Indian Economy News & Discussion - Nov 27 2017

[chetak]

India's palm oil imports are expected to fall to 340,000 metric tons in January 2025 from the monthly average of 750,000 metric tons until Oct 2024.

The lowest in nearly five years.

This happens because Indian-grown Soy oil is now cheaper than palm oil

[KL Dubey]

Generally, this report confuses me. There's no clear sense of where the slowdown is, and there's a possibility that data collection has broken down somewhere. I suspect GoI is busy trying to figure out where they're getting bogus data from, which would be the simplest explanation for why they've said nothing useful here.

Page 5 says a SAE will be released Feb 28. Then one can understand whether some of the indicators/extrapolators used in the FAE were responsible - or if data was incomplete (especially the Oct-Dec quarter).

[Suraj]

Yes the SAE is released at the same time as the quarterly estimate dof Oct-Dec, i.e. Feb 28. They also revise the prior year (2023-24) data, called first revised estimate and two years prior (2022-23) data - the second revised estimate then. Those REs might help them address the topic of discrepancies in the current FY.

The provisional estimates - the first 'real' data for full 2024-25 FY GDP, follows on May 31. So for any FY, the calendar is: FAE early subsequent Jan, SAE Feb 28 subsequent year, PE on May 28 in the subsequent FY, first RE on Feb 28th in the subsequent FY and a final second RE two FYs later on Feb 28.

With all that one would think they'd manage to reduce discrepancies to 0 by the end, but no...

[suryag]

wonderful podcast by Smitha ji with Shamika Ravi ji

[Supratik]

IMF estimates it will be 4.27 trillion dollars in FY24-25. We should overtake Japan in Q1 25-26.

[Yagnasri]

Can you provide any news report link.

[Supratik]

https://www.imf.org/external/datamapper/profile/IND

[Supratik]

There is incessant complaint on social media on income tax. Finance ministry should fix this problem. And not wait for middle class revolt or lesser number of seats in election. All you have to do is modify taxation based on growth rate and inflation based on a formula every few years. Given that a 4 trillion dollar economy is moving at 6-8% real you have to do it every few years. I am not in favor of Surjit Bhalla's suggestion of reducing the IT to GDP ratio below that of advanced countries. As once you do that it becomes difficult to raise it later. Better to adjust net tax every few years. As formalization of jobs take place your IT collection is going to automatically improve. Only 80-100 million labor force is in formal jobs out of roughly 600 million. Lot of scope for IT collection in future.

[srin]

^^^ Which expenditure do they need to reduce to balance the reduction in receipts ?

[vera_k]

Have always wondered why the standard deduction for income tax is not raised automatically each year based on the inflation index. Can still be announced in the budget if there's desire to get some publicity, but otherwise the IRS can publish it each year.

[Supratik]

Tax slabs should also change. There is granularity at the bottom 0%, 5%, 10%, 15% but not at the top. It should be something like 20%, 22%, 25%, 27%, 30% with 35-37% maximum. 47% taxation is extortionist. You want HNW people to stay in India and build businesses instead of moving to tax havens.

[Jay]

There is incessant complaint on social media on income tax. Finance ministry should fix this problem. And not wait for middle class revolt or lesser number of seats in election.

I fear that battle is already lost. I'm in India now and had to stop at SBI in Hyderabad. Every one from the Bank's General Manager, to the guy who was getting a loan to buy a two wheeler are dreading the next budget from Nirmala Ji and the 100% consensus in this group of 20 people is that what's happening with the tax regime is not good to their middle class wallets, and they are expecting an even worse outcomes. Personally, I have not seen Indian middle class crown be this pessimistic in a long time. This is a BJP area, and even here middle class is rapidly changing it's tune, and I believe the governments tax regime is the main reason.

[A Deshmukh]

Most of the middle class money is in bank FD.
they should give higher deductions in Income tax to FD interest income or make it tax free.
this will help the bank cash.
this will divert money from stocks and MFs to FDs. but in any case stocks are dicey with world wide economic issues and over priced stocks, which are still in "irrational exuberance" zone.

[Supratik]

This is not feasible. As soon US Fed carries out more rate cuts, RBI is going to do the same. This means interest on FD is going to go down. People want cash in hand due to rising cost of living. Better to cut net tax and make it more granular. IT is only 20% of total tax. You are going to generate more economic activity and hence tax revenue with direct rate cuts and more slabs and slab changes. 60% of Indian economy is private consumption but finance ministry is in socialist mode.

[bala]

Nirmala Sitharaman presents union budget 2025 in parliament. This is live YT.

youtube.com/watch?v=Cpvwpydqu4M

Some notes from listening:
32 lakh crore receipts of tax; expenditure 48 lakh crore. Customs duties have been lowered for many items. Mudra loan is hiked to 20 lakhs. Capital gains - short term 20%; long term 12.5% (some are 1 yr some 2 yrs for long term). Foreign company in India the Corporate tax rate 35% reduced from 40%.

Personal income tax: 0-3 lakhs - no tax; 3-7 lakh - 5%, 7-10 lakh - 10%, 10-12 lakh - 15%, 12- 15 lakh - 20% after 15 lakh is 30%;

Core Inflation is 3.1%; overall inflation is 4%.

[isubodh]

Nirmala Sitharaman presents union budget 2025 in parliament. This is live YT.

youtube.com/watch?v=Cpvwpydqu4M

Some notes from listening:
32 lakh crore receipts of tax; expenditure 48 lakh crore. Customs duties have been lowered for many items. Mudra loan is hiked to 20 lakhs. Capital gains - short term 20%; long term 12.5% (some are 1 yr some 2 yrs for long term). Foreign company in India the Corporate tax rate 35% reduced from 40%.

Personal income tax: 0-3 lakhs - no tax; 3-7 lakh - 5%, 7-10 lakh - 10%, 10-12 lakh - 15%, 12- 15 lakh - 20% after 15 lakh is 30%;

Core Inflation is 3.1%; overall inflation is 4%.

Speech was to start at 11 AM. Is this insider information ?

[uddu]

Budget 2025: From railways, aviation to defence, here are key announcements
https://economictimes.indiatimes.com/ne ... 811324.cms

Big relief for the middle class: No Income Tax on income up to Rs 12 Lakhs
https://x.com/OpIndia_com/status/1885583781446217880

https://x.com/KanchanGupta/status/1885580480029884898
@KanchanGupta
Income Tax Exemption Limits:

2005: ₹1 lakh
2012: ₹2 lakhs
2014: ₹2.5 lakhs
2019: ₹5 lakhs
2023: ₹7 lakhs
2025: ₹12 lakhs

https://x.com/VinodDX9/status/1885342288710340869
Sankalan Chattopadhyay
@VinodDX9
Guess the defence budget this year. Indian defence allocation in the last five years:
2020-21: ₹4,71,378 crore
2021-22: ₹4,78,195.62 crore
2022-23: ₹5,25,166.15 crore
2023-24: ₹5,93,537.64 crore
2024-25: ₹6,21,940.85 crore

[Suraj]

Unbelievable budget at first glance, from an IT perspective. Looks like a major reversion of the standard approach involving shaking down the salaried class. The continued buoyancy of GST probably plays a role here . Looking forward to early deep dive articles.

[uddu]

https://x.com/anishsingh21/status/1885586787692884131

Anish Singh
@anishsingh21
Defence Budget

2025-26 — Rs 4,91,732 crore

2024-25 — Rs 4,56,722 crore (Revised Estimates)

2024-25 — Rs 4,54,773 crore (Budget Estimates)

It’s about an increase of just Rs 35,000 crore

https://pbs.twimg.com/media/GirzLrwbYAMwzpG?format=jpg

[williams]

22.1 billion USD CapEx.

[Rupesh]

Capex for defense approx 180000 crores. Under capital expenditure, Rs 48,614 crore has been allocated for aircraft and aero engines, while Rs 24,390 crore has been earmarked for the naval fleet. A total of Rs 63,099 crore has been set aside for other equipment.

Defence budget as as percentage of general budget is just above 12%. I believe this is the lowest percentage in the last 65 years.

[Supratik]

Very good budget. Probably best budget so far by NS. She should look to rationalize the top IT backet (above 50 lakh) in future to encourage wealth generation.

[uddu]

Live: FM Nirmala Sitharaman holds Post Budget Press Conference | Union Budget 2025-26

[uddu]

https://x.com/SubramanianKri/status/1885601993391022443
Prof. Krishnamurthy V Subramanian
@SubramanianKri
#Budget2025: EFFECT OF PERSONAL INCOME TAX (PIT) CUT IS HUGE!!!
I estimate consumption in FY26 will ↑↑ by >10% and GDP will ↑↑ by >8%.
See step-by-step calculations below:

Step 1: I heard Madam FM
@nsitharaman
estimate in her budget speech that the tax forego due to PIT is about ₹1 Lakh cr. This is a direct ↑ in disposable income of middle class.

Step 2: Data shows that middle class saves about 20%. So, 80% of this ↑ in disposable income will go into consumption.

Step 3: Consumption multiplier = 1/(1-MPC), where MPC is marginal propensity to consume. MPC = 1 - Savings rate = 0.8. So, consumption multiplier= 1/(1-0. = 5.

Step 4: Combine with #1 above, ↑↑ in consumption will be = (consumption multiplier) * (↑ in disposable income) = 5* ₹1 Lakh cr = ₹5 Lakh cr.

Step 5: This year, ↑ in consumption is 7.3% on a GDP ↑ of 6.4%. So, for FY26, with expected GDP ↑ of 6.3%, ↑ in consumption can be estimated proportionally to be 7.2%. Remember, this is without the impact of the ↓ in PIT in #Budget2025.

Step 6: Now, we can estimate what will be the total increase in consumption due to ↓ in PIT. From GDP estimates (https://tinyurl.com/2s47xfxz), consumption (real) in FY25 is ₹104 Lakh cr. As 5/104=4.8%, ↓ in PIT will deliver additional ↑ in consumption of 4.8%. So, I estimate ↑ in consumption in FY26 to be 4.8% + 7.2% (as estimated in step #5) = 12%.

Step 7: Finally, what will be the impact on GDP? GDP (real) in FY25 is ₹185 Lakh cr. As 5/185=2.7%, ↓ in PIT will deliver additional ↑ in GDP of 2.7%. So, I estimate ↑ in GDP in FY26 to be 6.3% (w/o ↓ in PIT) + 2.7% (impact of ↓ in PIT) = 9%.

Final estimate: Let's allow for some over-estimation in the above. Even conservatively, consumption will ↑↑ by >10% and GDP will ↑↑ by >8%.

[Hriday]

D.Muthukrishnan, a certified financial planner with 546K followers in Twitter comments on the budget. He was earlier very critical of the tax burden on middle class. He now rate the present budget as 6 or 7 out of 10.

https://x.com/dmuthuk/status/1885608087 ... DWApg&s=19

Though belated, cutting down taxes to leave more money with people is a good move. Government should provide more money in people's hands by also reducing fuel prices and cutting down the GST rates. The expected cut in interest rates also would help.

Allowing people to consume more is basic for low income country like India. Government should not stop with today's move and look for ways to leave more money in people's hands. If people have money, they consume, borrow for future and so on.

Government should realise money in people's hand would do more good and effective for the economy than money in government's hands.

Recently RBI came out with measures for creating ample liquidity in the system. Expecting rate cut cycle to begin soon. With reduced interest burden and more money in hands due to reduced tax rates, I see a huge boost to consumption. This is the need of the hour. Consumption has been in doldrums for long.

Government should seize the moment and reduce GST rates. It should also cut fuel prices. With out consumption boost, there is no way for economy to grow.

[AkshaySG]

Much needed reforms, Not just from an economic standpoint but also for this government's image & standing among the salaried class

The post COVID years rightly or wrongly had the image that NS and Fin Min was just focused on extracting every single penny from the middle class salaried taxpayer.
They were fiscally responsible in the last budget and saw no electoral losses because of it because ours is a country that votes on feelings,not realties.

In my mind such tax benefits are preferred to the ladli behena and pyaari Didi's of the world but then again electorally the latter is a proven winner

[Hriday]

https://x.com/SubramanianKri/status/1885601993391022443
Prof. Krishnamurthy V Subramanian
@SubramanianKri
#Budget2025: EFFECT OF PERSONAL INCOME TAX (PIT) CUT IS HUGE!!!
I estimate consumption in FY26 will ↑↑ by >10% and GDP will ↑↑ by >8%.
See step-by-step calculations below:
...
Step 2: Data shows that middle class saves about 20%. So, 80% of this ↑ in disposable income will go into consumption.

Step 3: Consumption multiplier = 1/(1-MPC), where MPC is marginal propensity to consume. MPC = 1 - Savings rate = 0.8. So, consumption multiplier= 1/(1-0. = 5.

Step 4: Combine with #1 above, ↑↑ in consumption will be = (consumption multiplier) * (↑ in disposable income) = 5* ₹1 Lakh cr = ₹5 Lakh cr.

...


Step 7: Finally, what will be the impact on GDP? GDP (real) in FY25 is ₹185 Lakh cr. As 5/185=2.7%, ↓ in PIT will deliver additional ↑ in GDP of 2.7%. So, I estimate ↑ in GDP in FY26 to be 6.3% (w/o ↓ in PIT) + 2.7% (impact of ↓ in PIT) = 9%.

Final estimate: Let's allow for some over-estimation in the above. Even conservatively, consumption will ↑↑ by >10% and GDP will ↑↑ by >8%.

The above post is by Prof. Krishnamurthy V Subramanian, former chief economic adviser of India govt. He further explains below,
https://x.com/SubramanianKri/status/188 ... zr4xg&s=19

Let me explain the concept of "consumption multiplier" that I have used in estimating the impact of the personal income tax cut.
Say, Subbu, a middle-class professional, receives an extra ₹10,000 in disposable income because of the income tax cut. He decides to use this money to buy a new smartphone—say a mid-range model from a popular brand—from Kavita's electronics shop.
So, First Round of Spending (Subbu → Kavita):
Amount Spent: ₹10,000
Outcome: Kavita receives this ₹10,000 as revenue for her shop.
Kavita now has an extra ₹10,000 in income. Because she saves 20% of it, she spends 80% of this extra income on everyday items. For instance, she uses ₹8000 to purchase a Silk saree Ramya’s retail store. So, Second Round of Spending (Kavita → Ramya):
Amount Spent: 80% of ₹10,000 = ₹8,000
Outcome: Ramya, a retailer in a local market, now earns ₹8,000.
...X Snip X
The Chain Reaction:
At each step, only 80% of the previous round's extra income is spent (this is the MPC or marginal propensity to consume). The money keeps circulating in the economy as follows:
First Round: ₹10,000 is spent by Subbu.
Second Round: 0.8 × ₹10,000 = ₹8,000 is spent by Kavita.
Third Round: 0.8 × ₹8,000 = ₹6,400 is spent by Ramya.
Fourth Round: 0.8 × ₹6,400 = ₹5,120 and so on.

The Mathematics Behind It:
The total increase in consumption is the sum of all these rounds:
Total Increase=₹10,000+₹8,000+₹6,400+₹5,120+… (a Geometric progression)
Total Increase = ₹10,000 (1+ 0.8 + 0.8^2 + 0.8^3 + 0.8^4 +… )
Total Increase=₹10,000/(1-0. = ₹50,000
Remember the formula for the sum of a Geometric progression 1+r+r^2+r^3+... = 1/(1-r). Using r=0.8, you get the above sum.
So, the extra ₹10,000 that Subbu received ultimately leads to an overall increase of about ₹50,000 in consumption in the economy. That's why the consumption multiplier is 5.

Is the above estimate correct? A retailer can't spend every rupee he gets from sales. He only gets a small profit margin, isn't it? Also, almost all popular electronic goods are imported, and a good chunk of the spent amount will go outside to China, South Korea etc. Is that correct? Is there a better way to force that extra income inside India? Maybe vouchers for indigenous white goods products?

Suraj once commented here something similar, ie GDP or economy is essentially X amount of transactions per Y time. The more transactions, the better for the economy.

Now, if, as suggested by Muthukrishnan and Arvind Subramanian, increasing consumption automatically improves the economy, then why was it not put into practice earlier? Is it because targeted freebies for rural areas are more politically rewarding? Anyways, urban voters are known for skipping the elections/voting and spending the time holidaying.

[bala]

A slightly different topic: I know people were following Jal Jeevan.

This report is damn good for India:

https://ejalshakti.gov.in/jjmreport/JJMIndia.aspx

Notice who are the laggard states at the bottom with only 50 - 75 % done.

[drnayar]

Capex for defense approx 180000 crores. Under capital expenditure, Rs 48,614 crore has been allocated for aircraft and aero engines, while Rs 24,390 crore has been earmarked for the naval fleet. A total of Rs 63,099 crore has been set aside for other equipment.

Defence budget as as percentage of general budget is just above 12%. I believe this is the lowest percentage in the last 65 years.

if the capex is keeping upto modernisation requirements i won't worry much., however the R&D expenditure is something to be looked at.. for some reason no funds for high alt testing of aero engines

[AkshaySG]

A slightly different topic: I know people were following Jal Jeevan.

This report is damn good for India:

https://ejalshakti.gov.in/jjmreport/JJMIndia.aspx

Notice who are the laggard states at the bottom with only 50 - 75 % done.

MP is disappointing considering pretty much continuous BJP governance for last 15 + yrs.. Really need to step up the game there.
Rajasthan is difficult due to its arid nature but still should be 75% + with the technologies available in the current date

Both these states have incredible potential if they are able to find a leader like NM was for Gujarat, Unfortunately that doesn't seem to be the case anytime soon

[Supratik]

Cutting fuel prices is a bad idea. We should encourage faster shift to EVs. Hence, the budget promotes EVs. Short term pain, long term gain. Oil imports are a big component of total imports which leads to trade deficit which puts pressure on the rupee i.e. it depreciates.

Regarding eletronics which is a major component of total imports especially imports from China - it is work in progress. From PLI schemes to semi- conductors the ecosystem is being gradually built. Imports from China will be higher without these. Once the ecosystem is in place you will see imports remaining stagnant or even going down while exports rise. Again pressure on rupee will decline. But this wlill take a few years.

Why such steep cuts in IT. There has to be a balance between infra spending and consumption. This year's focus has been on consumption.

Freebies are required provided they are scientifically done and delivery is perfect. Thiis is if you want people to get out of poverty faster and join the middle class faster. Modi has done both efficiently. No single intervention is sufficient. If someone is earning Rs 20000 the money he saves through freebies he will may be put his children in a better school or tution. His children will go onto get into formal employment and join the middle class. Not everyone will do it but most will. Some will spend it on alchohol. This is why many of these schemes are targeted at women. Women are more responsible towards their family. This is the logic behind welfare.

[KL Dubey]

MP is disappointing considering pretty much continuous BJP governance for last 15 + yrs.. Really need to step up the game there.
Rajasthan is difficult due to its arid nature but still should be 75% + with the technologies available in the current date

Both these states have incredible potential if they are able to find a leader like NM was for Gujarat, Unfortunately that doesn't seem to be the case anytime soon

Overall I'd say great progress. States like MP and UP were way in the 10-25% range when this started, so its great to see their progress.

At this point, Kerala is now the most "laggard" state. That is technically correct, since the JJM mission specifically focuses on "installation of tap in household and connecting it to a treated water supply" (i.e. metered municipal water supply). However, it is also somewhat misleading. You will hardly find anyone in rural KL collecting water in buckets or not having a tap at home. Most houses in "rural" KL have household taps connected to a well. This water is still plentiful. There is no meter/no water bill, and most people boil the water for drinking but use it raw for bathing. There are land acquisition issues for the piping works. So, a unique situation.

[Vayutuvan]

What is the difference between 12 lacs exemption has 0% tax rate and 0-4 lacs no tax, etc.?

Say someone is earning 14 lacs PA. What taxes that person would pay?

Never mind. Got the answer.

[A_Gupta]

Total Gross GST Revenue
January 2024 1,74,106 crores
January 2025 1,95,506 crores
YoY growth: 9.4%
(Gross Import Revenue grew at 7.4% and Gross Domestic Revenue grew at 10.1%)
https://www.gst.gov.in/newsandupdates/read/581

[KL Dubey]

Very good budget. Probably best budget so far by NS. She should look to rationalize the top IT backet (above 50 lakh) in future to encourage wealth generation.

Yes, excellent budget overall: https://www.indiabudget.gov.in/doc/budget_speech.pdf

Also of note is the reduction in tariffs (in many cases down to zero) on a large number of goods - see pages 35-44. E.g., tariffs on waste/scrap critical materials and metals has been reduced to zero to further enable the recycling economy (I posted earlier on the sarkar's new recycling policies).

[arshyam]

Let me explain the concept of "consumption multiplier" that I have used in estimating the impact of the personal income tax cut.
Say, Subbu, a middle-class professional, receives an extra ₹10,000 in disposable income because of the income tax cut. He decides to use this money to buy a new smartphone—say a mid-range model from a popular brand—from Kavita's electronics shop.
So, First Round of Spending (Subbu → Kavita):
Amount Spent: ₹10,000
Outcome: Kavita receives this ₹10,000 as revenue for her shop.
Kavita now has an extra ₹10,000 in income. Because she saves 20% of it, she spends 80% of this extra income on everyday items. For instance, she uses ₹8000 to purchase a Silk saree Ramya’s retail store. So, Second Round of Spending (Kavita → Ramya):
Amount Spent: 80% of ₹10,000 = ₹8,000
Outcome: Ramya, a retailer in a local market, now earns ₹8,000.
...X Snip X
The Chain Reaction:
At each step, only 80% of the previous round's extra income is spent (this is the MPC or marginal propensity to consume). The money keeps circulating in the economy as follows:
First Round: ₹10,000 is spent by Subbu.
Second Round: 0.8 × ₹10,000 = ₹8,000 is spent by Kavita.
Third Round: 0.8 × ₹8,000 = ₹6,400 is spent by Ramya.
Fourth Round: 0.8 × ₹6,400 = ₹5,120 and so on.

The Mathematics Behind It:
The total increase in consumption is the sum of all these rounds:
Total Increase=₹10,000+₹8,000+₹6,400+₹5,120+… (a Geometric progression)
Total Increase = ₹10,000 (1+ 0.8 + 0.8^2 + 0.8^3 + 0.8^4 +… )
Total Increase=₹10,000/(1-0. = ₹50,000
Remember the formula for the sum of a Geometric progression 1+r+r^2+r^3+... = 1/(1-r). Using r=0.8, you get the above sum.
So, the extra ₹10,000 that Subbu received ultimately leads to an overall increase of about ₹50,000 in consumption in the economy. That's why the consumption multiplier is 5.

Is the above estimate correct? A retailer can't spend every rupee he gets from sales. He only gets a small profit margin, isn't it? Also, almost all popular electronic goods are imported, and a good chunk of the spent amount will go outside to China, South Korea etc. Is that correct? Is there a better way to force that extra income inside India? Maybe vouchers for indigenous white goods products?

I'm sure Suraj and other economic gurus can articulate this much better, but let me try my layman's perspective.

I think the numbers are slightly off, but the principle is correct. The retailer would get a portion of the sales proceeds of ₹10000, not the full amount, which she could spend elsewhere - a portion into the business' own expenses like paying salaries of staff, etc. Only a portion of what she gets as personal income would get spent on the saree. Similarly, another portion of the sales proceeds of the mobile phone would go to the distributor, manufacturer, etc., who will in turn spend their revenue on other things. So the multiplier effect remains, but the factor will be lesser (the prof argues it will be 5) and more spread out across the economy (still not a bad thing).

Having said that, I too believe the GDP numbers for the upcoming year will get a kick up due to more money in people's hands, and the foregone revenue of ~ ₹1.5lakh crore will more than compensate in terms of greater GST collections. We should watch for the latter to see how much impact this has.

Now, if, as suggested by Muthukrishnan and Arvind Subramanian, increasing consumption automatically improves the economy, then why was it not put into practice earlier? Is it because targeted freebies for rural areas are more politically rewarding? Anyways, urban voters are known for skipping the elections/voting and spending the time holidaying.

My take: first, yes, freebies are politically more rewarding, but beyond that, I suspect the BJP (which generally dislikes freebies) was forced to engage in the game so the opposition didn't take advantage and win. The first rule of politics and good governance is to be in power to attempt it - without power, nothing can be done. So if freebies are what the people want, that's what they get, whether one likes it or not.

Second: This reduction would have happened earlier if not for the whammy from Covid - we tend to forget negative things in general, and the economic impact of Covid is one of those. It was a difficult challenge to manage the impact of Covid, and not just medically. The govt had to ensure people, especially the lower middle class, didn't fall into "poor" status, while also maintaining the overall balance of the economy, including the fiscal deficit. NS loosened the strings a little bit by allowing for an expansion of the fiscal deficit in 2021 to fund the economy, including vaccines, free food scheme, etc. See the spike in the below chart. Many of these social programs were aimed at people most vulnerable to economic fallout of Covid, so the spend was justifiable, even if they were termed as freebies. But too much of the deficit will stoke inflation, currency depreciation, increase the value of goods, interest rates, etc. to fund that deficit, so it cannot be permanent and some belt tightening would be required elsewhere to bring things back of track.


https://www.statista.com/statistics/802 ... on-to-gdp/

So the temporary increase had to be reined in while keeping the spigot of freebies flowing in order to balance the political side of things. In effect, a tightrope walk, depending a lot on tax collections from the middle class (IT) and GST. Now that things are somewhat stable, some relief can be provided. That it will help spike up growth in times of a slowdown is a happy coincidence.

My reading is that without Covid, we would have reached here 3 years ago, that's the (economic) price we (and the rest of the world) paid for that damn virus.

[A_Gupta]

As long as the fiscal deficit remains under control, the tax cut will yield real GDP growth.

[bala]

Just want to add a note on freebies: many nations have them including the US (food stamps). BJP freebies has one major feature that many miss. Previously freebies by Kangress never reached the intended people directly. There were middle men/women who took a cut and also only gave dole-outs to their favorite folks. Here BJP with JanDhan bank account and AADHAR card delivers the freebie directly, no leakage, no pilferage, etc. Also women seem to be the target of the dole out, which is good since they are responsible ones in the family. Over time, the freebies can be reduced. Many folks gave up their gas cylinder discount by the Govt.

The middle class can now stop whining due to taxes. One benefit is that the money is with the people and they will spend or save. Both have secondary good consequences to the economy. Giving the money to the govt to spend on babus/judiciaries and then have them make decisions is lugubrious. This reminds me when will the BJP put an axe on babus/judiciary. The babu /officialdom cabal requires severe pruning. We can do away with so many departments which are completely useless and tax payer waste. The judiciary requires another revamp. Having justice based on a britshit system, wasting their time on writing judgements, and things like that, are all old schoool. The govt should invest in massive computer systems to have powerful search capability. Use AI to completely research cases. All routine cases can be disposed by a computer program, no judges/lawyers required. Now the new fangled generative AI using LLM (large language models) can effectively write a judgement complete with citations. This could be much better than what a judge produces. BJP needs to usher in the new era and get rid of most courts/judges in the nation.

[Hriday]

https://x.com/dmuthuk/status/1885877068 ... hLlEw&s=19

More people would show higher income now, upto tax free limit. Though this may not increase tax collections, it would lead to formalisation of economy resulting in better GST collections.

I understand that increased consumption means an increase in GST collections. But how does the declaration of higher income increase GST collections?

[chetak]

This would have crushed a lot of fragile egos from KER to cashmere


The congis were gobsmacked in the parliament yesterday, left shocked and speechless


no one expected 12 lakhs, it was totally out of the syllabus, at the very most some would have expected, at best about 10 lakhs IT exception

Let's see how dilli's freebie addicted middle class reacts to this political bombshell