»5 Minute Wrap Up by Equitymaster

On This Day - 23 JANUARY 2019
2 Reasons Why Rebirth of India Will Drive the Sensex to 100,000

Tanushree Banerjee, Editor, The 5 Minute Wrapup

'Nothing is certain except for death and taxes.' - Benjamin Franklin

Nobody likes it.

But taxes are an integral part of nation-building.

For any nation's progress, taxation plays a vital role.

If any country is to accelerate its growth rate, tax collection must go up.

This is measured by a very simple number: the tax-to-GDP ratio.

For many years, India's tax-to-GDP ratio remained way below global standards.

In 2016, India's tax-to-GDP ratio was 16.6%.

This was much lower than the average for emerging market economies of 21% and well below the average for developed nations of 34%.

Since then, things have changed for the better. Demonetisation and GST have completely turned things around.

The argument about whether demonetisation was good or bad for the economy refuses to die down.

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But there's one thing I know for sure. More people are paying taxes than ever before.

In FY17, due to demonetisation, about 9.1 million new taxpayers were added to the official numbers. The government's revenue increased by 14.6%.

In FY18, the tax collection increased by 17%.

IT Returns Filing Increased Substantially After Demonetisation

By the way, income tax rates have largely stayed put in the last couple of years.

But why stop at direct taxes?

Even on the indirect tax front, GST led to an increase in taxpayers by more than 50%. 3.4 million businesses have become part of the taxpayer base.

So it's not surprising that India's tax-to GDP ratio has improved considerably.

In FY18, it touched 18%. In FY19, it is expected to reach 18.5%.

Demonetisation + GST = Improvement in Tax to GDP Ratio


But that's not all, dear reader.

Here's something equally interesting.

India's per capita GDP is about to cross a vital threshold of US$ 2,000.

As per the World Bank, a huge transformation takes place once a country reaches this threshold.

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Basically, countries become more competitive. Productivity and wages rise along with advancing development.

India has now reached this sweet spot.

With this, along with the improvement in the tax-to-GDP ratio, I see several benefits:

  • The government can invest in infrastructure projects such as roads, affordable housing, ports, airports, etc. This will give a big boost to economic growth.
  • It will provide good support to the government's GDP growth target of 8%+.
  • It will help lower the burden on the government's fiscal deficit. Similarly, it would reduce the dependence on disinvestment.
  • It would also help to strengthen the social security net in our country by giving the government more spending power in areas like education and health care.

I believe, India is clearly on the right path.

This will go a long way in creating a new India.

But these are only 2 points. How can I be so sure of such a big transformation in our economy?

Well, that's because I've uncovered not 2 points but 50!

That's right, dear reader. Over the last few months, I've found 50 irreversible trends that are changing India for the better.

Put together, these changes will result in what I'm calling - Rebirth of India.

The Rebirth of India is at the heart of my big prediction: Sensex 100,000.

I believe, this is a once in a lifetime opportunity to buy multibagger stocks. This great transformation in our economy will happen only once...and you must make the most of it.

To help you take your first step, I've prepared a special report for you - Rebirth of India.

I urge you to read this report and join me on Thursday 31 January for a free online summit where I'll tell you exactly how you can profit from the Rebirth of India.

Register for the Rebirth of India summit here.

Warm regards,

Tanushree Banerjee
Tanushree Banerjee (Research Analyst)
Editor, The 5 Minute WrapUp

PS: The Rebirth of India summit is only 8 days away! Join Tanushree as she shows you how to amass life-changing wealth from India's rise as an economic superpower. As a patriotic Indian, you should not miss this dear reader. Register now for the FREE online summit here.

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