The good thing about GST and other links

Good to know that cars would be more expensive after GST rates were announced. One should welcome it. A country like India cannot be encouraging personalised mode of transportation. It is a small step to making both producers and buyers pay for the externalities of hydrocarbon based travel in India.

India’s 5-star hotels are already quite expensive, given the overall level of purchasing power in the country. They have a plethora of taxes. But, now they will become even more expensive.  That is not a good thing. May be, I am wrong.

Revenue Secretary Hasmukh Adhia has said that GST would lower the inflation rate by 2%. I am not sure if there is any mileage to be had in saying that. The margin for error is huge and second, international experience is that there is an initial jump in the inflation rate as businesses round off prices to the next higher level. It will be quite likely to happen in India.

Aparna Iyer had a good story on SBI 4Q results. Has the problem of NPA peaked? She is not sure. Neither am I. Notice how the GST rates would raise mobile phone tariff and prices for devices too at a time when the sector is facing a huge wave of competition from Reliance Jio.

Her earlier articles on the credit culture (or, its lack thereof, to be more precise) of companies in India are worth following. This is a classic understatement:

Corporates need to vastly improve their credit culture. [Link]

In the second part of her series on credit culture, Aparna Iyer argues that companies have been biggest beneficiaries of the culture of loan forbearance in India than farmers. One should not be surprised. Most Indian professed policy goals are mostly symbolic in nature – pro-poor, pro-farmer. In reality, they are not helped but hurt, both short and medium term.

But, the problem with such stories is that they would be used to argue the case for loan waivers but not against forbearance in general. Further, providing cash support to farmers to repay loans and waiving loans are two different things. The optics matters a lot.

In the third and final part of her series on credit culture, she again makes the point that banks have been far more lenient towards companies. Obviously, a lot remains unsaid. It is about unholy nexus and second, it is about the ethical foundations of corporate promoters.

Tadit Kundu has a good article on the Investment Proposals turning into actual investments in India. This is based on DIPP data. Actually, I track it regularly. The pick-up in ‘Implemented Investments’ in 2016 could be deemed ‘green shoots’ for manufacturing. Or not.

It was good that the Prime Minister has called for better data on the labour market. Not a day too soon. But, this government by Pronob Sen bears repetition:

“NSSO has a capacity of 3,200 people and its Chinese counterpart has 29,000 people. How will you conduct comprehensive employment data collection with this?,” he asked .

“We had demanded an increase in the headcount to around 5000 and also that the jobs survey should be expanded and made comprehensive. But the then government (the previous UPA government) did not agree. We need comprehensive jobs data,” Sen added. [Link]

Good to see that NASA will be collaborating with ISRO – an organisation that was on America’s banned list. Times, they do change.

Bibek Debroy has a good interview with Business Line. He does make a good case for taxing agricultural income. I endorse it:

The Centre has no plans to tax agricultural income. Constitutionally, it is a State subject. About seven States tax certain kinds of agriculture. I do think agriculture income should be taxed, in a way similar to personal income taxation, based on a threshold. In his taskforce on direct taxes, Vijay Kelkar had computed that given the levels then, 95 per cent would be below the threshold. Agricultural income is subject to year-to-year variations but you can do an average of three-four years and tax on the basis of that. [Link]



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