Indian Economy News & Discussion - Nov 27 2017

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Arjun » 31 Jan 2018 12:01

The issue of interest to me is that while the Indian economy is improving in comparison to China especially with the crossover in growth rates over the last few years - India has been declining in relative competitiveness in comparison to the same nation, in most key industries of the future.

So the question of interest is - how will this dichotomy ever be managed? Obviously this situation cannot continuue...either the Indian economy starts to reflect the reality of India's languishing competitiveness or we get some leadership in place at some point that recognizes why the country needs to be competitive and figures out what it takes.

In general, I am far more interested in competitiveness-related issues than generic economic ones. Let me know if this is not the right thread...

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 31 Jan 2018 12:16

2017 was the first year when Indian steel production topped triple figures, 101 million tonnes.
Worldsteel 2017 data (PDF)
We finished just behind #2 Japan, who producted 104 million tonnes. The US was #4, some way behind with 82MT.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 31 Jan 2018 12:18

Arjun wrote:So the question of interest is - how will this dichotomy ever be managed? Obviously this situation cannot continuue...either the Indian economy starts to reflect the reality of India's languishing competitiveness or we get some leadership in place at some point that recognizes why the country needs to be competitive and figures out what it takes.

Then do the hard work yourself to justify the topic. Dig up as much data as you can, and explain the topic in enough depth that everyone learns something new and interesting from your topic of interest. Don't bring your emotions here, as far as possible. If you do that I'll simply delete the entire chain of discussion as one person whining leads to more doing so.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Arjun » 31 Jan 2018 13:43

Deleted. Off topic. We all know what 'you are getting at' . The point is that you don't know what we are getting at :)
Last edited by Suraj on 31 Jan 2018 21:56, edited 1 time in total.
Reason: Another post about other countries here.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby JTull » 31 Jan 2018 14:55

Biggest difference between Indian enterprise and Chinese enterprise is Investments in Capacity. Due to much higher cost of capital, we will not invest until we've orders, Chinese will build capacity and then be competitive from the go due to scale. They may even be willing to initiate business with loss-leaders. By the time client countries wake-up to dumping their domestic industry has been destroyed. Solar panel and wind-turbine manufacturing are examples.

L&T built it's shipyard but due to crony capitalism (public shipyards), they've struggled to get orders.
HAL hasn't moved a muscle in setting up a new assembly line for LCA, other than the first one (and a small auxillary one).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 31 Jan 2018 18:33

Arjun, you have conveniently shifted the goal post when challenged with facts. What you are now talking about are new generation technologies much of it in development. These developments are happening in many advanced countries outside China and India in terms of its capacity is still not there. Many of us work in different domains of technology and while we appreciate China's attempts and some success in developing technology we don't consider it to be galloping away to victory. As such we do not share your views about China. Lets stick to the topic of thread.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahul M » 31 Jan 2018 18:58

Arjun, stop discussing China here. there's a PRC economy thread. please take your thread of discussion there. there won't be another reminder.
- Rahul.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Supratik » 31 Jan 2018 19:18

For those complaining about low IT tax base. The issue is primarily that there are not enough tax paying jobs which is a product of the economic stage the country is in. According to this article when adjusted for per capita income India's direct taxes base is on par.

http://www.livemint.com/Opinion/QaUbaTX ... ution.html

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby hanumadu » 31 Jan 2018 20:17

Supratik wrote:For those complaining about low IT tax base. The issue is primarily that there are not enough tax paying jobs which is a product of the economic stage the country is in. According to this article when adjusted for per capita income India's direct taxes base is on par.

http://www.livemint.com/Opinion/QaUbaTX ... ution.html


Another reason for the low tax base is we keep increasing the IT exemption limit. In comparision, to increase the tax base, China deliberately did not increase the exemption limit as they grew richer. China's income tax slabs start from as low as 0 RMB and tax rates are also higher.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Vips » 31 Jan 2018 20:49

Is India on the cusp of a fiscal revolution?

Income tax collection as a per cent of GDP tend to rise sharply once average incomes cross the $2,000 threshold—from 1% of GDP to around 5% of GDP. India is on the cusp of that threshold.

Arun Jaitley will present the fifth budget of the Narendra Modi government this week. The budget will be announced against the backdrop of a strong economic revival combined with greater macro risks. This column had noted a fortnight ago that the Indian economy in 2018 would look very different from the one in 2017 because of these two factors, and would thus test the new macroeconomic policy framework.

Various monthly indicators suggest that economic recovery will gather pace over the next few quarters, and investment bank Nomura says in a recent report that a V-shaped recovery will be driven by a strong pickup in investment activity as well as export growth. The flip side is that the current account deficit is expected to widen, interest rates in the bond market have begun to move up and the significant steepening of the yield curve suggests growing worries on the inflation front.

This combination of stronger growth with greater macro risks suggests that the finance minister should avoid fiscal adventurism. The economic recovery has enough internal strength to move ahead without fiscal support while it makes sense to preserve fiscal firepower in case there is a global shock over the rest of the year. It will be a tough political decision in the months leading to the next general election.

There is a broader issue that needs to be introduced into the Indian fiscal debate at this point in time. Is India ready for a fiscal revolution? Thomas Piketty has shown in his empirical work that most Western countries underwent fiscal modernization between 1914 and 1950. For example, income tax moved from being an elite tax levied on a thin slice of the population to a mass tax that a growing proportion of citizens paid.

The Indian nation state sits on a weak fiscal foundation. There are two consequences of this. First, low tax revenue means that essential tasks such as national security, the provision of public goods and offering social security cannot be done without running what would be among the highest fiscal deficits in the world.

Second, the low proportion of direct taxpayers leads to weak political incentives for good governance. Almost all Indians pay regressive indirect taxes but it could be argued that people are more alert about how their money is being spent when it is a question of progressive direct taxes. The Indian fiscal contract is very different from the one in developed countries.

The most reasonable criticism of the view that Indians pay far too little tax as a proportion of gross domestic product (GDP) is that we are a poor country. Tadit Kundu and Pramit Bhattacharya have shown in a data story published recently in this newspaper that India is not an outlier in terms of the tax-GDP ratio once the numbers are adjusted for per capita income. Indians pay enough tax given their average incomes.

Is that about to change? Here are two optimistic guesses about why the fiscal foundations of the Indian state could be strengthened in the next decade.

Global economic history suggests that income tax collections as a per cent of GDP tend to rise sharply once average incomes cross the $2,000 threshold—from 1% of GDP to around 5% of GDP. These four extra percentage points can make a world of difference. India is on the cusp of that threshold. What has happened in China is instructive. Its income tax revenue as a per cent of GDP began to climb in the early years of this century.

Many alert readers will notice that China had a lower level of per capita income at the turn of the century than India has today. Then why was there an inflexion point in its income tax collections? Piketty has argued that one reason why India has had less success in making the income tax a mass tax could be because “the proportion of formal wage earners in the labour force is ridiculously low”.

This is a very useful backdrop to examine the ongoing debate about whether India is creating adequate jobs in formal enterprises—as well as welcome the data in the Economic Survey released earlier this week on the formalization of the Indian economy. The very possibility that India is creating more formal sector jobs than most people assume, plus the fact that average incomes are close to $2,000, provides the initial conditions for a fiscal revolution.

Higher collections of direct taxes—on income, corporate profits, capital gains and property—could create fiscal space for the government to reduce rates on regressive indirect taxes such as the goods and services tax (GST). One of the central aims of the 1991 tax reforms was to move away from a heavy dependence on regressive indirect taxes. That job is still half done.

The even more powerful possibility— and it is only a possibility right now—is that higher direct tax collections could provide the next few Indian governments with the financial resources to maintain national security, provide public goods, build infrastructure and fund a meaningful social security system without being forced to run up huge fiscal deficits.

Is such a fiscal revolution just around the corner? It is impossible to say for sure—but some of the answers are blowing in the wind.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Mahindra » 31 Jan 2018 22:54

All this debate over tax collections, formal vs informal sectors etc is due to the persistence of the cash economy, and the creativeness of businesses (traders) in avoiding any form of accountability. Every business that has a license must be required to report every employee they have on their payroll and the employee's ID, even though no tax is withheld. (In the US, the employer is required to obtains each employee's SSN, withhold the 7.65% social security tax and appropriate amount of income tax, and deposit the proceeds periodically with the IRS. The penalties for not complying are severe). To my knowledge, in India this type of employee reporting and tax withholding is done only by large employers. Most employees working in numerous shops get their salaries in cash. These employees should be "formalized", with the goal of someday collecting some taxes from them. Besides employee salaries are a business expense for the employer and he should be able to claim them only if there is reporting.

Any payments a business makes to anyone should be made reportable, similar to the W-2, 1099, 1098 etc process in the US.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 31 Jan 2018 23:50

This is news about data for last two fiscal years (NOT current one) being updated. Revisions are:
Year 2015-16 (ended March 31 2016): GDP growth revised up from 7.9% to 8.2%
Year 2016-17 (ended March 31 2017): GDP growth unchanged at 7.1%, gross value add revised up sharply to 7.9%
FY17 GDP growth retained at 7.1% and GVA growth revised sharply to 7.1%
The Central Statistics Office (CSO) has sharply raised growth of gross value added (GVA) to 7.1 per cent in 2016-17, from earlier estimates of 6.6 per cent, due to revision in agriculture and mining expansion. However, it maintained its gross domestic product (GDP) growth estimate for FY17 at 7.1 per cent, but has upped it FY16 growth estimate to 8.2 per cent, from the earlier 7.9 per cent.

Data, released a day ahead of the Budget for 2017-18, however, painted a rosy picture of gross fixed capital formation, representing investments.
The Revised Estimates, released by the CSO, show the greatest divergence in the case of the primary sector. GVA by the sector, which includes agriculture and mining, is now estimated to have grown by 7.4 per cent in FY16, up from the earlier estimate of 4.4 per cent.

A detailed breakdown of this sector shows that while GVA in agriculture and allied activities grew by 6.3 per cent in FY17, up from the earlier estimate of 4.9 per cent, mining and quarrying grew by a staggering 13 per cent in FY17, up from 1.8 per cent in the previous estimate.
“The upward revision in the GVA growth for FY17 has been driven chiefly by agriculture, reflecting the record-high output, electricity, and a strikingly high revision in growth of mining and quarrying,” Aditi Nayar, principal economist of Icra, said.

Gross fixed capital formation (GFCF) growth was revised to 10.1 per cent in FY17, the highest in this series, from the previously anaemic 2.4 per cent.
“The extent of the revision in the growth for GFCF is surprisingly large,” Nayar said.

The savings rate in the economy has dipped from 33.1 per cent in 2012-13 to 29.6 per cent in 2016-17 (at current prices). By far the biggest contributor to savings is the household sector, with a share of 54.2 per cent in FY17. But this has declined from 56.9 per cent in the previous year, largely due to a decline in financial savings.

Eight core sectors' growth slows to five-month low of 4% in December 2017
Growth of the eight core sectors slowed to a five-month low of 4% in December 2017 due to negative performance of segments like coal and crude oil, official data showed today.

The output growth recorded in December is the lowest since July 2017, when these core sectors had witnessed 2.9% expansion.

These eight industries -- coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity -- had witnessed a growth of 5.6% in December 2016.

The output of coal and crude oil sectors contracted 0.1% and 2.1% respectively during the month under review.

Growth in steel and electricity generation slowed to 2.6% and 3.3% respectively in December last year as against 15.9% and 6.4% in the same month of 2016.

Refinery products, natural gas, fertiliser and cement recorded healthy growth last month.

Cumulatively, the growth in the eight core sectors during April-December this fiscal slowed to 4% as against 5.3% in the same period last fiscal.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 01 Feb 2018 00:00

India 6th wealthiest country with total wealth of $8,230 billion: Report
India has been ranked sixth in the list of wealthiest countries with total wealth of $8,230 billion, while the United States topped the chart, says a report.

According to a report by New World Wealth, the United States is the wealthiest country in the world as the total wealth held in 2017 amounted to $64,584 billion, followed by China at the second place with $24,803 billion and Japan with $ 19,522 billion at third.

Total wealth, refers to the private wealth held by all the individuals living in each country/city. It includes all their assets (property, cash, equities, business interests) less any liabilities. The report, however, excludes government funds from its figures.

Others in the list include United Kingdom (4th, $ 9,919 billion), Germany (5th, $9,660 billion), France (7th, $6,649 billion), Canada (8th, $6,393 billion), Australia (9th, $6,142 billion) and Italy (10th, $ 4,276 billion).

The report further noted that India was the best performing wealth market globally in 2017 as its total wealth swelled from $6,584 billion in 2016 to $8,230 billion in 2017, registering a 25 per cent growth.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jaysimha » 01 Feb 2018 11:58

http://dredge-india.nic.in/files/tenders/RFP.pdf

No. 4/45/2017-DIPAM-II-A
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF INVESTMENT & PUBLIC ASSET MANAGEMENT
ENGAGEMENT OF LEGAL ADVISERS FOR STRATEGIC DISINVESTMENT OF
DREDGING CORPORATION OF INDIA LIMITED (DCIL).

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jaysimha » 01 Feb 2018 12:29

Upcoming Major Trade Fairs & Exhibitions in India
(As on January 28, 2018)
http://eoi.gov.in/bahrain/?pdf4401?000

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Patni » 01 Feb 2018 13:56

Budget (2018-2019) at a Glance

Budget at a Glance presents broad aggregates of
the Budget in a reader-friendly document. This
document shows receipts and expenditure as well as
the Fiscal Deficit (FD), Revenue Deficit (RD), Effective
Revenue Deficit (ERD), and the Primary Deficit (PD).
of the Government of India. Besides, it presents a
pictorial account of sources of receipts, their application,
the details of debt and deficit indicators, sources of
deficit financing and trends and composition of important
budgetary variables through charts and graphs.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby A_Gupta » 01 Feb 2018 18:44

Jaggi's analysis of the budget:
https://swarajyamag.com/economy/modi-ge ... ating-jobs
Modi Gets The Message: His Only Job Now Is Creating Jobs

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 01 Feb 2018 20:45

The budget has been a setback for the corporate sector. LTCG tax has been introduced, while the govt has backtracked on its promise to reduce Corporate tax for all companies to 25%. The corporate tax relief came only for companies upto 250 crore revenue. Growth numbers expected to be lackadaisical for the coming quarters.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 01 Feb 2018 21:10

LTCG is not a corporate income tax. It's a tax on equity capital appreciation at sale, for sales happening one year or more after acquisition with gains exceeding Rs.1 lakh. There's nothing wrong with an LTCG. It's a sign of greater emphasis on taxation of non-wage income sources. We have two stock exchanges with aggregate market capitalization of ~$2.5 trillion each, plus commodity exchanges like MCX which are among the largest in the world. If I recall right, MCX has the second largest turnover volume by number of contracts, of any commodity exchange, after CME. Indian LTCG rate is just 10%, and even STCG is just 15%. They are generating an enormous amount of passive wealth, as seen from the fact that (from earlier post):
The report further noted that India was the best performing wealth market globally in 2017 as its total wealth swelled from $6,584 billion in 2016 to $8,230 billion in 2017, registering a 25 per cent growth.


As for corporate tax rate, the reality is that 99% of our companies have a turnover of Rs.250 crore or less. By raising the turnover limit for 25% rate from Rs.50 crore to Rs.250 crore, they added essentially the entire MSME sector to this bracket. These also constitute the overwhelming contributors of job creation. Lowering corporate tax rate, together with GST, helps them run more efficiently and generate more jobs, while the government has the benefit of having them in the tax net through voluntary compliance.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 01 Feb 2018 21:37

News coverage:
Budget 2018: One for the voter
Make no mistake. The NDA government’s fifth budget has elections written all over it. There are several appreciable, noteworthy proposals but they’re all aimed at constituencies that bring in the votes. Farmers, informal sector workers, small businesses, senior citizens and the poor in general, all stand to benefit from the Budget while the middle-class tax payer, markets and corporates have been hung out to dry.

The story of this budget may well be the proposed universal health cover of Rs 5 lakh per annum that will benefit 50 crore people. This is an excellent proposal to support the needy as most times the poor are forced to borrow for treatment in expensive private hospitals. Politically it ranks up there with the Right to Food and Right to Work (NREGA) legislations of the UPA government.

Budget 2018 is pro-poor, agri-focused
Summarliy, revenue is on target, but expenditures are above estimate:
Bond markets in a for a rocky ride
CSO's higher growth numbers also reduce the fiscal deficit issue:
Improved growth forecast gives Centre elbow room on deficit

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 01 Feb 2018 23:24

Suraj wrote:LTCG is not a corporate income tax. It's a tax on equity capital appreciation at sale, for sales happening one year or more after acquisition with gains exceeding Rs.1 lakh

Never said it was. LTCG affects corporate sector investment. It will have a negative effect on foreign investment. Mutual funds peneyration is still quite low in india at around 2 crore investors. Again, this tax will lead to local investors shying away from mutual funds.
Suraj wrote:There's nothing wrong with an LTCG. It's a sign of greater emphasis on taxation of non-wage income sources. We have two stock exchanges with aggregate market capitalization of ~$2.5 trillion each, plus commodity exchanges like MCX which are among the largest in the world. If I recall right, MCX has the second largest turnover volume by number of contracts, of any commodity exchange, after CME. Indian LTCG rate is just 10%, and even STCG is just 15%. They are generating an enormous amount of passive wealth, as seen from the fact that (from earlier post):
The report further noted that India was the best performing wealth market globally in 2017 as its total wealth swelled from $6,584 billion in 2016 to $8,230 billion in 2017, registering a 25 per cent growth.


There is already a transaction tax on every single equity transaction, irrespective of profit or loss. If this tax is in, the transaction tax must be revoked to avoid repeated taxation.
Suraj wrote:As for corporate tax rate, the reality is that 99% of our companies have a turnover of Rs.250 crore or less. By raising the turnover limit for 25% rate from Rs.50 crore to Rs.250 crore, they added essentially the entire MSME sector to this bracket. These also constitute the overwhelming contributors of job creation. Lowering corporate tax rate, together with GST, helps them run more efficiently and generate more jobs, while the government has the benefit of having them in the tax net through voluntary compliance.

Yes, 99% companies are below 250 crore. But what you conveniently ignored is that the remaining 1% generate 75% of the total corporate tax. So govt hasnt done as much as the optics show. At a time when US has reduced corporate tax to 21%, japan and france are planning to reduce theirs, india is quickly becoming an unattractive venue for investments. This will lead to outflow of funds and jobs. So no, this decision has the potential to lower jobs and investments rather than raise it. US and other countries will give too stiff a competition.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Feb 2018 00:27

Trikaal wrote:Never said it was. LTCG affects corporate sector investment. It will have a negative effect on foreign investment. Mutual funds peneyration is still quite low in india at around 2 crore investors. Again, this tax will lead to local investors shying away from mutual funds.

LTCG taxes are a standard and established practice of taxation in every major economy. If an investor depends on its absence to make an investment, he's not worth the trouble because he's not a long term investor who is investing for growth potential anyway - just a speculator depending on arbitrage. LTCG is not an unexpected move - it has been telegraphed for some time now, and any fund manager with any sense has long since baked it into his investing plans.

Foreign investors are subject to LTCG taxes in their own jurisdictions . And also *their* LTCG tax rates are in most cases more than ours (e.g US is 15%, plus STCG matching income tax bracket. ). It helps us to have an LTCG rate at 10% - we take our 10% cut, and they deal with the rest. There's no net impact on foreign investors - we're just getting money that would entirely have gone to their government coffers on the back our our growth driven gains. Better that we take the cut ourselves first.
Trikaal wrote:There is already a transaction tax on every single equity transaction, irrespective of profit or loss. If this tax is in, the transaction tax must be revoked to avoid repeated taxation.

I agree that STT should be progressively phased out. But as the saying goes, there's no such thing as a temporary tax...
Trikaal wrote:Yes, 99% companies are below 250 crore. But what you conveniently ignored is that the remaining 1% generate 75% of the total corporate tax. So govt hasnt done as much as the optics show. At a time when US has reduced corporate tax to 21%, japan and france are planning to reduce theirs, india is quickly becoming an unattractive venue for investments. This will lead to outflow of funds and jobs. So no, this decision has the potential to lower jobs and investments rather than raise it. US and other countries will give too stiff a competition.

Jobs are still largely generated in the MSME sector, which employs ~100 million people, which stands to gain substantially. GoI will not cut rates for large corporations until it sees greater revenue buoyancy.

Everyone always loves to complain about a tax cut they didn't get, but 'nothing happened' is better than 'they made it worse'. Tax is just one of the costs of doing business. Cost of capital, transportation and logistics, regulatory delays all cost companies too - disproportionately so for larger companies with far wider nationwide tentacles. It's not worth seriously dealing with an argument that claims that one thing is enough to break the camel's back, while ignoring measurable improvements to cost of doing business as a whole.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 02 Feb 2018 00:44

Suraj wrote:
Everyone always loves to complain about a tax cut they didn't get, but 'nothing happened' is better than 'they made it worse'. Tax is just one of the costs of doing business. Cost of capital, transportation and logistics, regulatory delays all cost companies too - disproportionately so for larger companies with far wider nationwide tentacles. It's not worth seriously dealing with an argument that claims that one thing is enough to break the camel's back, while ignoring measurable improvements to cost of doing business as a whole.

In isolation, 'nothing happened' is better than 'made it worse'. But we do not have that luxury. World economy is coming out of the slump. US reduction of corporate tax means we are the 6th highest in corporate tax among G7 ahead of only france. Our principal rival, china, offers corporate tax exemption as long as dividends are invested in govt encouraged projects. India is 119 in terms of paying taxes and 100 in doing business. While the PM has been courting fdi, this move means negative flow of funds. We urgently need a policy to make india an attractive investment avenue or else we might witness scaling down by companies.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Feb 2018 00:52

Once again, a reference to merely a tax rate means very little as far as an argument goes. I think you've already made your point, and it's generally self evident that a tax cut is better than no cut or an increase. I disagree with you on the larger picture of impact.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 02 Feb 2018 01:12

Trikaal wrote:Never said it was. LTCG affects corporate sector investment. It will have a negative effect on foreign investment. Mutual funds peneyration is still quite low in india at around 2 crore investors. Again, this tax will lead to local investors shying away from mutual funds.


I take GoI would tax something in the hope of getting revenues. If LTCG will cause MF to shy away, in turn share price going down and resulting in no gains to investors.

What tax will GoI get if there is no gain? And if they cannot make revenue from this move, it is obvious GoI will remove the tax.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 02 Feb 2018 02:05

Trikaal wrote:
Never said it was. LTCG affects corporate sector investment. It will have a negative effect on foreign investment.


A quick comment on this, since this is something I've seen most people, including economists get wrong.
Tax rates, even direct taxes, let alone capital gains, would only impact business investment in a very very indirect way, if at all. The first and foremost factor impacting investment is perceived demand. After that come capital availability, regulalatory environment etc. Tax rates are seldom inhibiting business investment, since if there is profit to be had, a company will not put off investing just for 10% less taxes.

Tax rates matter in situations where businesses can play off one jurisdiction against the other, but the decision to invest somewhere is made on other considerations.

Coming to the specific case of LTCG, one could make a long winded argument: LTCG tax-> less FII investment -> less capital avaiability -> less investment. But it is exactly that- long-winded.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby vijayk » 02 Feb 2018 02:23

After GST, Govt. Should have worked on perception of taxes. Should have been more forthcoming in cutting taxes to middle class.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Suraj » 02 Feb 2018 02:24

Thanks for the more detailed point on the same lines I was making, Rahulsidhu!

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Rahulsidhu » 02 Feb 2018 02:50

Not a problem. I sometimes get frustrated by all the kvetching I see about Indian tax rates. Indian tax rates are entirely reasonable! The country needs a lot of social and physical infrastructure to be built and a lot of that is going to be NPV -ve, so one cannot expect the private sector to do it. The govt. needs a reasonable fiscal base if we are to progress and prosper.
The things one should be whining about is proper use of tax money and lack of tax compliance, but you can hardly fault the Modi Govt. on these two fronts.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby putnanja » 02 Feb 2018 08:14

Even in US, doesn't one have to pay 15% LTCG on shares held? I believe many countries have similar rates, and I don't know why it will affect only Indian investment


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Austin » 02 Feb 2018 11:04

LTCG is positive thing , 10 % wont make much difference to any one in Equity Market that has been earning handsomely to any invester for past many years and there is no free lunch and it is a good opportunity to deflate the Indian Stock Market which is exhibiting to quote Allan Greenspan "irrational exuberance"

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Trikaal » 02 Feb 2018 11:16

putnanja wrote:Even in US, doesn't one have to pay 15% LTCG on shares held? I believe many countries have similar rates, and I don't know why it will affect only Indian investment

I don't think there is a transaction tax too in US. Indian stock market will cease to be as attractive as option as it was, but foreign investments will be affected a lot more by corporate tax than LTCG.

LTCG will affect indian private investment by individuals. Currently MF and stock penetration is very low in india and the govt has been trying to increase that to make more capital available, hence those MF ads of people eating pakodas. Now, this measure will discourage common man from investing.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby Prem » 02 Feb 2018 11:23

Sensex have already lost 1.50% in few hours .

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby yensoy » 02 Feb 2018 11:58

Trikaal wrote:
putnanja wrote:Even in US, doesn't one have to pay 15% LTCG on shares held? I believe many countries have similar rates, and I don't know why it will affect only Indian investment

I don't think there is a transaction tax too in US. Indian stock market will cease to be as attractive as option as it was, but foreign investments will be affected a lot more by corporate tax than LTCG.

LTCG will affect indian private investment by individuals. Currently MF and stock penetration is very low in india and the govt has been trying to increase that to make more capital available, hence those MF ads of people eating pakodas. Now, this measure will discourage common man from investing.


10% tax on LTCG is hardly a deal breaker. Something had to give to balance the numbers, and LTCG was an easy target (that is assuming that the taxes are actually realized based on projections).

Transaction tax is a red herring here. It is only 0.1%. Often the spread (difference between sell and buy prices) is higher especially for not heavily traded stock. Neither LTCG nor transaction tax should affect any long term investor, including most mutual funds and institutional investors. Day traders will be the most affected but day traders don't add much value in the bigger scheme of things.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby chetak » 02 Feb 2018 12:17

twitter

from pravin patil


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Re: Indian Economy News & Discussion - Nov 27 2017

Postby VKumar » 02 Feb 2018 13:38

Sensex rose by 10% in recent months. So 1.5 % is ok. To be expected. Now buying is coming back. If it drops by 25% one has to worry. Government has put in huge efforts to bring retail customers to market via MF . It will be careful that market does not crash. There will be parties interested to crash the market so as to discredit the government. This is to be expected.

What is really worrying is huge increase in customs duty on edible oils and other foods. This will hurt consumer. Wonder why this happened? Cannot understand the rationale behind this, especially as government looking for increased tourism.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jaysimha » 02 Feb 2018 14:15

repost
Last edited by jaysimha on 02 Feb 2018 16:30, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby jaysimha » 02 Feb 2018 14:17

repost
Last edited by jaysimha on 02 Feb 2018 16:30, edited 1 time in total.

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Re: Indian Economy News & Discussion - Nov 27 2017

Postby nam » 02 Feb 2018 16:22

Trikaal wrote:
putnanja wrote:Even in US, doesn't one have to pay 15% LTCG on shares held? I believe many countries have similar rates, and I don't know why it will affect only Indian investment

I don't think there is a transaction tax too in US. Indian stock market will cease to be as attractive as option as it was, but foreign investments will be affected a lot more by corporate tax than LTCG.

LTCG will affect indian private investment by individuals. Currently MF and stock penetration is very low in india and the govt has been trying to increase that to make more capital available, hence those MF ads of people eating pakodas. Now, this measure will discourage common man from investing.


The recent increase in MF is not because lack of LTCG, but crash in real estate as a investment option. Investing in MF is much easier than the hassle of real estate and there is no other long term viable investment for a individual.

Regarding the transaction cost, it is one of the lowest! In UK it is £10 per transaction! and your gains are consider Income and taxed accordingly. So if you in the high tax bracket, the same rate will apply to your gains, not 10% like in India.


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