Sunday, February 24, 2013

Budget 2013 and taxes

Every Sunday, I gorge into the Times of India, newspaper articles on the editorial page. I have my favorites like Gurucharan Das and Swaminathan A Iyer.

Excellent aspects into GD's article...

India's growth has plunged from almost 9 per cent to 5 per cent. One percentage point of GDP growth means roughly 15 lakh jobs; each direct job creates three indirect jobs; and each job supports a family of five. If you do the arithmetic, Madam, you will find that a four percentage point drop in GDP has brought pain and suffering to around 12,00,00,000 Indians. 

12 Cr. jobs vanished? and you can imagine the pulling-down effect it will have on consumption and thus on revenue and thus on GDP. Seems like a vicious cycle.
So, the 4 percent point growth rate dipped is due to NDA's stable government of 9 years? PM, Manmohan Singh's charismatic leadership and expertise in Macro-economics?

A recent study by Ejaz Ghani and others for the World Bank shows that the highways built or upgraded by the Golden Quadrilateral (GQ) have brought enormous gains in new manufacturing activity, jobs and productivity within ten km of the new highways.

This development though is self-evolutionary and not so much planned and induced by state and central govt initiatives of development. Certainly adds lots of direct and indirect employment and alleviates poverty. Makes society self-sustainable. Cash crops, dairy, poultry and other cash generating business develops around the GQ.

And you will see this development, when you drive across the Golden Quadrilateral.

Out of Swaminomics, interesting insights are---

Both George W Bush and Obama have greatly increased health entitlements. So, total US spending on three items — Social Security, Medicare and Medicaid (for the poor) — is projected to skyrocket from around 8 per cent of GDP today to 18 per cent by 2025. This is the crisis Obama has to tackle. 

 Recall Chidambaram’s vision in his so-called dream budget of 1997. He said India should aim over time to align its tax rates with those in ASEAN countries. These were fellow-developing countries that had achieved miracle growth of 7 per cent for decades, and hence clearly had tax systems worth replicating. They were also competitors of India in export markets, so in a globalising world India needed to ensure its tax regime was competitive with ASEAN’s. 
    Singapore, the biggest ASEAN success, has a top income tax rate of 20 per cent (including dividends) and corporate tax rate of 17 per cent.

 Thousands of Americans (including Facebook co-founder Eduardo Saverin) have migrated to Singapore and other tax-friendly places to avoid rising US taxes. 

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