Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Here politics is bigger than economics
Thu, 5 Aug Pre-Open

If only those responsible for governing India were more economically sensitive. The latest update from the Ministry of Finance presents a huge setback to India's economic prospects. That a bill slated to add atleast 3% points to India's annual GDP growth has been rejected. The Indian politicians have far more serious concerns than the economy's well being.

The bill in question was for introducing the 'Goods and Services Tax' (GST) in India. A much talked about and much-needed reform for the Indian economy. Some of the benefits of GST introduction would have been:

  • Creating a single, unified Indian market to make the economy stronger.
  • Abolition of numerous other taxes such as octroi, central sales tax, state-level sales tax, stamp duty, turnover tax etc.
  • The resultant rate of tax would be 14-16% under GST as against around 20% currently. This would benefit individuals as prices would come down. Lower prices would lead to more consumption, thereby helping companies grow their turnover and profitability.
  • India would join the league of 140 countries already having implemented GST.

But unfortunately, loss of political autonomy is not acceptable to Indian policymakers. If that comes at the cost of the economy's retarded growth, so be it. Apart from high indirect taxes, what also hurts India is the rather distorted nature of taxes. We certainly do not expect the Government to reduce taxes substantially. There are simply too many vested interests involved for it to take such a step. But we would certainly love it if the Government took steps to correct the current distorted tax regime. Unfortunately even an earnest step in this direction seems to be going futile.

The uniform tax measure (GST) threatened to eliminate the scope of individual discretions of state and central finance ministers in imposing taxes. This would have served the larger goal of keeping a check on prices. And solve the biggest economic problem India is currently facing. However, such solutions that curb their political rights are not acceptable to Indian policymakers.

The Government certainly needs more money. A ballooning fiscal deficit cannot be addressed only by hiking taxes. For this would mean burdening the already heavily taxed classes. But the GST would have ensured more equitable distribution of tax payment. As also more efficient usage of the funds thus collected. What's more, it could also mean greater wealth creation for shareholders as firms rake up more profit growth than usual. But unfortunately, we live in a country where politics is bigger than economics!

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Here politics is bigger than economics". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.