Indian Economy News & Discussion - Aug 26 2015

Picklu · Post by **Picklu** » 27 Oct 2015 22:17

You can start buying gold coins NOW for your daughter's marriage IN FUTURE and earn interest on it too.

That way, YOU hedge against inflation/devaluation of currency etc.

For GOVT, it smooths the gold import demand curve over time protecting against price fluctuation. Think of it as gold equivalent of strategic petroleum reserve but backed by actual future demand and stocked using your money.

Gus · Post by **Gus** » 27 Oct 2015 22:45

different people use gold for different purposes...

the ones who have less, and pawn it often, won't be depositing it for low interest - melt or no melt.
the ones who save for marriage - probably picklu's strategy may work out..buy once or twice a year in the form of raw gold and deposit it for safety and some interest
the one with lots of gold lying around - these will balk at the idea of melting..maybe old ones that they were planning on melting anyways..

Suraj · Post by **Suraj** » 27 Oct 2015 22:46

panduranghari wrote:In the government scheme, that is not the case. Besides why do we buy gold, because we do no trust the currency or banks or the government itself.

It is the validity of this assertion that I'd rather see answered by the scheme actually in operation. The fundamental issue here boils down to this - the assertion of a lack of trust in institutions. And yet, people are nowhere near demonstrating sufficient apathy to walk away from the democratic process of electing the right leaders for themselves, something they've recently demonstrated they're quite capable of doing despite all the noise and handwaving telling them otherwise. It's also true that there's quite a large expectation who still depend upon and desire GoI to deliver. It's also true that a large fraction of population are simply unbanked, being only able to access informal money lenders or family sources, for which gold is indeed a good tool.

On the other hand it is also true that there are plenty of folks vehemently opposed to this scheme, and who question its potential. It is also true that faith in the democratic system doesn't necessarily guarantee all people will trust GoI with their gold. And yes such schemes have failed before. On the other hand, banking inclusion was the purported goal of the 1971 bank nationalization. As late as 2014, there was a large unbanked population, a gap that was bridged only in the past year; more bank accounts were added in the past year than in cumulatively in the 5-10 years before that.

Therefore there are a lot of factors at play, particularly that of a government that does things as part of a larger concerted effort, rather than several piecemeal actions. I don't think there's anything novel to be said about the topic anymore. If you want to trawl FinMin or elsewhere to find detailed documents from firsthand sources (NOT press reports) then yes, that adds to the thread. Otherwise it's just noise now.

Picklu · Post by **Picklu** » 27 Oct 2015 23:44

Also the gold deposit scheme provides a round about way for the age old conundrum ... how to sell your gold in larger quantity safely without being cheated.

Prem · Post by **Prem** » 28 Oct 2015 07:02

Tesla plans battery plant in India: Elon Musk
http://timesofindia.indiatimes.com/busi ... 561129.cms

ENGALURU: While Tesla is looking at the possibility of building a car factory in China, the California-based electric car maker might consider a car battery factory in India, Elon Musk, founder and CEO of Tesla, said in a tweet. PM Narendra Modi had visited the Tesla factory while on his Silicon Valley visit last month. "Given high local demand, a Gigafactory in India would probably make sense in the long term," Musk said in response to a specific question about whether he would consider a factory in India too. Electric cars use lithium ion batteries and a manufacturing facility for such batteries is called Gigafactory. Incidentally, Modi's Tesla sortie in September was primarily focused on the company's Powerwall battery packs, with an eye towards procuring off-grid electric power technology for India. The fundamentals arise from Tesla's work on its highly-rated electric cars.

JE Menon · Post by **JE Menon** » 28 Oct 2015 08:40

How will India lose if all income tax is abolished, and instead a rigorously imposed general sales tax is put in place? Won't this enable a lot of black money instantly to become white, and loosen up a lot of internal funds for investment? Will the income tax revenue losses be made up by increased GST revenues? Won't this make India look like a fantastic repository of private wealth by individuals across the world, leading to an eventual massive inflow of funds from various parts of the world - not necessarily Western?

Maybe a silly question, but what do forum participants think?

Viv S · Post by **Viv S** » 28 Oct 2015 08:50

JE Menon wrote:How will India lose if all income tax is abolished, and instead a rigorously imposed general sales tax is put in place? Won't this enable a lot of black money instantly to become white, and loosen up a lot of internal funds for investment? Will the income tax revenue losses be made up by increased GST revenues? Won't this make India look like a fantastic repository of private wealth by individuals across the world, leading to an eventual massive inflow of funds from various parts of the world - not necessarily Western?

Maybe a silly question, but what do forum participants think?

It goes against the principle of progressive taxation. Assuming this is to be a revenue neutral proposal, you'd have to hike the GST/VAT/ST complement it. Ideally, increased spending by high income individuals should have made up the difference, but in practice they're more likely to save and invest the surplus. Being a regressive tax, its the poorest segment of the population that will be the hardest hit.

One alternative would be to keep GST unchanged but hike taxes on the investment and capital while abolishing IT. Which would bring us back to square one vis a vis under-reporting of income and black money. Probably exacerbate the issue since IT remains an 'efficient' tax on at least salaried individuals.

Yagnasri · Post by **Yagnasri** » 28 Oct 2015 09:04

If we make Income Tax a reasonable one it will lead to lot of benefits. If there is no tax up to the income of say 20 Lacs per year then only some 200000 people only left paying tax in the nation. Loss will be only 20% of the tax amount. 99.99% of the people will simply need not pay the tax and the lose of revenue will be limited because most of the middle class pays only "small amounts" as tax. But allowing them to retain this small amount makes their life much better. Only 20% of the revenue will be lost.

Subbu swamy also says if there is only some 20-30 items are only taxed as central excise tax only some 10% of the revenue will be lost. It will make thousands of products free of tax and free lot of babus from useless work.

But these kinds of talk is too radical. Removing Income Tax altogether may not be a good idea. But making the minimum limit as huge say - 20 Lacs is.

Take tax on agri land and cultivation. During the Brits rule it was a good amount and part of looting India. In today's world it makes no sense at all. When the State is giving concessions to farmers it defies logic to collect land revenue form them and have huge staff for that. Time to wind it up.

Stamp duty is another brit rule legacy. I fail to see why it shall be there. While registration of documents provides some important service the charges in most of the cases are huge and unreasonable. Both Stamp duty and registration charges in fact results in translations done in black money. Since both these things give lot of money to states it will be impossible to remove them.

In short we have 18th century tax structure with a bit of Karl Marx thrown in for coloring. That is all.

nandakumar · Post by **nandakumar** » 28 Oct 2015 09:41

JE Menon wrote:How will India lose if all income tax is abolished, and instead a rigorously imposed general sales tax is put in place? Won't this enable a lot of black money instantly to become white, and loosen up a lot of internal funds for investment? Will the income tax revenue losses be made up by increased GST revenues? Won't this make India look like a fantastic repository of private wealth by individuals across the world, leading to an eventual massive inflow of funds from various parts of the world - not necessarily Western?

Maybe a silly question, but what do forum participants think?

Just to add to Viv S' point. One way to understand the issue is like this. The State needs funds for various social and economic programmes that benefit the people. It stands to reason that those who can afford to pay more should contribute in greater measure than those who barely earn enough money to make both ends meets. Taxes on incomes and wealth inherently has that capacity to differentiate between the well-offs and the not so well-offs. Indirect taxes such as excise and VAT do not have quite the same capacity for discriminating between the two groups. As an extreme example let us say the Govt wants a simple tax system. It decides tomorrow it will abolish every other tax but just a tax on salt and nothing else. Now we all eat pretty much the same quantity of salt. But the effect of such a tax system will mean that both Mukesh Ambani and a landless labourer will pay the same amount of tax. That cannot be a fair arrangement, isn't it? As I said, it is an extreme example. But it helps us to understand the issue of 'equity' in tax system.

Suraj · Post by **Suraj** » 28 Oct 2015 09:46

JE Menon wrote:How will India lose if all income tax is abolished, and instead a rigorously imposed general sales tax is put in place?

Besides the question of progressive taxation (consumption is a larger share of income of the poor and therefore a sales tax based system proportionately taxes them more), income tax vs a sales tax or GST are entirely different topics. First figure out the latter, then figure out if you can afford to ditch the former. Don't go by dogma, but by effectiveness of implementation.

Austin · Post by **Austin** » 28 Oct 2015 10:05

India Moves Up in World Bank's Ease of Doing Business List

Full Report 2016 http://www.doingbusiness.org/~/media/GI ... Report.pdf

geeth · Post by **geeth** » 28 Oct 2015 11:42

How will India lose if all income tax is abolished, and instead a rigorously imposed general sales tax is put in place? Won't this enable a lot of black money instantly to become white, and loosen up a lot of internal funds for investment? Will the income tax revenue losses be made up by increased GST revenues? /quote]

In the case of salestax, the person or institution is only an agent of the Govt who collects the tax from the public and deposits with the treasury. He doesn't pay it from his pocket. Whereas income tax has to be paid from profit/income he makes...As others say, this is regressive because the poor will suffer a lot since they cannot be segregated from the rich in salestax regime.

Yagnasri · Post by **Yagnasri** » 28 Oct 2015 12:01

Consumption of poor need not be taxed if we remove tax on lot of stuff like food items and basic needs of the people. Make the stuff cheap for the poor so that their life is easy. Middle class savings and/or consumption also depends on how much they are taxed. Today the income tax slabs starting at a very low minimum income level is not helping the middle classes.

Chanakya says - Tax shall be like a bee taking honey from a flower. In this indirect tax is helpful because we do not even know how much we are getting taxed.

Directly Tax of any kind creates heart burn in people. Particularly in salaries class feel cheated when business class and propertied class do not pay any kind of income tax. There is also lot of corruption and black money creation due to high tax rates.

Huge savings are needed for medical expenses which are increasing at 40% per year and pension and PF needs. Children education costs are also huge now a days with States not providing free primary and secondary education of reasonable quality. State run hospitals are all now rubbish.

In this in fact poor are hit hardest hit due to both. Middle class also stopped taking services from both and switched to private sector. This also costs them. They can somehow pay but poor can not.

In my mango view the following steps may be helpful:
1. Increase the minimum tax limit substantially.
2. Increase the tax benefits for savings - particularly long term and infra related savings. This shall be a big increase as we need lot of internal savings.
3. Create a paid education and health sector with can provide cheap service - may be a NHS type structure.
4. Increase spending on primary and secondary education.
5. Fully free technical and professional education - Not MBBS and BE but ITI and Polytechnics etc.
6. Bring back wealth tax - 0.5% on the property more than say 50 Lacs and property shall include shares, gold etc,

Step 6 alone will ensure that tax amount increase to a huge extant and off set steps in Income and other tax benefits. Spending in education and health got down for decades as politicos giving subsidies for power, food and what not at the cost of education and health. This trend need to be reversed.

Todays income tax is only taxing salaries class. This had to change. Propertied class shall be taxed to a reasonable extant so that people will have more incentive to work and earn and not live of properties.

Austin · Post by **Austin** » 28 Oct 2015 12:11

Can India really be the ‘next China’?

http://economictimes.indiatimes.com/new ... 548115.cms

srin · Post by **srin** » 28 Oct 2015 13:19

From Direct Taxes point of view, they should keep it simple and remove all the exemptions
a) Full TDS everywhere feasible: Else only the accountants benefit. Really hard to figure out capital gains tax when I sold a MIP. There is the indexation benefit and the SIP amounts and so on. Hours wasted doing excel. AMC knows everything. So, deduct TDS and don't make it my headache

b) Flat rate for FDs and capital gains: Put the form-15G/H out of business. Set a flat rate with indexation benefit.

c) Remove the bad exemptions: I'm pretty sure there is a huge scam with food coupons business. People buy groceries with it....

d) Damp down real-estate trading: Know a few family-"friends" who have a Govt job but do side-business in real-estate, buying and selling plots. HRA is good, but I don't think there is need for capital gain accounts - this only forces repeat buying of RE.

e) Set max exemptions: Max exemptions should be some 3L or so.

alexis · Post by **alexis** » 28 Oct 2015 13:21

Yagnasri wrote:Consumption of poor need not be taxed if we remove tax on lot of stuff like food items and basic needs of the people. Make the stuff cheap for the poor so that their life is easy. Middle class savings and/or consumption also depends on how much they are taxed. Today the income tax slabs starting at a very low minimum income level is not helping the middle classes.

Chanakya says - Tax shall be like a bee taking honey from a flower. In this indirect tax is helpful because we do not even know how much we are getting taxed.

Directly Tax of any kind creates heart burn in people. Particularly in salaries class feel cheated when business class and propertied class do not pay any kind of income tax. There is also lot of corruption and black money creation due to high tax rates.

Huge savings are needed for medical expenses which are increasing at 40% per year and pension and PF needs. Children education costs are also huge now a days with States not providing free primary and secondary education of reasonable quality. State run hospitals are all now rubbish.

In this in fact poor are hit hardest hit due to both. Middle class also stopped taking services from both and switched to private sector. This also costs them. They can somehow pay but poor can not.

In my mango view the following steps may be helpful:
1. Increase the minimum tax limit substantially.
2. Increase the tax benefits for savings - particularly long term and infra related savings. This shall be a big increase as we need lot of internal savings.
3. Create a paid education and health sector with can provide cheap service - may be a NHS type structure.
4. Increase spending on primary and secondary education.
5. Fully free technical and professional education - Not MBBS and BE but ITI and Polytechnics etc.
6. Bring back wealth tax - 0.5% on the property more than say 50 Lacs and property shall include shares, gold etc,

Step 6 alone will ensure that tax amount increase to a huge extant and off set steps in Income and other tax benefits. Spending in education and health got down for decades as politicos giving subsidies for power, food and what not at the cost of education and health. This trend need to be reversed.

Todays income tax is only taxing salaries class. This had to change. Propertied class shall be taxed to a reasonable extant so that people will have more incentive to work and earn and not live of properties.

Yagnasri, i agree with you in principle as the above will benefit salaried people (including me); Similarly inheritance tax should also help in this regard.

However, implementation of such regime is going to be quite hard. Valuation of wealth and property is going to be a problem and give rise to further corruption.

JE Menon · Post by **JE Menon** » 28 Oct 2015 17:12

Thanks guys for the responses. I'm taking as the lodestone on this, Suraj's dictum: "Don't go by dogma, but by effectiveness of implementation".

Now several people have said that if there is no income tax then the sales tax will be a larger proportion of a poor man's income than say that of an upper middle class person. But isn't an upper middle class person consuming much more in the way of goods and services and thus paying a much larger rupee value in sales taxes? Further, isn't the poor guy currently paying sales taxes anyways? Furthermore, won't the absence of income tax motivate people to make more money, and once they do, to invest it to make more. So more jobs, for the poor guys. Knowing our shrewd, evil, dark and small-hearted bania mentality, I'd be surprised if a law abolishing income tax washes into the economy legally a humongous amount of black money, as well as acts as a motivator for both investment and consumption.

I'm trying to get a sense of this.

Bhurishrava · Post by **Bhurishrava** » 28 Oct 2015 17:41

Austin wrote:India Moves Up in World Bank's Ease of Doing Business List

Full Report 2016 http://www.doingbusiness.org/~/media/GI ... Report.pdf

Another western fraud. Like the rating agencies.

If you go by this - Ukraine has moved up 13 places this year and 16 places last year.

http://www.ukrinform.net/rubric-economi ... place.html

panduranghari · Post by **panduranghari** » 28 Oct 2015 18:24

Deleted

Theo_Fidel · Post by **Theo_Fidel** » 28 Oct 2015 20:22

JE Menon wrote:Thanks guys for the responses. I'm taking as the lodestone on this, Suraj's dictum: "Don't go by dogma, but by effectiveness of implementation".

Now several people have said that if there is no income tax then the sales tax will be a larger proportion of a poor man's income than say that of an upper middle class person. But isn't an upper middle class person consuming much more in the way of goods and services and thus paying a much larger rupee value in sales taxes? Further, isn't the poor guy currently paying sales taxes anyways? Furthermore, won't the absence of income tax motivate people to make more money, and once they do, to invest it to make more. So more jobs, for the poor guys. Knowing our shrewd, evil, dark and small-hearted bania mentality, I'd be surprised if a law abolishing income tax washes into the economy legally a humongous amount of black money, as well as acts as a motivator for both investment and consumption.

I'm trying to get a sense of this.

There is no need to speculate. A handful of American states have implemented this for many decades now with very mixed results. Florida, Wyoming, Washington, Texas, Alaska, Nevada etc. It hasn't given the states any visible advantages off the bat. Many are a natural resource states that use income from royalties, etc to balance the budget. Florida has Tourism, Nevada has Gambling, etc. Or they have hefty sales and property taxes. Combined sales taxes in say Texas can easily exceed 10% while in income tax states it is 5% or so. Lot of shopping is done across the state line. You might see the same in India with more shopping done in say Singapore/Sri Lanka/etc And the property tax rates in Texas are hard to believe relative to income... ...Property tax can be a progressive tax but recently the wealthy have been hiding their property in tax free trusts and it is busting Texas budget. India's combined sales tax is already 20% so do you really want to raise it even more.... ...we can try to avoid dogma but experience shows that an unfair tax system can easily provoke a violent counter reaction the other way, esp. as the less fortunate have the numbers to essentially confiscate everything from folks on BRF. The only stable structure is a progressive tax burden, a nation in India's development status should have a highly progressive tax burden...

If your concern is black money, the real reason it is concealed is not taxes but because much of it is illegally acquired. Most of these fellows will happily pay tax on them but they would be arrested the next day in a disproportionate income case and they know it. Also sales taxes would have to be paid on property transaction, which IMHO is where the majority of black money ends up. So black money would continue to hide....

It is best not to distort the taxation burden. Make it a little bit everywhere rather than lots in one place which will tempt distorting the economy....
----------------------------

Here is the pie chart for Texas state income. You can see how heavily property is taxed.

Suraj · Post by **Suraj** » 28 Oct 2015 23:44

JE Menon wrote:Now several people have said that if there is no income tax then the sales tax will be a larger proportion of a poor man's income than say that of an upper middle class person. But isn't an upper middle class person consuming much more in the way of goods and services and thus paying a much larger rupee value in sales taxes?

Progressive taxation looks at the proportion of income taxed. A larger proportion of a poor person's income is consumption, in general. Taxing consumption via a sales tax or GST means more of their income is proportionately taxed than that of a richer person. Outside of a flat tax regime, all income taxes are progressive in nature, increasing the rates for increasing income slabs. That is the nature of the generally accepted social contract within taxation of income, though everyone then does their best to evade taxes using every feasible loophole...

Yes, one can argue, as others have, 'don't tax food / essentials / xyz'. Fine. Then I ask you - what is the purpose of this debate ? All you're doing is replacing an existing structure with its own distortions, with another with a separate set of distortions. What is the point ? Like I said, this gets lost in whatever dogma an individual finds palatable. It's spectacularly difficult to actually implement in practice. Even something relatively straightforward as GST took 15 years and 4 administrations to even create a draft bill of.

The 'is abolishing IT and implementing some kind of ST a good idea' is not really directly relevant to this thread. It makes for nice discussion, but is a VERY long way from being anywhere close to real policy discussions. If anything, as the middle class grows, income taxes will become a later contributor to the exchequer than before, lowering any political interest in its elimination. In mature economies, income taxes contribute 30-40% of revenues. Much less so in developing economies, but as they mature they will just have greater emphasis on IT as a revenue source, and therefore less incentive to eliminate it.

There are some countries with flat tax regimes, but on the other hand their examples cannot be carried over easily. E.g. Russia does. On the other hand Russia also has access to massive hydrocarbon revenues whereas we are a chronic importer.

Yagnasri · Post by **Yagnasri** » 29 Oct 2015 08:02

In respect of immovable properties valuation of the property is not a difficult one. Immovable properties values are determined by respective states for registration and stamp duty purpose now. The same valuation can be used for taxing them. Normally this value rates will be near to marker price or at least 50% of it. In fact in many areas the value fixed by the state is more than the real value.

India has its own issues and can not be compared with other nations like Russia or US which have their own disadvantages and advantages. So we need something through which we can achieve a very high growth rate with greater equitable society. I am sure all the gurus here will agree on that.

At present Income tax has serious distortions. Agri income is not at all taxed. Business and other income can not be taxed as most of it is cash based. Many policies of the GOI during socialist days created huge black economy which is a serious challenge. There is huge unorganized and informal economic activities which can not brought into Income Tax. Most of the transactions can not be even traced as they are all cash based. The question in this situation what is the proper income tax structure for us?

Historically Indic kings used to take one sixth of the income of the people as tax. That is about 16%. Not 30 plus % we are all paying now and not some rubbish 80-90%s people were asked to pay in socialist days.

We need to provide money in the pockets of poor, lower middle class and middle class. Hence the minimum slab shall be reasonable.

People and the nation needs huge savings. With social support structure and small families this is very critical for people. Therefore we need to provide for tax benefits for savings.

There is a need for consumption within India. We are not china wherein most of people just export earn $ for Communists bosses. So middle class needs to have money for saving, good consumption levels.

Personal requirements like hosing etc are required to be a large extant with small families becoming a norm. Which once again need money in the peoples hand. As I have posted before same with education and health related costs.

So my view is

1. Increase Income Tax minimum limit to 10 Lacs.
2. Provide Tax benefits for savings to at least 5 Lacs or even 10 Lacs.
3. Greater tax benefits for pension/PF related savings or health insurance payments.

There is also need to stop cash based translations to a large level. Mobile based payment system, online payments etc shall be encouraged. Even made mandatory in most of the cases.

A Deshmukh · Post by **A Deshmukh** » 29 Oct 2015 09:10

IMHO
- Income Tax % needs to be reduced gradually over 10-20 years to 10-15% range.
- All income needs to be taxed. No exemptions for Agricultural income or any other income.
- Inheritance should be taxed. May be at the same (reduced) rate as income tax.
- Savings in bank accounts should not be taxed. this will lead to more money with banks.
- Tax exemptions should be reduced / stopped. ex: why do we have huge taxes on alcohol for aam public and tax exemption for defence forces?

Suraj · Post by **Suraj** » 29 Oct 2015 09:20

Proposal to allow jewellers to participate in GMS

jewellers who actually enjoy trust of gold consumers, may be allowed to act as a contact person between customers and collection centers under gold monetisation scheme.

However that may happen in the next stage as at present the scheme is being launched by the prime minister before Dhanteras.

The issue was discussed in last meeting of all stake holders in gold schemes, banks, representatives of hallmarking centers, Bureau of Indian Standards (BIS) which certifies centers and refineries.

Initially in the meeting when the issue of using the jewellers' network to promote scheme came up the BIS had shown reservations.

BIS was not comfortable in allowing jewellers to become collection centers as that is likely to create conflict of interest. However finance ministry official is understood to have suggested that jewellers can do assaying of jewellry.

Melting the jewelllery and issuing certificate based on which bank will open an account can be done by hallmarking center. BIS, said the source, will take a call when the scheme is up for review as the scheme for now has been notified.

If BIS agrees, will have to determine criteria for jewellers who could be part of the scheme.

This is a piece of good news - a sign of both greater liquidity and less constrained access to credit:
India's external borrowings drop to five-year low

The country's external borrowings fell to a five-year low in the April-September period to $11.8 billion as companies preferred borrowing domestically. External borrowings include external commercial borrowings (ECBs) and foreign currency convertible bond. Data from Reserve Bank of India (RBI) show that borrowings dropped 17.7 per cent, year-on-year, to $2.6 billion in September.

“Looking at the all-inclusive cost and hedging cost, ECBs turn out to be slightly expensive compared with onshore borrowings. A few years ago, the hedging costs were slightly low due to which it turned out to be cheaper to borrow overseas. This was also because at that time, the interest rates onshore were on the higher side,” said Ajay Manglunia, senior vice-president (fixed income), Edelweiss Securities.

Data from the Securities and Exchange Board of India (Sebi) shows the funds raised by Indian corporates through private placement of corporate bonds have been picking up and in the April-September 2015 period, it stood at Rs 2.43 lakh crore.

Last month, the central bank came out with a draft paper that allowed Indian companies to raise funds from a wider class of lenders. RBI said companies would be able to borrow up to $50 million in ECBs with three-year maturities and $50 million for five-year maturities, from the earlier $20 million.

A_Gupta · Post by **A_Gupta** » 29 Oct 2015 15:52

^^^ This table http://www.texastransparency.org/State_ ... by_Source/ gives a rather different picture of Texas state finances than the pie-chart above.

Further, from a Texas govt web page:
http://comptroller.texas.gov/taxinfo/pr ... asics.html

Texas has no state property tax. The Legislature has authorized local governments to collect the tax. The state does not set tax rates, collect taxes or settle disputes between you and your local governments.

That 'State Tax Revenue Sources - Texas' heading for the pie-chart is highly misleading.

Lastly, the tax revenues are not even the majority of the money available to the State Government of Texas. E.g., this document from the Texas State Legislature:
http://www.hro.house.state.tx.us/pdf/fo ... enue82.pdf

As the 82nd Legislature writes the state budget, it will have $177.8 billion in revenue available to spend for fiscal 2012-13, according to the comptroller’s January 2011 Biennial Revenue Estimate. This includes $76.9 billion from all state taxes, $70.2 billion in federal funds, and $30.8 billion in fees, interest, and other income. Dedicated funds make up $100.5 billion of the $177.8 billion total, and general revenue funds make up $77.3 billion. This report examines the major sources of state .tax revenue and surveys proposals to generate more

Note: $76.9 billion in taxes but $101 billion ($70.2 billion in federal funds + $30.8 billion in fees, interest and other income) from elsewhere.

Aditya_V · Post by **Aditya_V** » 29 Oct 2015 16:00

A Deshmukh wrote:IMHO
- Income Tax % needs to be reduced gradually over 10-20 years to 10-15% range.
- All income needs to be taxed. No exemptions for Agricultural income or any other income.
- Inheritance should be taxed. May be at the same (reduced) rate as income tax.
- Savings in bank accounts should not be taxed. this will lead to more money with banks.
- Tax exemptions should be reduced / stopped. ex: why do we have huge taxes on alcohol for aam public and tax exemption for defence forces?

Totally Disagree, there is something called cannon of economy. Tax spent on collecting a tax should be less than spent on the amount collected. Most Farmers in this country are not well off, Wealthy farmers spend money on businesses from high agricultural income which is anyway taxed. We will need to expand the IT department by about 10 times if we have to collect tax on agriculture.

Savings in bank accounts should not be Taxed??? no tax on interest income, no ways if will be good free money for banks but it favour a rich people, and it will discourage people from investing themselves in Business, if you can get tax free money at 8-9% why invest in equities, business etc.

Yagnasri · Post by **Yagnasri** » 29 Oct 2015 16:48

People will keep deposits in the bank more for security and reasonable risk. Business etc have risk and reward. There are lot of people who do not have such risk apatite.

I agree that there shall not be any exceptions or minimal exceptions given only in exceptional cases and they can be clearly identifiable to avoid any misuse.

We need larger investment in public education and health ASAP. Both sectors are already in a very bad mess.

Austin · Post by **Austin** » 29 Oct 2015 16:49

India less exposed to global risks & has strong forex rate: Moody’s

NEW DELHI: India's relatively resilient growth and policy reform momentum will slowly stabilize inflation, improve the regulatory environment, increase infrastructure investment and lower government debt ratios, ratings agency Moody's said in a report.

The ratings agency has a positive outlook on India's Baa3 rating, the lowest investment grade. India appears to be the best placed out of the 29 countries defined as frontier markets, being less exposed to external shocks than others. It also has a resilient exchange rate compared to the others.

"India's current account deficit, estimated at 0.8 per cent of GDP for 2015, reflects the sharpest adjustment driven by low oil prices," noted the report, which assumes the low oil price environment will persist.

The agency expects WTI crude to hover at $50 per barrel for the remainder of this year and fall further to $48 per barrel in 2016.

India's current account deficit has improved to 1.2 per cent of GDP in the quarter ended June from 4.8 per cent in 2012. In terms of economic strength, India has outperformed while Brazil has underperformed.

"We forecast strong growth in India of around 7-7.5 per cent per year in 2015-16, the highest growth rate among the G20 economies, which is supported by lower oil prices that will reinforce gradual growth-enhancing reforms," Moody's said, adding that the fiscal space was improving.

Weak fiscal ratios are the key constraint on the Baa3 rating, but an improvement in its government debt-to-GDP and interest-payment-to-revenue ratios to 66.8 per cent and 22.3 per cent, respectively, in 2014 from 79.5 per cent and 28.3 per cent in 2005 have helped country get a positive outlook with the possibility of an upgrade.

"India's significant monetary tightening in 2013, coupled with some fiscal consolidation, was an example of effective macroeconomic management that restored macroeconomic stability, albeit at the expense of near-term growth," the agency said.

It said structural reforms to address regulatory and infrastructure weaknesses, lower inflation and current account deficit outcomes have set the pace for the monetary loosening that commenced in 2015.

Austin · Post by **Austin** » 29 Oct 2015 16:51

As our Debt to GDP ratio is 66.8 % and interest payment to revenue ratio is 22.3 % of GDP

Question to gurus is can we use our huge forex of $350 billion plus to pay off our Debt and say get it under 50% which also improves interest payment to revenue ratio ?

Theo_Fidel · Post by **Theo_Fidel** » 29 Oct 2015 18:43

A_Gupta wrote:That 'State Tax Revenue Sources - Texas' heading for the pie-chart is highly misleading.

No I would not say that. It is looking at the total tax burden rather than just the 'state government' tax burden. One should look at the total state tax burden.

But it is true that due to the Federal transfers, mostly SS/Medicare, technically income tax is used to pay for that and gets transferred to the state. But SS/Medicare are not progressive taxes....

In any case I don't even know what the point you are trying to make is, can you clarify that.

A Deshmukh · Post by **A Deshmukh** » 29 Oct 2015 21:16

Aditya_V wrote:
A Deshmukh wrote: - All income needs to be taxed. No exemptions for Agricultural income or any other income.
Totally Disagree, there is something called cannon of economy. Tax spent on collecting a tax should be less than spent on the amount collected. Most Farmers in this country are not well off, Wealthy farmers spend money on businesses from high agricultural income which is anyway taxed. We will need to expand the IT department by about 10 times if we have to collect tax on agriculture.

I disagree with you.
A lot of corruption happens today, by declaring side income as Agricultural income.
Farmers that are not well off will not be taxed anyways as there are minimum income exemptions.
This is a tyranny of majority of farmers (voters) that only employees should pay income tax and not farmers.
This has to stop. There should be no discrimination that certain income types are completely non-taxable.

Aditya_V wrote:
A Deshmukh wrote: - Savings in bank accounts should not be taxed. this will lead to more money with banks.
Savings in bank accounts should not be Taxed??? no tax on interest income, no ways if will be good free money for banks but it favour a rich people, and it will discourage people from investing themselves in Business, if you can get tax free money at 8-9% why invest in equities, business etc.

To have good returns on equity requires a lot of knowledge on stocks.
Average common man cannot get good returns in stock or MF.
As Savings are taxed, money is invested in gold, or real estate, etc.
India needs to cut down appetite for gold.
I think this will benefit the middle class more than the rich. Middle class has savings in banks. Rich class has diversified investments in particularly real estate.

Suraj · Post by **Suraj** » 29 Oct 2015 22:17

Austin wrote:As our Debt to GDP ratio is 66.8 % and interest payment to revenue ratio is 22.3 % of GDP
Question to gurus is can we use our huge forex of $350 billion plus to pay off our Debt and say get it under 50% which also improves interest payment to revenue ratio ?

External debt ? Maybe, though not all of it. External debt exceeds forex reserves. Also, a lot of external debt is an accounting artifact. E.g. money in NRE accounts adds to forex inflows, and also adds to external debt . Why ? Because it is repatriable, and therefore comes with a repayment obligation. That's true even though most money in NRE accounts may be sticky and the account holder has no plan to exchange it back to $s .

Austin · Post by **Austin** » 29 Oct 2015 23:09

Suraj wrote:
Austin wrote:As our Debt to GDP ratio is 66.8 % and interest payment to revenue ratio is 22.3 % of GDP
Question to gurus is can we use our huge forex of $350 billion plus to pay off our Debt and say get it under 50% which also improves interest payment to revenue ratio ?
External debt ? Maybe, though not all of it. External debt exceeds forex reserves. Also, a lot of external debt is an accounting artifact. E.g. money in NRE accounts adds to forex inflows, and also adds to external debt . Why ? Because it is repatriable, and therefore comes with a repayment obligation. That's true even though most money in NRE accounts may be sticky and the account holder has no plan to exchange it back to $s .

What about Internal Debt , Moody is talking of Government Debt to GDP Ratio by that they mean Public Debt ( Internal/External ) , Cant we pay our internal debt , even if the internal debt are perhaps in Rupee they can just print more rupee to pay it back isnt it ?

External Debt may be mostly Private Debt and its something the companies might have to pay

Kakkaji · Post by **Kakkaji** » 29 Oct 2015 23:35

Road, port sectors to create over 50 lakh jobs: Nitin Gadkari

MUMBAI: Union minister Nitin Gadkari today said roads and ports sectors will create over 50 lakh jobs in the next five years and contribute nearly two per cent to the country's GDP.

Suraj · Post by **Suraj** » 29 Oct 2015 23:53

Austin wrote:
Suraj wrote:External debt ? Maybe, though not all of it. External debt exceeds forex reserves. Also, a lot of external debt is an accounting artifact. E.g. money in NRE accounts adds to forex inflows, and also adds to external debt . Why ? Because it is repatriable, and therefore comes with a repayment obligation. That's true even though most money in NRE accounts may be sticky and the account holder has no plan to exchange it back to $s .
What about Internal Debt , Moody is talking of Government Debt to GDP Ratio by that they mean Public Debt ( Internal/External ) , Cant we pay our internal debt , even if the internal debt are perhaps in Rupee they can just print more rupee to pay it back isnt it ?

If internal debt could be paid back so easily without consequence, no one would have any internal debt

In reality pretty much everyone has a lot of internal debt, so...

Kakkaji · Post by **Kakkaji** » 30 Oct 2015 04:18

Could go in the Achievements thread:

Once a month, PM Narendra Modi steps in to revive stalled projects

Once a month, Modi holds a meeting with top state and federal bureaucrats to check why projects have not got off the ground. Since March this year, his intervention has helped revive nearly $60 billion in federal and state projects, according to government data through September seen by Reuters.

Modi has won plaudits for the initiative that has chipped away at a $150 billion backlog of planned roads, ports, railways, power stations and other projects.

Austin · Post by **Austin** » 30 Oct 2015 11:15

Suraj wrote:If internal debt could be paid back so easily without consequence, no one would have any internal debt In reality pretty much everyone has a lot of internal debt, so...

Can you care to explain how does one go about paying internal debt but if moodys stastics is on the money if our interest payment ratio is 23 % and Public debt of 66 % then isnt that a very high debt to have for us ?

Can we pay of some of the debt with say our forex and instead of raising debt to pay our Budget Deficit can we use or Forex to pay it back ?

I understand the forex is there for paying imports and may be in worst case defending rupeee but can we also use it to pay our debt ? Thanks

Suraj · Post by **Suraj** » 30 Oct 2015 11:17

The government pays down its debt with its revenues or other non-revenue proceeds to the exchequer (e.g. disinvestment). Forex reserves are not GoI revenues for them to expropriate and use to pay down their own deficit burden. If that were permissible, then why bother with forex reserves ? They can leave a note in your bank account and take the money.

Suraj · Post by **Suraj** » 30 Oct 2015 12:06

Govt eyes bankruptcy reform to ease decades of gridlock

A group of government-appointed advisors has recommended sweeping changes to India's overburdened bankruptcy system, aiming to modernise a process that takes several years and costs investors and taxpayers billions.

The changes would be the most ambitious overhaul to date of rules governing the liquidation or revival of companies in India, a country with no single bankruptcy code and where competing laws, unclear jurisdictions and inadequate resources can leave cases languishing for decades.

The proposals, to be handed to the Finance Ministry as early as Monday, will impose deadlines for the first time and establish a network of insolvency professionals to lighten courts' workload and tackle delays, T K Viswanathan, chairman of the Bankruptcy Law Reform Committee, told Reuters.

Under current rules, even deciding whether to save or liquidate an ailing company can take years, leaving it in the hands of managers who can - and do - strip assets with impunity. Under the proposed changes, a decision would have to be reached in 180 days - even 90 days for fast-track applications, Viswanathan said.

"The whole essence of our exercise is that everything is done within time," he said.

Foreign and domestic investors say the difficulty in exiting ventures can deter them from entering.

Cases such as the protracted collapse of liquor tycoon Vijay Mallya's Kingfisher Airline empire have burnt investors. The airline was grounded in 2012 with some $1.5 billion in debt and its shares are now worthless, but creditor banks seized his former Mumbai headquarters only this year. The fate of his Goan villa is stuck in a prolonged court tussle.

India ranks 130 out of 189 in the World Bank's Ease of Doing Business report, below Lesotho and Cameroon, not least because of its poor performance in resolving insolvency.

The World Bank says it takes 4.3 years on average, more than twice as long as in China, with an average recovery of 25.7 cents on the dollar, one of the worst among similar size economies.

Once a month, Modi steps in to revive stalled projects

Prime Minister Narendra Modi is personally taking on India's notorious red tape to clear tens of billions of dollars worth of stalled public projects, hoping that his hands-on intervention can bend a vast, dysfunctional bureaucracy.

Once a month, Modi holds a meeting with top state and federal bureaucrats to check why projects have not got off the ground. Since March this year, his intervention has helped revive nearly $60 billion in federal and state projects, according to government data through September seen by Reuters.

Modi has won plaudits for the initiative that has chipped away at a $150 billion backlog of planned roads, ports, railways, power stations and other projects. But equally, critics say, the fact he needs to personally intervene shows the level of government inertia in Asia's third-biggest economy.

"It is a systemic problem that the prime minister needs to work on," said Arun Maira, a management consultant and member of the previous Congress government.

The initiative, launched by Modi in March and publicised on his personal web site and Twitter feed, is called pro-active governance and timely implementation, or Pragati, which means "progress" in the Hindi language.

Federal and state bureaucrats are linked by video to Modi's office for the meeting, usually held on the fourth Wednesday of each month. They are typically from the finance, law, land, environment, transport and energy ministries whose clearances are needed for many projects.

The agenda is set the previous week and usually has about a dozen stalled projects, public grievances and other governance issues.

A senior official who has attended said that when a project comes up for discussion, Modi turns to the representative of the ministry where it is being held up.

He simply asks, "Please tell me why it hasn't happened," the official said.

Several months into Pragati, the official said, a majority of the projects are cleared before they come up for discussion.

The chief minister of Uttar Pradesh state, Akhilesh Yadav, a political rival of Modi, wrote to the prime minister's office requesting the inclusion of a $1 billion metro rail project in the state capital at one Pragati meeting.

It got the clearances, including a pledge of federal funding, at the September meeting.

"This is a welcome move which would go a long way in doing away with avoidable delays," said Alok Ranjan, the state's top bureaucrat.

Yagnasri · Post by **Yagnasri** » 30 Oct 2015 12:12

While I welcome the new bankruptcy code or whatever they plan to bring, unless there is a serious attitude change in the judges it also will fail.