#FiscalDeficit / #IndianEconomy ?
No one wants fiscal deficit to go up / widen / get worse
Certainly not Shri Surjit Bhalla , Member PM – Economic Advisory Council ( #PMEAC )
His views are reported in Business Line ( 18 Oct ) as follows :
“ Govt may stick to fiscal deficit target, says EAC’s Surjit Bhalla “
The government is likely to stick to its fiscal deficit target of 3.2 per cent of GDP, and may accelerate sales of government stakes in lenders and other companies as part of an effort to recapitalise banks, said Surjit Bhalla, a member of the Prime Minister’s Economic Advisory Council, on Tuesday.
The government has already used up nearly all of its budget for the current fiscal year, and tax revenues are expected to fall far short of initial expectations. At the same time, economic growth has slowed, sparking calls for more stimulus.
But Bhalla said the government had stuck to its fiscal deficit targets over the past three years and is expected to do so this year as well.
The central bank has warned that missing the fiscal deficit target could lead to a spike in inflation, hurting macro-economic stability. Indian stocks slid last month on reports that a stimulus package worth up to ₹50,000 crore might be in the works — one that would widen the deficit to 3.7 per cent of GDP.
Economic growth slipped to its lowest level in three years in the first quarter, logging an annual rate of 5.7 per cent, but Bhalla said there were signs of recovery.
“I am more optimistic on the economy than I was two weeks ago,” he said, adding that last week’s industrial output and export data suggested fears about a slowdown were exaggerated.
He said GDP growth could be close to 6.5 per cent for the fiscal year — although that forecast is lower than the central bank’s latest estimate of 6.7 per cent.
Bhalla said the Council’s views on the fiscal deficit has been communicated to the government by its chairman Bibek Debroy.
Bad loans in the banking sector hit a record ₹9.5 lakh crore at the end of June, with stressed loans as a percentage of total loans at 12.6 per cent, the highest level in at least 15 years.
That represents a major problem for Asia’s third-largest economy, as provisions eat into profits and new lending is choked off. The bulk of the sector’s bad loans are held by the 21 state-run banks.
For a layman like me , Fiscal Deficit means :
Excess of government’s EXPENDITURE over its REVENUE , in a given year
Spending more than what you earn ? What our parents told us never to do when it
came to managing household budget ?
Here are some ways to bring down “ Fiscal Deficit “ :
# Spend less
# Earn more
# Simultaneously , spend less and earn more
“ Spending less “ is out of question . That would further slow down the economy !
If anything , the crying need right now is to “ SPEND MORE / MUCH MORE “ – in order to boost the Economy
Govt needs to spend Rs 350 Lakh*Crores on Infrastructure in next few years
That leaves us with the following options to “ RAISE / INCREASE REVENUE “ :
# Increase Taxes ( – horror of horror – considering that all kinds of elections are
around the corner ! Who wants to commit political hara-kiri ? )
# Borrow money from wherever you can ( did not Japan give a loan of Rs 1 lakh*crore
at nearly zero per cent interest ? Why worry about Public Debt going up ? Let the
public worry about that – just as public is worrying about those bank NPAs getting
neutralized by Central Government through RE-CAPITALIZATION , using tax collected
from you / me ! )
Since these are not “ Viable Options “ , I request Shri Bhalla ( – and other members of PM-EAC ) , to consider my following blog / suggestion / email :
Tuesday, 2 February 2016
TIME IS NOW !
Quoting from a news-report ( HT / 02 Feb 2016 ) :
At a recent World Economic Forum summit in Davos, Shri Arun Jaitley had said , India needs some additional growth engines , indicating that the focus would shift to reviving PRIVATE investments
Senior Govt officials said,” The incentives could be in the nature of TAX CONCESSIONS ”
DIPP Secretary , Amitabh Kant added , ” For the Indian economy to continue to grow, it has to be on the back of DOMESTIC PRIVATE SECTOR investments ….. for a continuous robust growth , investments from the PRIVATE SECTOR , have to be ramped up ”
Let us not keep fooling ourselves !
Prey ! From where do the so called PUBLIC SECTOR investments come from ?
It is PRIVATE MONEY ! Just re-routed by governments , using yours and mine tax money !
That is, whatever gets left ( of that tax money ) after expenses of running the government
Apart from that ,
* Re-routing tax money through PUBLIC SECTOR investments, is a very slow / cumbersome process
* Persons who manage those investments are rarely made ” accountable ” for profits / dividends
* Since tax-payers do not get immediate benefits from such re-routing , it gives rise to tax evasions
* Tax evasions lead to generation of BLACK MONEY and CORRUPTION
And no political party would advocate ” raising of taxes ” so that , on 29 Feb 2016 , Shri Jaitley could allocate
* ONE TRILLION DOLLARS ( Rs 70 lakh*crore ) each to , Piyush Goyal / Suresh Prabhu / Nitin Gadkari / Ravi Shankar Prasad / Uma Bharati / Venkaiah Naidu / Rajiv Pratap Rudy etc
* TEN TRILLION DOLLARS each to , Manohar Parikar ( Defense ) and Nirmala Sitharaman ( Make in India )
WHERE CAN WE FIND THAT GROWTH-ENGINE ?
In my email ( 08 April 2014 ) , I wrote to Shri Narendra Modi :
* Create Infrastructure SPVs
* Allow people to invest in these directly and make ” returns ( interests / dividends ) ” , tax free
* Amnesty Scheme for funds invested in such SPVs ( no questions asked as to the source of funds invested )
* An ” INVERSE TAX ” regime for Personal Income Tax ( with decreasing tax-rates for each higher slab )
Later emails recommended :
* Encourage CREATION of WEALTH by total abolition of Personal Income Tax
* Decreasing Corporate Income Tax , linked to number of permanent employees
I hope Shri Jaitleyji does not treat these as POPULIST measures and keep tinkering with 80ccg / 80dd / 80ddb / 80e / 80g /80gg /80ggc / 80tta / 80u / 24b ….etc !
Time now is for embracing TRANSFORMATIONALIST measures
It is time for the Butterfly to emerge from its cocoon !
18 Oct 2017
www.hemenparekh.in / blogs