A_Gupta wrote:If not paying taxes makes money "efficient" (whatever that means), then the Pakistani economy should be beating hollow the Indian economy.
The joke is that "market efficiency" doesn't mean that money works better. It simply means that "prices always fully reflect available information."
PS: "white" money can be used for a wider variety of things than "black" money, so white money will inherently find its way to more productive uses than black money (if by "efficient money" is meant the productive use of money). Still puzzling over what "efficient money" means.
Like all arm chair "economists", I am trying to understand the disappointing GDP numbers. I am not trying to argue that black money is better than white money. White money indeed find its way to more productive uses than black money. The question here is of a transitionary nature. If an economy is used to particular amount of liquidity (white + black money) and you remove the black money from that liquidity, what is the result? PM Modiji in his independence day speech mentioned that 3 lakh crores (or ~50 billion dollars) has come back to the bank of which 2 lakh crores are under scrutiny. What is not clear is whether that money has stayed in the bank. If so, what is the result of removing $50 billion of liquid assets from a economy? Will you see a GDP slowdown?
In 2008, when US came with TARP funds to "bailout" economy, they put in ~$800 billion of liquidity into a $17 trillion economy and many mainstream economists argue that event saved US economy. Many mainstream economists also argued back then that increasing taxes would be a disaster at that time and were recommending additional tax credits so that people spend and effect the local economy better than what Govt could potentially achieve with larger projects. We may have removed $50 billion of liquidity from a $2.4 trillion economy. Would it have caused the GDP slowdown?
About taxation, my argument is also that whether the increase in tax compliance (direct taxes as well as indirect taxes via fuel taxes) has hit the GDP growth rate. What was previously used to provide local employment (either directly or indirectly), is now going to the government. Now the question is how well does Govt spend it. If it is spending on things (even with all the leakages) that has a multiplier effect on springing up GDP, then it is better than leaving it with people. But if it is spending it on things that make your economy NOT as competitive as your competitors (like China and east Asian countries), then it will slow down GDP. For e.g., why are factories that have been priced out in China moving to Vietnam and not India?
Do we need SEZs that should be there to suck that into India? Would having expressways connect that SEZs to ports help? For e.g., Wistron is setting up shop near Bangalore, but is far away from any ports. There are no expressways connecting Bangalore to either Mangalore or Chennai.
PPS: "(free LPG for example, that is being used for cooking does not add much to economy. People used to cook even before that)" On the other hand it is said that not making the average road speed faster is less efficient -- but people used to drive even before that, no? In my reckoning, if a family gets an additional hour every day to spend on something else because of more efficient and clean fuel for cooking, that is a major economic benefit.
My argument is whether moving to LPG from kerosene make women go out and work to provide that economic addition? Or is she watching TV with the extra time? For e.g. the following study shows that providing free electricity to villages may not have the economic addition that we think it will, unless we provide them holistic support for entrepreneurship.https://www.swissinfo.ch/eng/opinion_of ... a/43294158
A negative quote from the above link
At the same time, other findings were sobering. We found virtually no evidence that these solar microgrids had any broader socioeconomic effect. There was no evidence of new businesses being opened at a higher rate; women did not spend more time working. Savings and consumption remained unaffected as well.