Saturday, February 27, 2016

2015-16 Budget Blueprint

2015-16 Budget Blueprint 

* Govt of India's Economic Survey 2015-16, tabled in the parliament on 26th Feb highlights a glaring anomaly. Hopefully the Union Budget for 2015-16 will mend this aberration. 

* It is well known yet never spoken fact that as a nation, India subsidizes the rich to get richer. Our demographical growth stands testament to the fact that the economic growth rate of India's rich is exponentially higher then the growth rate of the poor.

* The statistics of the Indian development reflects that 33% of the proletariat have grown at 1% and the elite 33% have grown at 17%. The government proclaims the mean growth rate at approx 8%. Even today 22% of the Indian population subsists on less than $ 2/- daily,which is the internationally accepted norm for extreme poverty.

* A farmer while selling his wheat borne out of his own sweat & toil, goes to the procurement agency, weather it is governmental or private and pays tax to the government as Mandi Tax etc. Paradoxically, again while buying same wheat from the market for his personal consumption, the same farmer pays sales tax again. In fact, farmer is doubly taxed by the government for his own produce. Same with Tribals growing their own forest produce which too is taxed.

* For households energy is a need, hence subsidizing it is acceptable, but for industry, energy is capital, and subsidizing it hurts the other capital, that is labour.

* We as a nation are partisan towards the rich by covertly subsidizing cheap fossil fuel to industry, which results in incentivizing manufacture using fossil fuels being a lot cheaper than manufacturing thro labour. India annually subsidizes nearly $50 Billion worth of fossil fuel. 

* The fundamental principle of taxation is to list the consumables in their order of priority of usage and start taxing them from the bottom up. For ex., Food will be topmost and luxury cars would be near the bottom of such a list.

* There are two classes of people in the Indian Economy :- 1) The villager, proletariat, manufacturer of basics, below poverty line. 2) The urban, intellectual, elite, industrialist, above poverty line. We need an economic policy which encourages the former even if it is partially adverse towards the latter. Unfortunately, our economic policies are encouraging the latter more than the former.

* Successful economics should mean minimum variation of pricing between producer and consumer.

* Businessmen never give tax. Tax is given by producer and consumer. Trader is only a medium.

* Tax and controls are springtime for traders. These are very helpful in corrupt trade practices.

* Taxes and controls are the root of corruption. The more they are in numbers and quantity, higher will be the prevalence of corruption.

* Massive mechanized industrialization is beneficial only if a weak consumption area lies outside the industrialized area. These areas eliminate unemployment in that area but generate manifold unemployment outside it.

* As prosperity increases, so does dependency and usage of non-renewable energy. As poverty increases, so does dependency on labor and bread.

* The easiest way to eradicate economic inequality is to hike labor cost. The capitalist and the intellectuals work diligently on the above conspiracy to regress labor cost. Rightists and leftists in India are in the same boat as far as labor exploitation is concerned. The leftists declare themselves as labor friendly and at the same time vociferously oppose energy cost hike.

* Most of India’s socio-economic problems can be rectified within the ambit of hiking labor cost/Labor wages.

* Inflation means decreasing purchasing power of the rupee and it results in indirect tax burden upon liquidity

* Inflation does not affect people who do not have cash or bank balances.

* Inflation and price rise are different topics. Inflation does not affect the common man whereas price rise does. Price rise means increase in the cost of products in proportion to peoples’ purchasing power.

* Price rise occurs in specific goods and not in all products. If there is an across the board rise in prices, it is called as inflation.

* In India: - 1) Gold, silver and real estate prices have gone up piercingly. 2) Government jobs, Lentils have become modestly costly. 3) Labor and artificial energy costs are stable. 4) Grains, Textiles, and other consumer products have become cheaper. 5) Conveyance, paper, mail, watches, pens, phones and electronic gadgets have become incredibly cheap.

* Economic disparity has grown rapidly. Rich have grown rapidly and poor have grown slowly. This disparity is incessantly increasing.

* Increasing economic disparity is the reason behind public discontent.

* In the last 60 years land prices have increased unbridled. The fascination for land has also bloated.

* Bread, clothes, medicines are taxed in India to nullify the effects of pollution emanating from an internal combustion engine.

* Population explosion is a global phenomenon. To blame it for all of India’s ills is spreading falsehood.

* It is the very nature of The State to provide overt tax & covert privilege to those it wants to reward, and provide covert tax & overt privilege to those it intends to cheat.

* In India the elite is overtly taxed & covertly subsidized (income tax v/s subsidized gas, energy) whereas the poor are overtly subsidized & covertly taxed (various subsidies, schemes, NREGA, v/s everyday consumables are heavily taxed, farmers are taxed for their own production). We need to reverse this trend by taxing energy heavily and freeing consumables from tax vice.

* It is a misconception that cities pay more tax than villages. 70% of India is rural dweller and their everyday consumables are taxed. The calculation thereafter is simple.

* If the above solutions are made policy, it will mean hiked wages & hikes fossil fuel prices which will burden the population. To offset these, the government will have to:

A. Provide Rs 2000/month to every citizen of India as subsistence allowance.
(Calculations prove it will Cost Govt neary Rs 25 Lakh Crore against its GDP of 121 Lakh Crore, ie only 25% of India's GDP)

B. Abolish Income Tax, & GST & tax all property at 2% of its "Circle Rate" value per year.
(It will make hoarding of unproductive land costly, yet tax on productive land will be nominal. This will broaden the tax net exponentially & the richer will have to pay high taxes due to their large property holdings)

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