Indian Economy - News & Discussion 27 May 2012

nakul · Post by **nakul** » 28 Sep 2012 18:35

I am no expert in tax but i have heard people say that the govt should abolish income tax since businesses use unfair means to avoid them. They should increase taxes on commodities people buy so that people who buy only essentials would be able to save more while the fat kats continue to enjoy themselves legally.

RamaY · Post by **RamaY** » 28 Sep 2012 18:48

^ That was a very old proposition. IIRC Morarji Desai or someone like that proposed it in 1960s. Spending tax (tax on purchases) instead of Income tax. The hope was that it would encourage saving.

I think that will have slightly adverse impact.

A low-income person spends all of his/her income in spending - thus end-up paying more tax as %of his income
A high-income person will not spend all of his income - thus ends up paying less tax as % of his income.

nakul · Post by **nakul** » 28 Sep 2012 18:53

I think the tax will vary according to goods. so dal & rice could be ignored while taxing while cars & electronics will get taxed more. Like how cars imported have to pay 100% duty. the people who will buy the imported stuff don't pay tax due to loopholes. Middle class goods like TV, fridge could be medium taxed. The poor will be able to make ends meet more easily and the people eho can spend 3 laks on a car would not stop buying if it is 4 lakhs. There are always cheaper models (Tata Nano) out there. Similar thing with phones, higher tax will not affect comsumption since companies will launch more proucts to fit budgets.

This solves two things. One, is there will be no reason to hide income. Two, the poor will not be burdened as they are now.

shyam · Post by **shyam** » 28 Sep 2012 20:37

ramana wrote:Economist Interactive Map of Indian states and their economy.

Very interesting GDPs for the states:

India Figures Interactive Guide

Can't believe that Kerala GDP is half of that of TN (its size is also half of TN) and is more than that of Haryana and Punjab. May be we have to have different indicator, GDC (gross domestic consumption) because that is what Kerala is ahead of others.

RamaY · Post by **RamaY** » 28 Sep 2012 22:30

RamaY wrote:http://ibnlive.in.com/videos/295505/upa ... erjee.html

I posted below image a while ago in Telangana thread to understand INC political & economic movements... i request forum members to view above MB interview while reading these numbers..

Virupaksha · Post by **Virupaksha** » 28 Sep 2012 23:18

nakul wrote:I think the tax will vary according to goods. so dal & rice could be ignored while taxing while cars & electronics will get taxed more. Like how cars imported have to pay 100% duty. the people who will buy the imported stuff don't pay tax due to loopholes. Middle class goods like TV, fridge could be medium taxed. The poor will be able to make ends meet more easily and the people eho can spend 3 laks on a car would not stop buying if it is 4 lakhs. There are always cheaper models (Tata Nano) out there. Similar thing with phones, higher tax will not affect comsumption since companies will launch more proucts to fit budgets.

This solves two things. One, is there will be no reason to hide income. Two, the poor will not be burdened as they are now.

I would support income tax continuing in the present fashion. With your suggestion the consumption would simply be done in some other countries by the fatcats. Also taxing too much of anything will lead to black markets.

What I would add though into the mix is some of land tax. Every inch of land of must be either govt owned or taxed - absolutely no exemptions. The tax again can be slabs and vary by location. That way the land mafia can be controlled. One other thing is, there will be a public records of which lands paid the tax. Of course this requires some other finetuning.

Aditya_V · Post by **Aditya_V** » 29 Sep 2012 12:48

martinbaker wrote:I have a noob question for enlightened folks... Whats the point of taxing a common street vendor 12% Service tax and sales tax and then giving full exemption to Heavy industries such as textile industries.....I mean charge the common Beauty parlor owner a whopping 12% for which government provided no subsidies and exempt textile industries for which the concessions begin right from conception of idea!!!!

A better example would be TV media with its High profile personalities is exempt in many cases from Incoem Tax, TDS and Service tax.

Even lawyers for the bills the charge, the guy who receives the Service has to pay Service tax while they go scott free.

Thats the way of game.

krisna · Post by **krisna** » 29 Sep 2012 20:44

Radiating Death: How Walmart Displaces Nearby Small Businesses

In 2006, months before a Walmart store was opened in the Austin neighborhood of Chicago's West side, researchers counted 306 businesses in the surrounding area. Two years after the Walmart opened, 82 of those businesses had closed.That some businesses, particularly small businesses, would close after a large retailer moves into the neighborhood is to be expected. But, as the researchers found, the pattern and severity of those closures was far from typical. The closer a business was to the new Walmart store, the more likely it was to close.

It is about how walmart kills small local businesses in its vicinity.
Yes this is about khanate.

nakul · Post by **nakul** » 29 Sep 2012 20:49

This is not just khanate but I have observed this in India as well. The quality of goods also come down. With a no name store, people usually check the product before buying but for large well known stores seldom do people check the quality because they believe the store will only stock high quality products. This allows substandard Chinese maal flowing under the radar without the customer knowing better. Larger ones like WalMart will simply order it from China while putting their label on it.

nakul · Post by **nakul** » 29 Sep 2012 20:50

Thousands upon thousands of acres of farmland, typically owned or leased by corporates or large farming interests, grew bounteous harvests of corn (even in a drought year). This was not the corn, the "bhutta" from the push cart vendor that you eat with relish. It is mostly genetically modified, tasteless, industrial-grade rubbish that is aimed at maximizing yield. When it is not used as animal feed, it is turned into corn syrup which is used sweeten almost everything you see in the supermarket, including that sugary soft drinks you guzzle.

The result is all too visible in much of the U.S., nowhere more than the heartland of the country, where people come in large, economy size, with consequent health issues (obesity linked diabetes and heart disease). Much of this comes from eating cheap, low-quality, industrial grade food -- from mass-produced breads and meat. There are few places in the world is where food available as cheaply (relative to income) as America. Till a couple of decades ago, Americans spent up to 15 per cent of their income on food; it is now below ten per cent and still dropping. It is now an accepted fact that the poorer the state in America, the more obese people are, because they are eating cheap, mass-produced food of the kind offered by fast-food chains. That dreadful burger and pizza and cola that you are wolfing down from the retail assembly line...it's the cheapest and the worst kind of food you could be eating.

From India's FDI retail saga: From Wal-Mart to Agarwal-Mart?

krisna · Post by **krisna** » 29 Sep 2012 20:54

No express lane for Wal-Mart, rivals in India

For five years, Raj Jain fought to bring Wal-Mart to India. After finally getting his wish on Friday, now comes the hard part for Jain, country head for the world's biggest retailer which must negotiate a thicket of restrictions to set up shop in the world's second most-populous country.

Turning a profit in India for global supermarkets is widely expected to prove even tougher than in China, where Wal-Mart Stores Inc loses money after a dozen years and restrictions are fewer than those imposed by India.

Wal-Mart, which has been ramping up its wholesale operation in India, where it operates 17 of the cash-and-carry stores allowed under the old rules, is determined to get its retail business right in a country where even local chains struggle.

Heavy price competition, expensive real estate, and poor supply chains make for a tough Indian retail environment.

CHINESE LESSONS

Like India, China was seen as a Holy Grail for global retailers drawn by a huge population and rapidly growing disposable incomes.

But China has disappointed foreign retailers as domestic players offered better prices and global operators failed to convince customers their stores had better quality goods.
( hope India follows similarly)
"India as a market will be even more tough than China," said Harminder Sahani, managing director of retail consultancy Wazir Advisors in Gurgaon, India.

Wal-Mart's Jain said that while China and India are vastly different, they have variety between regions in common.

"... Food habits actually change every 200 kilometers in India. We need to regionalise that assortment. We need to focus on local flavours, local brands and regional brands," he said.

Wal-Mart spent 53 million dollars in India to get access to retail market, alleges M.M. Joshi

"They (Wal-Mart) have mentioned in their public documents that they have spent 53 million dollars in India to get access to the Indian market. They should name the ministers they paid money to," Joshi said at a public rally here.

nakul · Post by **nakul** » 29 Sep 2012 21:00

The restrictions in India are mainly due to prevent imports. China does not face cheap import problem since it is the cheapest. Hence lower restrictions on the likes of WalMart. Moreover, the local stores have the same advantage in pricing as WalMart does. So WalMart will find it difficult to underprice its goods. None of these apply to India. They can import from China quite easily. The other shops don't have the same kind of access to low priced goods.

Murugan · Post by **Murugan** » 29 Sep 2012 23:11

Devdutt Pattanaik on Business Paradigm and Thinking Difference in West and East

http://video.ted.com/talk/podcast/2009I ... I-480p.mp4

krisna · Post by **krisna** » 29 Sep 2012 23:22

“Unorganised” sector, “Hindu” rate and terminological terror

The reforms debate has taken an interesting turn in the last few months. It consists of, according to our pink paper experts, allowing Wal-Mart in retail (now confirmed with a formal announcement) and the abolition of General Anti Avoidance Rules (GAAR), so that Vodafone need not pay the tax demanded. Now a third point has been added, that the opaque coal block allotments should not be tampered with. The argument has been taken to the extent where the interest of a couple of allottees is equated to the welfare of country by some experts.

The first prize goes to the term “unorganised sector”. Anything which is not acceptable to the reforms elite is ”unorganised” and “inefficient” – implying a sort of disorganised activity that needs global companies and hedge funds to try and fix it.

he terms “unorganised” and “inefficient constitute, what I call, terminological terrorism (TT), imposed on us by our colonial rulers, but we repeat the same without understanding how this usage has come about. To be sure, even among the so-called experts, there is no unanimity about the terms. One expert told me that all stock exchange-listed companies are “organised” and another told me that any corporatised entity is “organised.”

Actually, small unincorporated enterprises use capital much more efficiently than big businesses, since big firms can expect banks to write off their loans or, in the worst case scenario, they may even skip paying shareholders.

The second important TT is about India being an “emerging power” and hence it should take all steps to become an “emerged” market. These pundits do not know that till 1820 – from the first century AD – India and China had half of Global GDP. After 1820, due to colonisation, etc, it has fallen. A path-breaking study by Angus Maddison clearly establishes that India and China are re-emerging powers, or retrieving their global economic position. They are not “emerging powers.” (See Table-B-20, Appendix B; pp 263; The World Economy: A millennial Perspective, by Angus Madison, OECD Development Centre Studies, 2007).

The third example of terminological terrorism is much more fascinating – it is calling the low economic growth rates of the sixties and seventies as the “Hindu rate of growth.” Today, as growth in the Indian economy slows, there is regular wailing about slipping back to the “Hindu rate of growth.”

The term was coined in the 1970s by a well-known Left economist Dr Raj Krishna to describe the inability of the economy to grow at more than a modest 3 percent real rate per annum, when other economies were growing at a much faster pace.

krisna · Post by **krisna** » 29 Sep 2012 23:38

Retail FDI- Creating political storms

Trade constitutes the largest segment of the economy with a nearly 16.7 % share in NDP in 2010- 11, that is, in the aggregate NDP of Rs 43.2 lakh crore that year trade accounted for Rs 7.2 lakh crore [ at 2004- 05 constant prices] higher than the share of manufacturing [at 13.4%] and Agriculture [ at 15.0%]. ( National Accounts Statistics of the CSO, New Delhi 2011).

Trade is conducted mostly [ more than 80%] by partnership / proprietorship firms with active involvement from members of family and community. More than 125 lakh kirana stores provide a source of livelihood to nearly 16 crore people. Retail trade has grown faster than the economy: it registered a compounded annual growth rate ( CAGR) of 9.2% between 2004- 05 and 2010- 11 when the Indian economy grew at 8.6%. The retail trade comprises all kinds of people and formats – from street vendors to departmental stores of various types, shapes and characteristics.

More than 80% of trade is accounted for by partnership and proprietorship forms – often called the ” unorganized” sector. The kirana shop adjacent to my home opens at 7am and closes at 10pm every day, 365 days of the year. It is very efficient, and one can order through a mobile. The owner knows the tastes and price preferences of our family, but his business is classified as ” unorganized” by our experts and economists.

The retail trade suffers from two major handicaps. One is the non- availability of credit at reasonable rates from institutions; the other is the bribe one has to pay to the government babus to leave him in peace.

My vegetable vendor carries half a truck- load of vegetables on his TVS 50 at morning 5am. In India small businesses use capital more efficiently than big ones- So supply chain if at all will be more expensive. As far as consumer prices – they may come down initially but global experience suggest after ” predatory pricing for some time” global companies will hike it to much higher levels since they need to increase returns.

The other argument is that the MNCs bring ” funds” and ” efficiency” . An MNC does not normally bring funds from outside sources as it can access them in our market by showing ” comfort letters” from their parent companies.

Many financial institutions, both government and private, are ready to lend to them below the prime rate as they are ” Global”. That the MNC will bring funds from abroad is largely a myth.

Remember, Enron which was supposedly bringing Rs 10, 000 crore from outside. The final result is that Indian FIs are holding more than Rs 6,000 crore of worthless paper.

In the US, it is an issue of labor shortage but in India there is surplus that is part of the large self- employed group. For the economic expert goods held by household is consumption but held by mom- and- pop store is inventory.

Hence, inventory reduction has been achieved in the economy. Not much space is available in Indian houses to convert them as ” retail stores”. Another aspect is the fuel cost of driving long distances to the super- market and spending thousands of man- hours between aisles. Plus mobile phones are useful in placing orders from our Mata- Pita stores [also known as mom and pop stores in USA]. All petroleum services and products, rice, tobacco, salt, alcoholic beverages and fresh food traded at public markets are excluded in Japan from any ” distributional aspect” by companies of other countries. Australia, Japan, South Korea do not allow trade services in petroleum, its products, rice, tobacco, salt, milk, fertilizers etc by foreign companies.

French using their Loi Royer simply restrict any development of hypermarkets to protect what they call the ” centres of French towns and villages and the living of small shopkeepers”. Germany has legislative constraints on outlets above 1200 sq. m.

Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail.

We are signatory with more than 70 countries on to Bilateral Investment Promotion and Protection Agreements ( BIPAs), India has to provide national treatment to the investors. State governments therefore, may have to open up for big retail. Industries will use the legal option to force the States to comply.

The paan- chewing, dhoti- clad, English- ignorant retail trader (new term for sdre trader)should not be seen as an inefficient entrepreneur who needs to be bleached by globally- accepted detergents. What he needs is a level playing field, in the full sense of the term, with access to affordable credit and the abolition of inspector raj in the form of harassment by various arms of the government. Let us remember that we are still a savingsbased, family- oriented economy.

Makes sense a lot compared to others.

Rishirishi · Post by **Rishirishi** » 30 Sep 2012 01:03

Retailing is simply foreign companies selling Indian stuff to Indians and making a profit. Sounds bad but think about a few points.

1 Mc Donalds came to India. Before that there was only Nirulas. Now you have a whole range of fastfood chains. Mc donalds have a very small percentage of the market, and they are strugling at many locations. Others, including Indian options are thriving.

2 Van Husen, Nike, Lotto etc brought the branded goods to India. This jumpstarted the Indian branded goods revolution.

Most likely large retailers will bring in new technology to run largescale retail opperations.

krisna · Post by **krisna** » 30 Sep 2012 01:27

Rishirishi wrote:Retailing is simply foreign companies selling Indian stuff to Indians and making a profit. Sounds bad but think about a few points.

1 Mc Donalds came to India. Before that there was only Nirulas. Now you have a whole range of fastfood chains. Mc donalds have a very small percentage of the market, and they are strugling at many locations. Others, including Indian options are thriving.

2 Van Husen, Nike, Lotto etc brought the branded goods to India. This jumpstarted the Indian branded goods revolution.

Most likely large retailers will bring in new technology to run largescale retail opperations.

The foreign companies are never altruistic. it is to the credit of sdres that took the best part of it and jumpstarted the revolution.
Given a chance the foreign companies will destroy the locals and establish monopoly.

krisna · Post by **krisna** » 30 Sep 2012 02:15

Home Depot Gives Up And Closes The Last Of Its Big Box Stores In China
walmart and now home depot in pandaland.

nachiket · Post by **nachiket** » 30 Sep 2012 02:22

Home Depot knows exactly why it didn't work. It says in the article: "The market trend says this is more of a do-it-for-me culture rather than the American do-it-yourself culture,". The do-it-yourself culture is kind of extreme in the US and it's unique. Home depot will never work in India either when carpenters and plumbers are available for cheap. Few people own standalone houses anyway.

Bade · Post by **Bade** » 30 Sep 2012 03:10

I think in China, single family homes are definitely on a much smaller scale than in India. Home depot tuned for local needs will surely do much better in some areas in India, where there is less of multi-storied complexes vs stand alone homes.

I would encourage Home Depot to start experimenting the India market.

http://www.businessinsider.com/ikea-hom ... led-2012-9
OTOH, Ikea is doing fine there.

... Chinese consumers need to be educated as they have no role models. They are eager to learn but they need guidance. Companies that invest in educating the market can expect to reap handsome rewards."

When you go to Home Depot, you're asking for help to solve an existing problem that you have — you want to install a ceiling fan, you want to put new windows in or you want to build a deck. The staff is helpful, and they'll help you figure out what you have to do for the project, but the project in it of itself isn't necessarily packed with Western culture.

IKEA, on the other hand, teaches the consumer how to decorate their home, and thereby experience Western culture. The project — and the payoff, for that matter – lets consumers experience that culture.

pgbhat · Post by **pgbhat** » 30 Sep 2012 15:45

Panasonic to make India a manufacturing hub

Gus · Post by **Gus** » 30 Sep 2012 17:34

When we say and believe indian conditions are different than US, then we cannot also look at how walmart has driven out local competition and take that as what'll happen to corner store.

I doubt WM and such big retail companies can replicate their typical operations in US. I am curious as hell as to what their strategy would be for a fragmented and diverse market like India.

abhischekcc · Post by **abhischekcc** » 30 Sep 2012 19:42

Big retail has only one answer to all the questions thrown at them - that they will reduce prices by removing 'layers of middlemen'.

This idea of a relationship between 'removing businessmen' and 'reducing prices' is a MBA concoction, who have no idea of how razor thin margins can get in India. Everybody gives the example of how vegetable prices are hiked when they travel from the farmers to the end consumer. Vegetables are not the only thing that Indians buy, and there is no guarantee that the same price hikes will be seen (and removed) in other product categories.

Middlemen in India even sell below buying price to make a profit. How so? They take goods on 30 day period, sell them immediately, and the cash thus generated is used several times in the 30 day period in other goods to make a profit. How will Wal Mart compete with -5% margins of the traders.

The only aspect where small traders/retailers do not have an advantage is in the cold storage chain. If big retailers are able to save the 30% food that is wasted every year from spoilage, it will give them that much of a price advantage over the smaller players.

Will the consumers benefit? Yes and no.

Yes because the entry of large players is already forcing smaller traders to combine together and make bulk purchases, driving down prices (The producers are getting shafted).

No because big retailer format promotes needless consumption and purchase, and has too much control over what we eat. My real concern is over the poisons that American retailers will pump into the Indian food supply through their outlets.

There is another danger of Chinese manufacturers entering India piggybacking on WM and the likes.

krisna · Post by **krisna** » 30 Sep 2012 20:00

abhischekcc wrote:
This idea of a relationship between 'removing businessmen' and 'reducing prices' is a MBA concoction, who have no idea of how razor thin margins can get in India. Everybody gives the example of how vegetable prices are hiked when they travel from the farmers to the end consumer. Vegetables are not the only thing that Indians buy, and there is no guarantee that the same price hikes will be seen (and removed) in other product categories.

No because big retailer format promotes needless consumption and purchase, and has too much control over what we eat. My real concern is over the poisons that American retailers will pump into the Indian food supply through their outlets.

There is another danger of Chinese manufacturers entering India piggybacking on WM and the likes.

If there are sdre retailers then there is no problem from dumping chinese stuff. as GOI can control them better. Also if any court cases and any other troubles their assets are all in India.
With MNC retailers inside India these MNCs will heavily influence the GOI (does not matter the party) to make changes to suit them. Foreign countries will influence GOI, will have assets all over world. they can easily decamp and escape. corruption will be on higher scale relatively speaking.
GOI has to take steps that MNCs do not dump chinese goods on hapless sdre consumers irrespective of foreign influence.

abhischekcc · Post by **abhischekcc** » 30 Sep 2012 20:05

MNCs will not be able to decamp easily - most of their investments will go in purchasing real estate. In fact, high real estate cost is likely to be the biggest constraint to both growth and low prices.

Rishirishi · Post by **Rishirishi** » 01 Oct 2012 03:22

krisna wrote:
Rishirishi wrote:Retailing is simply foreign companies selling Indian stuff to Indians and making a profit. Sounds bad but think about a few points.

1 Mc Donalds came to India. Before that there was only Nirulas. Now you have a whole range of fastfood chains. Mc donalds have a very small percentage of the market, and they are strugling at many locations. Others, including Indian options are thriving.

2 Van Husen, Nike, Lotto etc brought the branded goods to India. This jumpstarted the Indian branded goods revolution.

Most likely large retailers will bring in new technology to run largescale retail opperations.
The foreign companies are never altruistic. it is to the credit of sdres that took the best part of it and jumpstarted the revolution.
Given a chance the foreign companies will destroy the locals and establish monopoly.

Sure the MNC's are in it for the money, and will always try to corner as much profit as possible. But my point is that they do teach the local competition in the process. Local manpower is trained, who are happy to move to competitors.

JwalaMukhi · Post by **JwalaMukhi** » 01 Oct 2012 07:32

Ah, the joys of "planned obsolescence" versus "unplanned obsolescence". Got to experience the cultural shift where "planned obsolescence" by design is integrated into the chain.

Well, monetary profit motive may not always be necessary for investment. There could be other kinds of profits (including minimization of cost/loss) that could help. Say for example, it is easier to manipulate the policy changes by effecting a "few ambassadors in the form of retail who are designed to profit(p.s. not necessarily monetary)" , than paying exorbitant money to a mad dog neighbour such as say pakis. In effect, the desired policy changes were effected with less cost (albeit could be a loss - but nonetheless less better than a humongous loss.). To be read as a hypothetical case onlee.

Did someone mention that shri.Narayan murthy of infosys played only instrumental version of national anthem so as not to offend the firangi guests?

Say hypothetically, would saudis (saudi owned companies) hestitate to invest in bollywood if it doesn't yield monetary profit but can help in furthering the arab colonization of willing dhimmis?

Having said that, agree with Shri. Seldonji, that pilot trails of the retailers needs to be done so every stakeholder gets a taste and probably it might be a slingshot to the movers and shakers of the society to have more pleasant ride on the gravy train.

Mort Walker · Post by **Mort Walker** » 02 Oct 2012 08:54

nachiket wrote:Home Depot knows exactly why it didn't work. It says in the article: "The market trend says this is more of a do-it-for-me culture rather than the American do-it-yourself culture,". The do-it-yourself culture is kind of extreme in the US and it's unique. Home depot will never work in India either when carpenters and plumbers are available for cheap. Few people own standalone houses anyway.

The vast majority of carpenters, painters, masons, plumbers and electricians in India have poor skills, don't know how to use power tools, and do a sloppy job. I'm sorry if I am harsh, but it is true. Take a look at residential construction closely and see the quality of the work - it is hopeless. Yes, there are skilled laborers in these trades, but they are 1 in 10 and their rates are typically higher. To make matters worse, construction materials for residential use are bad too. There is a need for a Home Depot, but it should be scaled back and at least provide tools and materials that are needed. I tried to buy wire nuts, a wire stripper for 12-16 gauge wire, and a simple multi-meter in a 2nd tier city and it was next to impossible.

Singha · Post by **Singha** » 02 Oct 2012 08:59

the better ones do more guaranteed work for the construction sites like apartments and offices. they have all the tools and stuff. there are professional cos who lay the miles of internal data and phone wiring in ITvity offices for example.

the local odd jobs guy is variable - either a seasoned old timer good enough to make a living on his own, or a struggling young lad trying to break into the trade.

Mort Walker · Post by **Mort Walker** » 02 Oct 2012 09:03

That is what I saw. The better skilled workers were doing jobs in commercial construction like apartments, malls, and offices. Residential ones show up to paint without masking, a mason that doesn't carry a level, an electrician that carries only a screwdriver and some wire. A really pathetic situation. Even commercial construction once sold needs skilled labor and materials for maintenance. I had a situation where a builder used aluminum wiring in a flat, and guess what happens when you have a couple of window unit ACs? The wire overheats and burns. There are a lot of fires in the summer in India due to poor wiring installation when ACs get installed.

Singha · Post by **Singha** » 02 Oct 2012 09:15

the state of wiring in old commercial buildings is quite bad, as over the years nothing is maintained and extra loads and wires are just added piecemeal.
periodically places like the russel market or carlton towers in blr go up in flames because of that.

entire square kms of chandni chowk is another fire trap waiting to explode. even most of the buildings there look structurally unsound, being held up in mutual embrace by other buildings.

Theo_Fidel · Post by **Theo_Fidel** » 02 Oct 2012 19:37

Yes. Invariable, every apartment I looked at had Aluminium wires and of the wrong gauge meaning too thin for the length of the run. I calculated line losses in one apartment at roughly 25% of the electricity from the pole to the pankha. This is not factoring in shoddy wiring contacts and uninsulated connections and shoddy earthing. It would not surprise me to know that 30% of a persons electric bill is simply wasted from poor materials. The worst part was these were 80 lakh to 1.2 crore type apartments. $200,000-$300,000 in USA money without even a patch on the same quality..

ArmenT · Post by **ArmenT** » 02 Oct 2012 21:49

X-posting a link from the FDI in retail thread:
Viewpoint: What was the real reason behind India's reforms?

Mort Walker · Post by **Mort Walker** » 03 Oct 2012 02:04

Theo_Fidel wrote:Yes. Invariable, every apartment I looked at had Aluminium wires and of the wrong gauge meaning too thin for the length of the run. I calculated line losses in one apartment at roughly 25% of the electricity from the pole to the pankha. This is not factoring in shoddy wiring contacts and uninsulated connections and shoddy earthing. It would not surprise me to know that 30% of a persons electric bill is simply wasted from poor materials. The worst part was these were 80 lakh to 1.2 crore type apartments. $200,000-$300,000 in USA money without even a patch on the same quality..

Yes. Aluminum of the same gauge has higher resistance compared to copper. Aluminum is cheaper and lighter (to transport in spools), so builders prefer it and electricity costs are the buyer's problem.

National Electric Code in the US specifies for residential wiring solid core 12-gauge (typically, sometimes 14-gauge) copper wire. This is never seen in India even in small commercial construction. Typically you see 14-16 gauge aluminum wire, often multi-stranded, with oxidation build up on connectors leading to short circuits and fires.

Coupled with poor power production and transmission, this sort of stuff is a drag on the economy.

arnab · Post by **arnab** » 03 Oct 2012 11:45

alexis wrote:This revenue foregone is a clear bunkum figure for analysis; it is like CAG's figure of loss. it is absolutely hypothetical in the sense that it assumes the tax base would remain the same if it is levied. It would not be the same - As RamaY pointed out, this exemptions attract investments in the most needed place, create jobs and encourage Indian business to be competitive abroad.

You also speak as if it is Govt's right to tax people and business whatever it wants! if Govt taxes people too much, people would stop being productive and we got pre-1991 state

Saar hand waving is not a substitute for analysis (neither is quoting newspaper reporters

). Please ask yourself the following questions - what is the motivation for investing in a particular location? How critical is tax exemptions in this decision making?

Then please read this paper
http://www.imf.org/external/np/cmcg/2003/eng/091803.pdf

These are the conclusions:

Investors underscore that motivations for investing in EMCs and determinants of
investment location differ among countries and across the economic sectors. They
concur, however, that certain general factors consistently determine which countries attract
the most FDI. Investors cite, in particular the following:
• Market size and growth prospects of the host country play an important role in
affecting investment location since FDI in EMCs is increasingly being undertaken to
service domestic demand rather than to tap cheap labor.
• Wage-adjusted productivity of labor, rather than the cost of local labor per se,
will increasingly drive efficiency-seeking investments of “footloose” firms that use
EMCs as export platforms.
• The availability of infrastructure is critical. EMCs that are best prepared to address
infrastructure bottlenecks will secure greater amounts of FDI.

*****

Investors underscore the predictability and stability of the tax system as important
in determining investment decisions, but, with a few exceptions, they note that tax incentives
are not critical. Investors note, in particular, that tax incentives cannot substitute for political
stability, good macroeconomic fundamentals, the availability of infrastructure, and a sound
legal framework.

Another paper talks about why tax incentives (or better defined as tax expenditures) actually impact the budget without creating commensurate returns for the economy.

http://www-wds.worldbank.org/servlet/WD ... ps3927.pdf

A tax expenditure, in broad terms, is a tax provision that deviates from a
normative or a benchmark tax system. Tax expenditures may take a number of forms:
exclusions, exemptions, allowance, deductions, credits, preferential tax rates, or tax
deferrals.

It is also similar to an entitlement program (like NREGA)...

Tax expenditures are comparable to entitlement programs, which are direct
expenditures. A tax expenditure allows any qualified taxpayer to reduce his or her tax
liabilities, while an entitlement program is paid to all eligible persons. But there are
fundamental differences in the appropriation of funds to tax expenditures and to
entitlement programs. Tax expenditures are generally enacted as permanent legislation.
Entitlement programs must be appropriated periodically through the budgetary process.

... and has the following impacts:

1. Tax expenditures reduce tax revenue, which affects the budget balance

2. Tax expenditures, because they are funded from the tax base, affect prioritizing
fiscal allocations. Tax expenditures (regardless effective or efficiency) have a
higher priority than direct expenditures (regardless of whether they are
mandatory or discretionary). Even though the main concerns in many developing
countries are economic growth and poverty reduction, tax expenditures have a higher
priority than direct expenditure programs for infrastructure, economic growth, education,
health, poverty reduction, and so forth. Most poor people do not benefit from tax
expenditures because their incomes are below tax thresholds.

3. Tax expenditures reduce the effectiveness and efficiency of public resource
allocations: for example, some tax expenditures overlap or conflict with direct
expenditures, some tax expenditures are outdated, and sometimes different tax
expenditures are not coordinated.

4. Tax expenditures increase the complexity of the tax system (second to structural
provisions), and enormously complicate tax administration. Taking advantage of
the complicated tax system and the overburdened tax administration, the
abusive taxpayers would evade and avoid tax liabilities, causing more tax
revenue loss.

5. Tax expenditures that are loosely subject to financial discipline/scrutiny provide
an opportunity for abuse by government officials and legislators either for selfenrichment
or to provide benefits to favored interests.

Finally - you will need to prove that without tax incentives companies will not be willing to invest in the country and create jobs (specially when it has been repeatedly shown that tax incentives are not critical for investment).

Also - regarding whether governments have the 'right' to tax people - I'm afraid they do. Who was it that said - "taxation is the price we pay for living in a civilised society"? Alternatively - you are free to vote with your feet and move with your family to the tax free utopia of Saudi Arabia

RamaY · Post by **RamaY** » 03 Oct 2012 16:47

GoI can balance the budget, whether there are tax expenditures (nice word heh

) or not.

Indian current tax revenues are 3,00,000 lakhs more than cost of running the govt. The secular, socialist governments of India have been submitted deficit plans irrespective of the leader.

That tells us all.

P.S: I have presented my thoughts in how India can balance its budget while providing sustained growth for atleast 20-30 years in the Alternative Budget Scenarios thread. Intelligent posters can read that and comment.

P.S2: I wonder if our esteemed JNUnomist did a "scientific" (can a communist do logical research other than regurgitating what his master said?) research and educate us on India's tax revenue potential if the tax % is 5-10-20-30-40-50...-100% and enlighten us how this curve behaves and how much tax GoI can collect if they put a law to have 100% tax rate as in slave-nomies.

Avinash R · Post by **Avinash R** » 03 Oct 2012 21:48

Chidu’s firesale will rob urban wealth to buy rural votes

arnab · Post by **arnab** » 04 Oct 2012 04:34

RamaY wrote:
GoI can balance the budget, whether there are tax expenditures (nice word heh ) or not

I have presented my thoughts in how India can balance its budget while providing sustained growth for atleast 20-30 years in the Alternative Budget Scenarios thread. Intelligent posters can read that and comment.

P.S2: I wonder if our esteemed JNUnomist did a "scientific" (can a communist do logical research other than regurgitating what his master said?) research and educate us on India's tax revenue potential if the tax % is 5-10-20-30-40-50...-100% and enlighten us how this curve behaves and how much tax GoI can collect if they put a law to have 100% tax rate as in slave-nomies.

er.. in which case GOI can also balance its budget whether there is an NREGA or not (afterall the amount is significantly lower in this case).

P.S1 Yes looked through that howler - wasn't worth commenting on

P.S2 Well you need to make up your mind - a 'communist' quoting IMF and World Bank research - who are presumably the handmaidens of capitalists

But on a more serious note - since the thrust of your argument (such as it is) has always focused on labeling people 'secular' or 'commies' or sundry other epithets that you can come up with to cover up your lack of evidence - I guess we can reasonably conclude that this conversation has reached an end.

member_23677 · Post by **member_23677** » 04 Oct 2012 12:38

Country’s services sector expanded at its fastest pace in seven months as a spurt in new business encouraged firms to hire more staff, a survey showed on Thursday, suggesting the worst of the economic slump may be over.

A reading of 50 and above separates growth from contraction and the index has held above the break-even mark since November last year.

India’s services sector makes up for over 60% of the country’s gross domestic product and a strong reading in HSBC’s survey augurs well for the economy, where growth has faltered in recent months against the backdrop of political upheaval.

“Service sector activity grew at a faster clip in September led by firm demand, underscoring (its) resilience,” said Leif Eskesen, an economist at HSBC.

The new business sub-index surged to its highest since February allowing firms to hire more workers, and employment touched a 15-month high. Reuters
“This further lifted employment, which helped businesses keep up with orders.”

The new business sub-index surged to its highest since February allowing firms to hire more workers, and employment touched a 15-month high.

But survey participants are now less optimistic about the future. The sub-index measuring business expectations, a gauge of what firms think conditions will be like in a year’s time, fell to 67.2 from 74.0 in August.

Policy measures taken by the US Federal Reserve and the European central bank to shore up their respective economies have led to an increase in demand for Indian services. Still, the fragile recovery in the US and a dire euro zone economy pose a threat to India’s export dependant services sector.

Growth in Asia’s third-largest economy languished near its slowest in three years at 5.5% in the quarter ended June, as the lack of reforms by New Delhi and high interest rates hurt investment.

Determined to regain investor confidence and bring the economy back on track, the government launched a slew of reforms last month by slashing fuel subsidies and inviting foreign investments in retail, aviation and broadcasting.

Rising prices
Prices also rose at a faster pace in September from the previous month, the survey showed. That could further fuel wider inflation in the economy where the wholesale price index rose to 7.55 percent in August after a temporary slip in July to a three-year low.

Liquidity injections from the Fed and other major central banks have in the past pushed global commodity prices higher and resulted in rising inflation in emerging markets.

That could pose a complication for the Reserve Bank of India which, although determined to fight inflation, may find the task difficult.

“The RBI has limited room for policy rate cuts given the persistence of inflation, although further progress on fiscal consolidation and structural reforms may eventually pave the way for some easing,” Eskesen said.

A similar survey on Monday showed factory activity expanded at a steady pace in September as new orders and output rose.

http://www.firstpost.com/economy/india- ... 79128.html

Austin · Post by **Austin** » 04 Oct 2012 19:08

Big reforms again: Cabinet clears FDI in insurance, pension