Arjun wrote:Amitji, and what conclusions might these be? I am curious !
Like I said what I feel doesn't matter to anyone but myself. And I'd like to keep out those feelings from the discussion.
I happen to be strongly right-wing liberal on economic, political and social issues.
Good for you!
Btw, GST is neither a right-wing nor left-wing issue, so I have absolutely no reason to take an ideological stance on it.
Your instinct is right. GST is too important to be a political issue. However, rather unfortunately it has become a political hot potato. To think otherwise is to be delusional.
...so while I would definitely not dispute the increase in growth I would not be so certain about the precise quantum of increase - more so when Kelkar keeps using the qualifier 'flawless' GST in his justification for the workings.
Actually IMO you are barking up the wrong tree when you try to fix the actual quantum of growth that will come from GST. Kelkar himself gives a very wide range (in terms of GDP growth his range is very wide). The whole idea is that GST will allow pan Indian movement of goods and services without being stopped at state borders. And so resource rich states would benefit as would those whose people are the most entrepreneurial. In short a good tax regime ushered in by GST would act as lubricant by reducing the cost of doing business. After that the actual growth will depend on a host of other factors like global economic condition and such. Suffice to say given the same conditions (do note I dislike the use of latin phrases!) there will be more economic growth in a GST regime than what we have now.
- My contention was that redistribution of taxes cannot DIRECTLY contribute to growth. My post had also mentioned that there are indirect benefits like rationalization in the conduct of business which contribute to growth (Looks like I used the word 'tangential' instead of 'indirect'. If that is what is causing you grief, then my apologies - that was my mistake.)
You miss the point (and, please nevermind what you think Somnath said or not, let your POV stand on its own). GST was never meant to be direct engine to push the up GDP growth. It is meant to ease or reduce the cost of doing business and this would then effect an improvement in GDP growth.
- As regard your point regarding retail prices, please do spend some time with the Kelkar report. There is a whole chapter that talks of effect of GST on prices, and details out which items would increase in price and which would decrease. Agricultural commodities and services btw are specifically mentioned as ones that would see a price rise.
Boss, let's just say I think over my post and do my homework before hitting the submit button. That's why my post count is so low.
I think
you need to re-read the report's comments on agricultural prices. Let me put it here:
7.27 Further, the terms of trade can also be expected to improve in favour of agriculture vis-a-vis manufactured goods. The prices of agricultural goods would increase between 0.61 and 1.18 percent whereas the overall prices of all manufacturing sector would decline between 1.22 and 2.53 percent. Consequently, the terms of trade will move in favour of agriculture between 1.9 to 3.8 percent.
7.28 The increase in agricultural prices would benefit millions of farmers in India. Similarly, the urban poor will also benefit from new employment opportunities. With regard to the food crops the poor would continue to remain secured through the public distribution system. The prices of many other consumer goods are expected to decline. These include sugar; beverages; cotton textiles; wool, silk and synthetic fibre textiles; and textile products and wearing apparel.
Now you'll notice that Kelkar says the prices of agri goods would increase by a certain percentage point and by this
he implies that more money would go to the hands of millions of farmers. That doesn't necessarily mean that you'd be paying extra at the shop. It could also mean that middle men, shop owners and other folks hanging at various parts of the supply chain will have to give more money to the farmers who produce the primary goods. And besides he adds that the prices of many consumer agricultural goods would go down, it is not as if there will be an across the board increase in prices of every agricultural goods.
But again this not the important point which Kelkar makes. The important point is, again that there will be more money in the hands of farmers. And if you do a cursory look at the Indian economy you would find that the biggest consumers who drive consumption are not the suave, sophisticated middle class who know their political leanings but farmers. That's where demand generation will happen and along with the lower cost of capital (which again Kelkar mentions) will result in more consumption because higher demand would be complimented with lower cost of production.
Now with all the above, I would point to an earlier comment which you made, which I didn't agree with:
Cheaper prices is not a given from GST...there are several competing factors at play. For example prices of agricultural goods would go up. There is an an entire chapter in Kelkar's report that focuses on which items would see a price increase and which ones a price decrease. Kelkar himself is not making the claim that average cost of goods will go down as a result of GST.
This is what Kelkar claims:
7.37 To conclude, the implications of a switch over to the ‘flawless’ GST recommended by us are indeed far-reaching. Every stakeholder stands to gain. This has the potential to transform not only the tax system in the country but also the way we organise and do business.
Notice the disconnect, that I was pointing to?
And yes Kelkar also said this:
10.9 The introduction of the GST should be viewed as the last mile in the reform of the indirect tax system of this country initiated in 1986 with the introduction of the MODVAT. The present system of taxes on goods and services is an outcome of a gradual approach to tax reform over the last 23 years. Consequent to this approach, the country has undoubtedly lost out on potentially higher economic growth, higher real wage rates, fiscal consolidation and consumer welfare. All stakeholders other than the oligarchs, both within and outside the system, stand to gain from a swift comprehensive changeover to the GST. The multitude of the poor will gain from this reform measure more than any other stakeholder. To the extent the switchover is staggered, the potential gains from the comprehensive GST would remain unrealised thereby adversely impacting the poor. We therefore, recommend that all taxes on goods and services, whether levied by the Centre or the States, should be subsumed in the GST in the very first year of its introduction.
I'm really appalled by the sheer cussedness of the opposition to GST.
I wonder, is the opposition driven by the oligarchs, whom Kelkar mentions? I can't help but remember things like the Bombay Club from the early 1990s. Is history repeating itself?
Sorry for the long post.
)..
