Vijay Kumar Gaba: What does it mean?

Some food for thought

Accept everything just the way it is.

—Tao proverb

Word for the day

Scry (v)

To use divination to discover hidden knowledge or future events, especially by means of a crystal ball.

First random though this morning

Owning our mistakes and inadequacies, and seeking forgiveness is one of the quintessential elements of Indian ethos. Allowing for mistakes, accepting inadequacies of others, forgiving, affording a chance for redemption of mistakes and fulfillment of inadequacies is also an equally important element of our ethos.

Any person, who seeks to be governor or administrator of Indian society, needs to fully assimilate and imbibe our ethos.

Unfortunately, none of the people responsible of governance presently appears to have imbibed this very critical aspect in their individual or social character.

The leaders and supporters of ruling parties claim no mistake or inadequacy on their part. The leaders and supporters of the opposition parties see nothing good in the people responsible for governance, and are absolutely unforgiving for mistakes and inadequacies.

The situation is slightly better in case of administrators, but only slightly. Not many administrators are generally seen trained to comply with Indian ethos in performance of their duties.

This phenomenon is bothersome and to some extent frustrating.

The point to ponder is "whether it is the time for a cultural renaissance in our society, or we should accept the evolution (or degeneration if you like that way) of the socio-political narrative as it is, and move forward with modified expectations."

#NOTA

Chart that caught my attention yesterday

What does it mean?

We are yet to get enough evidence to make an assessment of the success or otherwise of the 'Make in India" policy. However, some evidence is emerging to show that 'Buy American and Hire American" policy of President Trump might have already begun to jeopardize our interest.

As per some latest reports (see here) An analysis shows denial rate for H-1B visa increased 41% in the last three months of 2017, compared with the previous three months. This is a worrying sign for all, the overseas companies using H1B VISA to undertake job contracts in USA; the workers who aspire to work with employers in USA; and the US corporations which thrive by hiring the best available talent globally.

I don't know how this would impact political fortunes of Trump, but I am very confident that all endeavor to close borders to foreign capital, trade, resources etc. will fail eventually.

In the post cold war era, the world has invested only in technologies that reduce or eliminate the boundaries of time & distance; bring people closer; and rule out the probability of any major war breaking out. This gigantic effort and investment cannot fail. At least, I would not like to fathom this probability.

Back home, the 1QFY18 GDP data has surprised many.

Skeptics are highlighting the discrepancies, citing poor base and doubting the sustainability of this trend in the subsequent quarters.

The hopeful are picking up several green shoots, arguing in favor of the sustainability of the trend and building a strong case for robust economic revival in next many quarters.

A large number is however sitting on the fringes and waiting for further evidence to emerge before they accept or reject the complete economic revival theory. For now, I am in this camp, not leaning towards any extreme.

There are many data points that are keeping me from taking a clear stand. For example, consider the following:

(a) Despite official claims of material recovery in economic activity and better tax compliance, the tax buoyancy is not visible in data.

The GST collections continue to remain materially below the budget estimates. In first four months of FY19, the average GST collection is ~INR950bn, against BE of ~Rs1.04trn. Moreover, the average GST revenue per filing has declined sharply from ~Rs1,72,500 in March 2018 to Rs1,40,300 in July.

Considering the large scale disruptions caused by widespread floods, it is unlikely that August-October collections will pick up materially from the current run rate.

(b) The number of Income Tax filings has seen sharp rise in FY18. However, the growth is so far not reflected in the amount of tax collected. As per recent CBDT data, reportedly the personal income tax has grew only 6% in April - August 2018 period, as compared to the previous year. The corporate income tax has seen just 1% growth.

If accept the ~11% nominal GDP growth figure and juxtapose that to revenue collection data, and try to draw any conclusion, it would be a complicated a task.

Does it mean that growth is mostly coming from social sector which may not have direct correlation with revenue generation? or

Does it mean that inflation is eating into household income much more than what official figures are showing? or

Does it mean that the government's claim of huge growth in MSME (where the tax incidence is nil or very small) due to its schemes is correct? or

Does it mean many other things?

The currency and bond markets are extrapolating this revenue short fall and rising pressure to cut duties on petroleum products to mean a sharp fiscal slippage. Even though there is literally no evidence to suggest that the government would give in to the pressure of reducing taxes on petroleum products.