We are what we are!
Lot of noise about GDP numbers released yesterday. All TV news in English and vernacular discuss about fall in GDP growth to 4.5% , in ominous tones and words from Economists including former PM, threatening the people with dire forecasts for the country and the economy. Why should this add to Gross depression, desperation and despondency in the country. And when was the last time we were at 4.5% or thereabouts and that was not too long ago .It was Q3 Fy 12-13. Who were at the helm? our good old Dr.MMS and financial wizard & US educated Mr.PC. Mr.PC suspected CSO numbers and doubted its methodology.link another (link).
There are some methods by which this Growth recession can be tackled.Some of the good measures already brought in by the Govt will kick in with a lag.Many of them like corporate Tax cuts are supply-side and so will not address demand deprivation .
1) "Pump Priming" is a time tested method to boost the demand and consumption.Govt. by pumping money into the economy through building infrastructure is the best route possible since other alternate routes will be highly inflationary. Even though this can cause demand pull inflation temporarily, in the short run it will follow Phillips curve which will reduce unemployment.
2) another important measure for Govt to do is pay all its Suppliers esp. in infrastructure sector like Power Generating Cos, Road Construction cos. and clear its dues.As an offshoot Govt must also look at indexing all the User charges it collects to inflation.This must include Electricity Tariff also in all the States.
3)Big Infrastructure projects which are stuck and small infra where the last mile completion is a challenge must be taken up to unclog the system. If they are stuck due to land acquisition disputes Govt. should try to invoke emergency powers to bring an ordinance for speed tracking these issues.
4) Also Govt must look at reducing IT for individuals and increase Sec 80C exemption limits for savings and investments or reduce all IT rates to just 10% of incomes earned whether the income is Rs.1 lac or Rs.10 cr.eliminating all exemptions.This will make IT wrinkle-free since all talk about progressive taxation is actually regressive in reality.This will bring demand back to the table in a big way.
5)Central govt should work with GST council to cut GST rates on Autosector. This can start with reducing Cess which is over and above GST at 28%.
Some of the suggestions mentioned above can lead to expansion in fiscal deficit this year and next year but they will have a salutary long term effect beneficial to the economy.
Lot of noise about GDP numbers released yesterday. All TV news in English and vernacular discuss about fall in GDP growth to 4.5% , in ominous tones and words from Economists including former PM, threatening the people with dire forecasts for the country and the economy. Why should this add to Gross depression, desperation and despondency in the country. And when was the last time we were at 4.5% or thereabouts and that was not too long ago .It was Q3 Fy 12-13. Who were at the helm? our good old Dr.MMS and financial wizard & US educated Mr.PC. Mr.PC suspected CSO numbers and doubted its methodology.link another (link).
There are some methods by which this Growth recession can be tackled.Some of the good measures already brought in by the Govt will kick in with a lag.Many of them like corporate Tax cuts are supply-side and so will not address demand deprivation .
1) "Pump Priming" is a time tested method to boost the demand and consumption.Govt. by pumping money into the economy through building infrastructure is the best route possible since other alternate routes will be highly inflationary. Even though this can cause demand pull inflation temporarily, in the short run it will follow Phillips curve which will reduce unemployment.
2) another important measure for Govt to do is pay all its Suppliers esp. in infrastructure sector like Power Generating Cos, Road Construction cos. and clear its dues.As an offshoot Govt must also look at indexing all the User charges it collects to inflation.This must include Electricity Tariff also in all the States.
3)Big Infrastructure projects which are stuck and small infra where the last mile completion is a challenge must be taken up to unclog the system. If they are stuck due to land acquisition disputes Govt. should try to invoke emergency powers to bring an ordinance for speed tracking these issues.
4) Also Govt must look at reducing IT for individuals and increase Sec 80C exemption limits for savings and investments or reduce all IT rates to just 10% of incomes earned whether the income is Rs.1 lac or Rs.10 cr.eliminating all exemptions.This will make IT wrinkle-free since all talk about progressive taxation is actually regressive in reality.This will bring demand back to the table in a big way.
5)Central govt should work with GST council to cut GST rates on Autosector. This can start with reducing Cess which is over and above GST at 28%.
Some of the suggestions mentioned above can lead to expansion in fiscal deficit this year and next year but they will have a salutary long term effect beneficial to the economy.
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