"It will never rain roses: when we want to have more roses we must
plant more trees."
—George
Eliot (British, 1819-1880)
Word
for the day
Inculcate (v)
To implant by repeated statement or admonition; teach persistently and
earnestly.
Malice
towards none
Who was Geeta Zutshi?
Please answer without
googling.
First random thought this morning
It is now confirmed that lower crude prices are hitting a section
of Indian economy very hard. Remittances from gulf have fallen marginally last
year. This year could see the worse in terms of both employment &
remittances.
A lot of businesses rely upon activities of the Indian employed in
gulf countries, especially travel related businesses and financial services
firms. These businesses are already suffering. The pain may rise in coming
months. Workers who have been supporting savings, consumption and investment
back home may return and sit idle for some time.
Have you heard a plan from the government?
My two cents on GST
The wider debate on GST is now limited to two points - (1) whether
it will be implemented from April 2017 or from a later date; and (2) whether it
will be inflationary.
From investors' perspective the single point of interest is to
find the potential gainers and losers from the indirect tax regime transformation.
The traders want to know what can give a jump of 10%+ in today's trade.
Frankly speaking, I have no ready answer to any of the questions.
Moreover I do not believe most of the answers provided by various experts and
currently available in the public domain.
However, what the five things I can say with fair degree of
certainty at this point in time are as follows:
(a) GST is a progressive
reform and will benefit the economy as a whole. It is possible that due to
regional political interest groups, in the initial years some restrictions are
introduced in the legislation that prevent creation of a truly national market.
Nonetheless, it will
happen as the benefits become quantifiable over next decade or so. We have
been living without GST for seven decades. One more with partial implementation
is definitely not a matter of life and death.
(b) One of the primary
objective of GST is to improve tax compliance. This is hugely disruptive to the
ways a large number of businessmen in the country are used to function.
Thousands of MSME
units are viable just because of tax evasion opportunities under the current
regime. These opportunities may not be available under GST regime. Hence, the
sustainability of these units is under thick clouds.
Moreover, there is a
full army of professionals which helps these businesses evade tax. These also
risk losing their jobs. A large number of revenue department personnel who
thrive on bribes, and agents responsible for collecting octroi and entry tax
will also suffer.
Unemployment, losses
and shut down of businesses due to financial unviability, are inevitable
consequences that will impact urban consumption in the short term. The positive
is that we may see many polluting factories operating in neighborhood getting
closed.
(c) Many businesses have
made huge investment in tax havens (backward areas) to benefit from tax
arbitrage at the expense of business rationale. This investment risks going
under water as this arbitrage vanishes in due course.
(d) Productivity gains
shall be seen in most large businesses as logistic costs improve, and
compliance becomes easier. For smaller local businesses though benefits are not
so direct. These may mostly benefit from the overall pick up in economic
growth.
(e) A household consumer
may see rise in the cost of living.
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