAT as cited by the policy makers are that it will bring transparency because of it’s built in check system. It will bring out automatic compliance from the traders and reduce the tax evasion to a negligible level. In the existing system the traders generally do not maintain proper records. Underreporting of sales is very common to them, and on the basis of this under-reporting they can evade not only sales tax but also income tax. In the VAT system, it is argued that tax evasion will be minimized to a greater extent. Though this is true to a large extent it is no fool-proof formula for tax avoidance.
The experience of MODVAT (Modified Value Added Tax) introduced by the center is contrary to this. The union government had to withdraw this after the large-scale misuse of central excise tax credits. So what is the guarantee that a similar thing will not happen now. The international experiences of VAT are also not that encouraging. The experiences of other countries where VAT was introduced, show that the VAT is also evasion-prone. In South Africa, VAT has become a ‘source of dirty money and money laundering" (VAT Monitor, July 2002). France, the inventor of VAT, has also been facing the problem of evasion. In 1981 the figure of evasion was 18.1 percent. This constituted 6.6 per cent of total revenue (EPW, May 10, 2003). The Economic and Social Committee appointed by the European Commission reported on April 25, 2001. "... VAT system provides opportunity of fraud because of the fact that goods are in circulation on which no tax is imposed. Temptation is therefore great to divert such untaxed goods on to the black market".
According to Transparency International, the Berlin-based anti-corruption organisation, India is one of the most corrupt states. In India it has been estimated that more than 40% of GDP constitute the black economy. Those who are so efficient to turn white into black to evade taxes, there is no reason to believe that they will fail to utilise VAT for the same purpose. Suresh Bindal,
secretary-general of a body of textile merchants, has expressed his view that he "isn’t very hopeful about the prospects of VAT reducing tax evasion". But what the VAT system does is that it equips the tax authorities with greater powers, which will mean even more corruption by these officials. As the VAT system has a lot of checks and one of its main aims is to widen the tax net it will be able to enforce more compliance amongst the traders. This will entail not only the payment of VAT but other taxes as well, like income tax. With a mere Rs. 5 lakh yearly sale exempted from VAT (i.e. anything over Rs. 1,500 per day) the tax authorities can harass even the smallest retailer for records. The tax officials can became a terror police for the lakhs of small traders and businessmen. The government is openly propagating that it is only the "tax-dodgers" who are opposing VAT. Haryana has already increased its revenue by 30% last year after the introduction of VAT.

Traders Opposition to VAT Is Justified

Though the introduction of VAT is going to adversely affect large sections of people it is only the traders who have shown an organized protest against this. After protesting at state levels they called for an all India traders’ bandh on February 21. After the success of the bandh their all India body, Confederation of All India Traders (CAIT), which is spearheading the protest has threatened to go on an indefinite strike against VAT. Though VAT requires the traders to maintain proper records, it is unfair to say that they are opposing the introduction of VAT only for that reason alone. Besides, the bulk of the small trades and business find it difficult to survive even now. This tax will crush them. They are also protesting against the "harsh" clauses in the VAT and the inclusion of essential commodities. The penal provisions in the proposed VAT are deliberately made harsh not with the intention of ensuring compliance from traders but to push them out of the business. They are basically meant for facilitating the entry of giant retail store chains.
To dilute the opposition for VAT from traders, small dealers with a gross annual turnover not exceeding Rs. 5 lakh are presently exempted from VAT. For those with an annual turnover not exceeding Rs 50 lakh, they are given an option either to pay VAT or gross turnover tax of 1% (which will be more than the VAT amount.) However those who opted for turnover tax will not be eligible to claim input tax credit. The Rs.5 lakh limit is ridiculously low as that would mean only those traders who have sales of about Rs.40,000 per month. Besides, most States switched over to single-point-taxation in the 1990s (on the first sale), VAT will entail a multi-point taxation. Though all goods may not have been under this system a large proportion was. Under single point taxation, a large section of traders, especially the smaller ones, were out of the tax net. This exempted them from not just the demands of record-keeping, paper work and costs it entailed, they were also free from the arbitrary harassment of tax officials. Now, with VAT, even on the smallest of value added (say even through transport) it will attract tax. So, in the earlier scheme the bulk of the sales tax was paid by the manufacturer (i.e. on the first sale) and the traders escaped most of the burden. Now the overall tax will fall equally on the traders — both big and small. Not only that, tax officials can harass each and every trader who will be forced to keep records as very few will be able to explain that they have sales of mere Rs.40,000 per month. And even to prove this they will have to maintain proper records. So, we can have a VAT terror police roaming the lanes and by-lanes harassing even the small retailers. After the introduction of VAT small shop keepers will not be able to comply with the documentary evidences to claim input tax rebate and they will end up in paying more tax than what they are paying now. The complicated system of VAT will force them out of the business paving way for the large retail chain outlets of MNCs.
The small traders and retail shopkeepers see a threat in the invasion of Indian markets by international giants and are fighting for their survival. Their demand to exclude essential items from the purview of VAT is a demand of the general public. Their fight against VAT, which they are fighting for their own interests and even survival should be seen as a part of the anti-imperialist struggle.

Consumers Will Suffer

The consumers are still in the dark. They do not have proper knowledge about the consequences of the VAT though the implementation of VAT will primarily affect them. The implementation of the proposed VAT would affect the consumers adversely by leading to a price-rise. VAT will be a multipoint levy and will replace sales tax. The rates of sales tax are 7 to 8 percent, whereas the rate of VAT will be 12.5 percent, in general. It means there is a straight 50 percent increase in taxes which is going to increase the return to the government. VAT at 12.5 percent is one of the highest tax rates in the world. Not only that the actual tax paid will always be on the final sales value (as all value added will be taxed at each stage of the chain), while in the earlier case most of the sales tax was on the first sale, at the point where the goods were manufactured. So, overall the tax paid by the consumer under VAT will be much higher than what is paid now. Another important aspect is that VAT covers almost all goods. The prices of diesel, kerosene, petrol, eco-friendly CNG, other petroleum related products, rice pulses and other such essential commodities will go up after the introduction of VAT. Under VAT, the present level of 12% tax on petroleum related products will be increased to 20% and the essential items like bread, salt, spices, pulses, food grains and other related items on which there is no tax at present will come under a 4% tax slab. Who is going to pay for this? Definitely not the traders. It will be borne by the consumers. Moreover as VAT will be a multipoint levy, the value and the rate will be higher at each subsequent higher rung which means the actual tax which consumers are going to pay is not just 12.5% but it is much more than this. There fore the introduction of VAT instead of bringing down the prices it will break the consumers back with a sharp rise in prices. Besides, in the name of encouraging exports the tax rate on them is made zero and yet credit will be given on tax paid on inputs. This helps the exporters to make super profits.

It Weakens Federal Structure

As per the constitution by virtue of Entry 54 of the State List, State governments are empowered to levy and collect the Sales Tax. Sales tax is the major source of revenue and contributes up to about 80% of the states’ revenues. It is the constitutional right of state governments to decide the sales tax structure suitable to the specific conditions in their states. Tax rebates and additional taxes are not only important sources of revenue for the states but also an important tool in their hands to promote industries. In the name of a uniform tax structure under VAT throughout the country this basic right of the states to have their own tax structure is being snatched away. Though their revenues may not come down as the center has promised to compensate the short fall of revenues but their dependence on the center will grow. After the introduction of VAT, states will be reduced to the level of municipalities whose only role would be to collect the taxes that are decided at the central level. In a large country like India with diversified features having a uniform tax structure means undermining the authority of the states.
Though VAT is now in operation in more than 120 countries, not many countries in the world with a federal structure have introduced VAT. The biggest example is America where VAT is not introduced. Another example is Canada where though VAT is introduced it is not uniform through out the country. The administration and structure of VAT across the provinces differ because of the heterogeneity among the provinces. In Canada some states like Quebec both central VAT and provincial VAT are in operation by the state; in some states like Newfoundland, Nova Scotia both Central and Provincial VAT are operated and administered by the center; in some states like Ontario both provincial and central VAT are operated by the respective governments and some states like Winnipeg which has rich natural gas have not introduced VAT at all. The European Union, which is a loose federation of countries has introduced VAT but its structure is not perfect and is currently undergoing changes. So a uniform VAT is not a universally accepted tax structure. The purpose of the so-called Empowered Committee formed by the state governments is only to protect their revenue interests and the committee has not taken up the task to safeguard the constitutional rights of the states. As a consequence, the state governments are contended with the assurance that the center would compensate for the loss of revenue. But they are forgetting the fact that their dependence on the center will increase. And it has been agreed that to overcome the constitutional problem every state well adopt a resolution to replace the existing state sales tax by the new one (i.e. VAT), mentioning this only as a change in the method of taxation. Another aspect has been indicated by the union finance minister. That is, a patch-work VAT will not serve the purpose, so a full fledged VAT is necessary. The union govt. prompted by the imperialist forces, has been advancing towards that direction step by step. In such a case, all other taxes levied by the state govts will be rolled into VAT. This will further curb the fiscal authority of the states.
This is nothing but concealment of the true aims of VAT of robbing the state of its authority. This will go against the interest of the federal structure by strengthening the controlling power of the center. In all practical senses the centre will take charge of its implementation. It is the centre and not a body of states’ representatives, who is to be entrusted with the controlling power to decide commodity classification, rate fixation, identification of taxable items and all other matters regarding taxation. The union ministry of finance has already started this business. The states are preparing their draft following the central draft. The union ministry of finance will supervise the draft legislations of all states so that they maintain uniformity in expression and definitions of terms. Thus all the state governments, including those avowed champions of the slogan "more power to the state" have surrendered to imperialist forces via the union govt. All these parliamentary parties have once again betrayed the people who aspire to a decentralized federal India with more powers to the states.

More And More Abject Surrender To Imperialist Forces:

As it was mentioned earlier the objective of VAT is neither to increase the revenues for the states nor to facilitate tax collection and nor to reduce the burden on people by eliminating the cascading effect. The single objective of VAT is to create a unified single market in the country without any trade barriers. This is a pre-requisite for fulfilling their ultimate objective of fully and totally integrating the Indian market with the global market. The imperialist and comprador big bourgeois forces want removal of all impediments for economic integration of country to smoothen the expansion of their capital and the creation of a homogenous market in India for their commodities. (In fact they want to extend this even further to entire South Asia through SAFTA) It simply means further intensification of their exploitation. The implementation of a uniform VAT throughout the country serves this purpose by replacing sale tax which varies from state to state. The other important purpose of VAT is to hike tax collection by increasing the tax on commodities and by drawing a wide net of traders and small businesses into the tax net. The Kelkar report has stressed this; so have the IMF in its obsession to reduce the budget deficit. In its recent review the World Bank ‘had stressed on the need to give utmost importance to reforms in taxation...’ (The Hindu, July 22, 2003, Delhi edition). It is clear from this that the World Bank is not happy with the present pace of progress. It wants a complete free play for the international market forces so that the expansion of imperialist capital can be facilitated further. A unified tax structure throughout the country will facilitate the capitalists in taking their investment decisions. Once VAT is in place they no more require to have different business strategies for different states. Another very important factor behind the introduction of VAT is the large retail market of an estimated $ 180 billion. With international capital desperately in search of new avenues for investment opportunities to tide over the severe crisis they are facing, the large retail market is an attractive destination for their investment. The Finance Ministry is already talking of allowing Foreign capital even into retailing. (In fact, today the biggest TNC in the world is a retailing chain — the American giant Wal Mart) They need the consolidation of the Indian market by outplaying the small retail traders. VAT will act as an important weapon in achieving their goal. The union govt. has already reduced tariffs and removed import control barriers providing wide scope to imperialist forces. There is no mention of imposing internal taxes eg. VAT and service tax on imports to protect the interests of the country in the white paper on VAT. Rather in his budget proposal (2003-’04), the finance minister suggested to exclude anti-dumping duty, countervailing duty and safeguard duty, from the base of calculating additional and special additional duties on customs. These three duties are levied to protect domestic producers against imperialist dumping, subsidizaion and the sudden surge in imports. Even then, these are not enough to quench the thirst of the imperialists. The imperialist forces have been continuing to pressurize and both the union and state governments have been surrendering more and more to their pressure providing them further opportunities to intensify their exploitation.
According to a report jointly prepared by McKinsey & Company and the Confederation of Indian Industries (CII) global retail giants such as WalMart, Tesco, Kingfisher, Carrefour and Ahold are waiting in the wings to enter the Indian retail market. This report also states that the Indian retail market holds the potential of becoming a $ 300 billion (Approx Rs 13,50,000 crores) per year market in another 5 years i.e by 2010. It is this huge market which the imperialists are eyeing. The proposed VAT will help in consolidating this market
for them. In a nutshell, the VAT which is come into effect from April1, 2005 is another instrument to serve the imperialists and another weapon in their armory to exploit the vast masses. The tall claims of our policy makers about its advantages, the rosy picture they are painting and the justifications they are giving about its logical working is only to mislead the masses. Behind their massive misleading propaganda they are covering up their treacherous and exploitative motives. VAT, contrary to the claims of the ruling classes, is being introduced only to serve the imperialists and comprador big bourgeoisie. It will pave way for MNCs into the retail market, displace the small traders from their business, push up the prices of all commodities especially essential items like food grains, and deprive the states of their political fiscal authority and increase their dependence on the center. Seeing the way all parliamentary parties without any exception (with the CPM in the lead, but with the SP still hesitant) are supporting this anti-people and pro-imperialist VAT it is evident that they all are willing to serve the imperialists with the same enthusiasm. The state governments of different political parties including the revisionist parties are competing with each other to show their commitment to push through this anti-people legislation. In these circumstances only a broad based strong anti-imperialist people’s movement is the alternative to resist this imperialist onslaught. That the consumer will be the worst hit by VAT brings out this urgency even more.

The wise man said just walk this way
To the dawn of the light
The wind will blow into your face
As the years pass you by Hear this voice from deep inside
It's the call of your heart
Close your eyes and your will find The passage out of the dark
Here I am
Will you send me an angel
Here I am
In the land of the morning star
The wise man said just find your place
In the eye of the storm Seek the roses along the way
Just beware of the thorns
Here I am
Will you send me an angel
Here I am
In the land of the morning star
The wise man said just raise your hand
And reach out for the spell
Find the door to the promised land Just believe in yourself
"I hope someday we will stop killing each other and live in peace"

There is never enough time to do everything that has to be done at work. Sorting the urgent from the chronic leaves a person either hungry or guilty a half-hour later. One article in a national newspaper suggested that getting organized and throwing things out is the new form of dieting. Drifting and stumbling along in professional practice or even in firm management is more hazardous than ever. Clients are sophisticated and demanding, and competitive forces are unforgiving.

The essence of strategy is making choices about what to do and what not to do. Professional practice, careers and firms must be actively managed. Personal and firm goals should be set and aligned with each other – and the firm comes first. Here are four sets of choices that can help determine your own strategy.

The first sets of choices are those that concern the clients and their legal needs. Three questions need to be answered:
1. With which clients do I want to work?
2. How can I learn a great deal more about these clients and theirchallenges in a very short period of time?
3. What type of legal work and advice are they likely to need?
The second set of choices is about reaching the clients. Some would call this "business development and marketing." Fundamentally, legal services are still a relationship-based business, even for price-sensitive practices like conveyancing and family law.
Individual expertise or the firm’s brand count in getting the first file -- but after that, service and results are all that count, regardless of experience.
4. Can I make and sustain 50 regular contacts every 90 days?
5. Who, in the firm or elsewhere, can I rely on to help do this?
6. How will I manage to speak to five new contacts every week?
7. What is my plan to meet three new or established contacts each week, even when I am busy?
The third set of choices concerns the economics of professional practice. Assuming that 50 hours are available most weeks of the year, then choosing what to spend time on each week (not each month) becomes critical.
The first year of call, the next three as an associate, the first five years of partnership, turning 40, 50 and 55 are all milestones. Each stage requires its game plan.
8. Am I investing five hours a week speaking to clients and prospects not related to a specific matter?
9. Is my effective billing rate where it should be, or am I "dumbing down" and not delegating enough?
10. Are there ways to replace hourly-based work with fixed fee or results-based arrangements?
11. Am I taking four weeks' vacation each year?
The fourth sets of questions are designed to tap creativity and innovation. This is a backdoor to living with change in a rules-based and rights-oriented industry. Clients want solutions at a reasonable cost – whether for an injury, to acquire a competitor, or to solve a labor dispute. Predictability and risk management command a higher price.
12. What specialty can I say that I have?
13. Can it be defined by type or client as well as by type of law?
14. Is it possible to innovate in the solutions I offer, in the way the service is delivered, and even in the pricing for both?
15. Am I spending two hours each week reading non-legal materials about professional services, leadership, management and my clients' sectors?

Management consulting (sometimes also called strategy consulting) refers to both the practice of helping companies to improve performance through analysis of existing business problems and development of future plans, as well as to the firms that specialize in this sort of consulting. Management consulting may involve the identification and cross-fertilization of best practices, analytical techniques, change management and coaching skills, technology implementations, strategy development.
U roam around, lots of consulting organizations with different nomenclatures; it seems consulting wave has swept everybody!!
One latest I found is "Revolution Consulting"-
Concept 1-
So-called negative emotions, those natural human feelings of anger, despair, envy, hate, resentment, etc. that we all have from time to time, have an important place in building intimacy. They need to be expressed and released when they show up in order to be detoxed. Having 'negative emotions' doesn't make us bad people. Thinking that they do is what keeps so many people from expressing and releasing these emotions, thereby keeping themselves stopped up and sick. After all, 'we're only as sick as our ugliest secrets,' which include our repressed bad feelings. It is when our feelings - all of our feelings, including the ones we're afraid of, embarrased about, or uncomfortable with - are openly revealed and then forgiven that we have a chance to heal, become whole, and truly connect with others."
So much of healing work is the emptying out of old repressed feelings - stuff that I might have bottled up to the boiling point for many years, and now the volcano is about to blow. And then, as the rumblings begin, other people will often urge me to "stop dwelling on the past" and "just suck it up and move on." Well, I'm not built to "ignore" my feelings, nor am I built to "stuff them," and yet it's true that it's never effective to "dwell on the past." But the best way to put myself in a position to never have to dwell on the past is to "own and express each present feeling, as I feel it," even the ones that I or those around me might have labeled as inappropriate or ugly. They are all mine -meaningful and meant to be experienced, and, once they are owned and released, they are meant to be let go of completely to enable me to effectively move through them to the next experience. Without storing them up as baggage, I learn to flow through them and learn from them how to be healthy and whole, and how to encourage others to fully express themselves and connect with them in their wholeness.
Concept 2-
“Compassion costs. Sharing it sincerely is a form of suffering - the 'suffering with' another. And it's the hard work we're asked to do. However, it is much easier - in fact, it's almost effortless - to argue, criticize, and condemn, all in the name of being right, making these actions and attitudes empty lies. Redemption is costly, and giving comforting support draws from the deep. Brains can argue all day long, and then brawn can take over when they're tired, but it takes great heart and tremendous effort to care about, comfort, and lift up others.”
It's so fascinating how we can turn our use of personal, organizational, or governmental "force" - in the form of argument, criticism, and condemnation - into a "good" thing in our own minds. We often conveniently define this as "being strong," just because it is the place to which we naturally gravitate in our weakness, and in our pride we don't like to admit that. We will even go to war and kill each other to avoid facing it. There is a bigger war to fight, however, and it is an inner war - the war within ourselves to learn and understand that the wars outside ourselves are only a sign of our having given up on God, and that "now we must take control." It makes a mockery of our faith, and then we insult God even further by waging our battles in His name. How much history will it take to show us the folly of this?
William Sloane Coffin once said, "The trouble with saying, 'The only thing that the other side understands is force' is that you must behave as if the only thing you understand is force." Many of God's most powerful lessons are based on St. Augustine's insight: "Never fight evil as if it were something that arose totally outside of yourself." If we seek God's peace, if it is really peace that we say we are fighting for, it is not in being hard, mighty, and strong that we will find it, but in being willing to do the really hard thing - to suffer for it (and that means the decision-makers who are calling the shots, not the "front-line soldiers" and their families who end up doing most of the suffering). We must be willing to die to our own hardened ways in order to rise up. We must be willing to question ourselves first and most often - our anger, our contentiousness, our deepest motives, our laziness, our pride. The answers will not be found in doing things the way they've always been done. We must find new ways. And they will likely be found in the midst of paradox, by turning logic on its head.For example: "Come to think of it, 'attacking' worldwide poverty with everything we have - all of our abundance, resourcefulness, and wealth - could turn out to be our best 'defense' policy. It certainly would marginalize extremists and dramatically slow down the recruitment of new terrorists."
“The reason why many fail in battle is because they wait until the hour of battle, and then angrily insist on winning. The reason why others succeed is because they have gained their victory on their knees long before the battle came, having already humbly acknowledged their failure.”
War is a cowardly escape from the overwhelming problems of peace."
Wishful thinking....perhaps the consulting has gone beyond human head or brain!!
Still searching the answer????
I hope the smoke wont go down