What Could Be the Reasons for Unprecedented Petroleum Product Price Rise and Slow Covid Vaccination in India?

India is the largest populated nation in the world. It is a constitutional democracy where democratic system of governance has been in operation for the past over 7 decades. It is a federation of states where the central government and the state governments have powers to enact and administer laws in accordance with the written Constitution.

In the event of any disputes or contradictions in the laws, the Supreme Court of India is empowered to intervene to set things right!

Though democracy might be the best form of government for the best kind of people with reasonably high knowledge and wisdom, it may not be the case for a nation like India where the average Indian has not attained that kind of a stature so far!

In other words, the average Indian is a mediocre or perhaps below mediocre individual. For that kind of people, democracy deteriorates over time to yield governments by mediocre or below mediocre individuals! Unfortunately, the best kind of people though available in large numbers but less than the mediocre are often overpowered in a democracy that has adopted adult franchise as the democratic election process.

A nation with a complex population with varying individual or group understanding, likes and qualities, complexities in administration are quite natural. And when such complexities are dealt by a mediocre group of law makers, administrators, media and judiciary, the complexities of the nation are bound to rise with time. In such a democracy, people keep facing problems of various kinds continuously for several decades. They use their democratic powers to change their mediocre administrators but may not find success because they have only mediocre fellows to be selected as the replacements or their own mediocre abilities keep failing them from getting the desired outcome of good governance.

Indian citizens have been witnessing such a phenomena for quite some time. They felt that their government was not doing any thing to control prices of essential commodities such as petrol and diesel and the ministers in government talked and showed arrogance that they could not tolerate any more. That was the case prior to 2014 when the Indian National Congress and its allies in the name of United Progressive Alliance (UPA) were ruling the nation.

The Indians easily got carried away by the other major opposition group called the National Democratic Alliance, NDA, led by the Bharatiya Janatha Party or BJP. People believed what they told. The secular appeasement of minority religions of the nation by UPA was the reason told by BJP for rising prices and lack of opportunities!

So they voted the ruling UPA out of power and installed NDA to do good governance of the nation, in 2014! 

The new group in power on a fine evening declared withdrawal of certain currency notes in circulation, a step that is noted in history as the 'demonetization' step. The motivation for this step was told as for eliminating black money concentrations in the hands of many in the form of unaccounted cash. The idea was perhaps good, but its unplanned and haphazard implementation did more harm than good.

This one step caused great problems to millions of people in India. More than the direct problems it affected the lower level economic activities of the nation in an unprecedented manner. It caused unceremonious closure of millions of business activities of the nation which so far had been predominantly working on a currency based system. But no one ever noticed it as none had the ability to view the country as a whole! But it began to show in tax collections by the central and the state governments. But the mediocre administrators preferred to ignore the signs!

Some mediocre bureaucrats who happened to be near to the top administration of the political bosses in governance seemed to have advised the latter for the need of quick implementation of what is now known as the GST system of taxation for improving the falling tax collections! The new system had double advantages, they told the bosses! Most importantly, the new system would make all tax money to go to the central government account and the latter would later allot the states' share. It can be used as a whip to control those states ruled by those not liked by the individuals in the central government! Besides, the new system is fully computerized and that will make any attempt of tax evasion by any business fellow, impossible! Interestingly, the GST system was something that was adopted by several progressive nations that was getting planned for implementation by the Congress led UPA government and vehemently opposed by the BJP when not in power.

But when BJP led NDA captured power and formed the new government in 2014, they immediately seemed in agreement with the previous government. This happens because in several instances, the policies are framed by the bureaucracy which for all practical purposes remains the same.

So the new political masters hastily approved the idea without much thoughts or preparations. The mediocre bureaucrats implemented it too quickly by issuing orders after orders. They never gave any thought of the practical difficulties that would be faced by the good majority of remaing business community with so many complex rules and procedures to be adopted by them! The illustrious individuals in the government considered it unimportant to make the business people understand the system and get experienced with it! They simply thought that harsh punishments and fines would make every one fall in line too quickly! So the GST system of commercial taxation was adopted in a fully digital and networked system by executive orders. It had to be operated with faulty or inadequate computer network, server computers and perhaps a hastily made up software system!

This caused havocs to millions of small and medium scale business groups to the extent that their operating profits and cash flows got affected adversely. Many businesses that survived the demonetization a few months earlier now became unviable and became sick in a matter of months! Perhaps only the large businesses with enough resources could overcome those quickly. The bureaucratic and political individuals in governance paid little attention to the falling tax collections. They simply didn't do much to help the tax payers overcome the difficulties due to unplanned administrative actions. They failed to save the businesses who were earlier paying handsome amounts as both income and commercial taxes!

The cascading effect of this was closure of millions of businesses, both manufacturers and traders. Yet none thought it important to look in to it!  The effect was not immediately visible to the public. But it was clearly visible to the government. Their tax collections were falling drastically!

But how can a group of mediocre people in governance admit their wrong decisions? Only high caliber people are broadminded enough to admit follies. Mediocre people are highly egoistic in nature. They can never ever admit their own mistakes! When they are too reluctant to admit mistakes, how can they ever look for rectification of mistakes?

Due to corruption, inefficiency, wrong policies, high ambition to enhance military and policing have been causing Indian governance a high cost affair. Indian governments have not been able to have enough resources to fast forward economic development to satisfactory levels comparable to other nations with good infrastructure, social security, healthcare, literacy, employment opportunities and reasonable per capita income. They have been with ambitious plans without enough monetary resources to implement the plans properly in time. Regretably, those in key administrative positions never made any proper plans for having a balanced budgetary roadmap for governance!

They seemed to ignore the fact that a robust economic stability is essential for the governments too to gain financially. Heavily taxing the burdened economy was the only method they knew!

And that constrained the economic activities of the nation. When people have lesser incomes, they cut spending on goods and services that are not so essential. That in turn causes downward shift in the markets affecting business profitability. In turn tax collections too get affected adversely.

To add to the woes of the Indian economy, the Covid-19 lock downs also came into effect in 2020.

So the Indian government and consequently, the state governments have begun to lose revenue and income by way of tax collections. Instead of quickly adopting rectification of the problem, they preferred to adopt other methods.

And one such other method was enhancing the taxes of essential commodities like petrol, diesel, gas, aviation turbo fuel etc. The high taxation on the other hand are making more and more businesses to become unprofitable and unviable.

So now India is in a vicious circle. It is increasing the taxes for enhancing the governments' income without attempting any thing to reduce its several wasteful expenditures. The higher taxes are reducing the profits of businesses and their tax contributions.

That's making the government to increase taxes further! That in turn is making prices of all commodities to rise in an unprecedented manner. Covid lockdowns for over an year has almost caused drastic reduction in the income of people in the unorganized sector. In turn their spending too has come down affecting the markets.

As profitability of several corporate entities got affected, performance linked pay hikes of majority employees got adversely affected. 

Employment opportunities in India fell drastically! Unemployment is rising!

All these have drastically affected the financial stability of the central and state governments. They are constrained to spent money for essential things like buying Covid vaccines for the people in a timely manner. But like a brave head of any ruined family they're showing a brave face by borrowing from all sources known! 

Where are we going?

Who has got the courage to bell the cat?

If you ask me, only the people have the power for that. Indian people have to think while electing their representatives such as members of the parliament or state assemblies. They have to use their precious democratic power to make the individuals in politics and bureaucracy to do the service of proper governance wisely and for the benefit of the nation and its people.

They should learn to reject people without character, competence, compassion and courage who are fielded by political gangs for getting elected as their representatives. They should learn to reject people who are merely slaves of their political bosses who play from behind the curtains!

They should support political parties who have logical manifestos for making overall improvement to the nation rather than those with vague or twisted agendas.

Most importantly, the people should use their common sense to weed out evil political outfits who adopt all kinds of tricks to fool people to capture the power to govern the nation to fulfill their own vested interests rather than the nation and its people!

When that's done, India will have good governance by good people who would be in a position to find out and implement better methods of administration.

Such a government in India, like several other better governed nations, would not be required to tax people to suffocation! Such a government in India would use every rupee collected judiciously for the welfare of its people!

Indians would  then be proud of their democracy and no more would be cursing the demoncracy that they have been subjected to so far!

Is there any hope?

Indian Union Budget 2014: Is it Anything Different From Previous Years?

The new Finance Minister of India, Shri Arun Jaitley had already finished his task of reading the budget proposal for 2014-15.

Many of us would not be interested to read the whole thing what he had read out. We know now what it means for us the ordinary individual tax payers. 

Perhaps the business people have to spend some time with their tax lawyers and consultants to understand the implications of taxation affecting their respective business ventures.

For some it could be beneficial, and for some it could mean some loss and problems.

If you are interested, you may have a look in to the whole text of the budget speech of July 10th 2014 by opening it in the Hindu website using this link. 

Unfortunately, the FM has not found it worth while to address the problems of the ordinary individual tax payers to undertake the mandatory e- filing of  the income tax returns that I had written an year ago. 

As with the FM's of the previous UPA regime, he too did not think it prudent to remove some of the ridiculous I-T provisions that got introduced in the earlier years. 

He and his team also did not find it worth while to eliminate the requirements of tax return filing for the salaried class and pensioners. 

Neither there was any thoughts on making some progressive steps by removing the regressive taxation and going for some other progressive methods to raise government income such as the alternatives some financial experts and thinkers have suggested. 

So in short the budget speech of 2014 followed the essential format and frame work of the budget speeches of the past with some changes here and there. It was fundamentally the same as in the previous years!

But perhaps the FM could not have done better than this, given the short time of just a couple of months that he could get to do the work.

To make any drastic changes in the legacy of the existing system, one has to do much painful exertion which most people would not like to do. 

Who would like to antagonize the officers and staff of the ministry and their departments? Change is always painful and cause resistance. 

Thinking of A Modern Non Pinching Taxation Regime? Transaction Tax Could Be the Answer !

Paying taxes to the government is an unavoidable responsibility of all citizens. Taxes paid by the citizens are used for the common benefit of all people. Hence, taxing the people by the governments cannot be avoided.

There could not be much dispute on this. All right thinking people should agree to this fundamental fact of social responsibility. 

But yet many people are scary and worried about taxation. They are annoyed with the governments for creating problems for them in the name of taxation. Governments world over have been in the practice of terrorizing their peoples with many kinds of regressive taxation and taxation laws. In reality, taxation laws are not essentially made with the sole objective of raising funds for the governments to function, but are also aimed for controlling the people with fear inducing whips of taxation laws laden with many kinds of punishments for the defaulters. Many times it is not enough to pay the taxes, but the citizens are forced to submit of file many kinds of reports, called tax returns, to the tax enforcing authorities and keep answering to various kinds of irritating questions from the latter.

This kind of a situation makes the lives of citizens miserable as they are forced to do complex documentation of accounts of  their incomes and expenditures which goes beyond their normal level of understanding and capabilities. The governments in turn are forced to keep a large work force of tax enforcers who simply add to the complexities are eat away the good portion of the taxes that are being collected by way of salaries and perks to this great work force attached to the taxation administration departments. Imagine the situation when the governments are spending the good amount of the taxes collected as costs for collecting the taxes!

The same tax administration then becomes the policy making authorities and advisers to the government and a complex system of regressive taxation gets perpetuates in the society. The citizens are becoming angry over their elected representatives who become more and more helpless to do any kind of creative reforms as they are more and more dependent on certain administrative organisations which had grown over to unmanageable levels with complex rules and regulations over the years. When expenses of the government increases every year, there is no other way than to tax the people more. When people are taxed more with more and more regulations, productivity of the people goes down and the tax collections decline compelling the governments to adopt more regressive laws with bigger administrative set ups. 

A vicious circle is formed in this process and the elected representatives who get in to the top positions of government becomes helpless to do any thing. The chances of the elected representatives knowing about a complex system of governmental finances are rare as they are representatives of the ordinary citizens. They could be good in criticizing a problematic governmental system with their high pitched voices to the full satisfaction of a good majority of the angry citizens. But when it comes to the question of making those very systems corrected the way they wish, things do not happen that way because they really do not understand the way out. Very often, their zealous attempts add up the complexities because of the lack of knowledge and competency that they and their supporting teams have in varying degrees.

As I have mentioned in some other blogs in these pages earlier, it is not very difficult to understand the difficulty one might face when he tries to remove the knots in an entangled web of strings. If he is an expert and knows the techniques, he could easily do it. Otherwise, he would make more knots and make the web more complex making it difficult for others with some expertise to try for some success. It happens in systems of human organizations as well.

In India, and for that matter in many other countries, the taxation laws are indeed regressive as it stands today. The taxation rates are too high and do not encourage honest tax paying. The tax collection costs are high. The collected taxes do not get evenly or justifiably distributed. The laws talks about only punishments punishments only and not of any incentives to any honest tax payer. High tax payers are treated as anti socials. Wealth generators and entrepreneurs  live under constant fear of the authorities because they could be harassed with the tax administration laws and treated like dreaded criminals.

Out of all regressive tax laws the income tax laws in many countries are draconian and do not exhibit any reflections of human civilization or culture. They surely reflect the legacy of the bloody past of the human race when they existed as warring groups with every man antagonistic to every other.

Modern tax laws such as the service tax laws too are becoming harsh and anti people and non-progressive with more negative qualities than positive attributes. 

Could there be any alternative where in governments could get the money they need and at the same time the money collection efforts do not harass the people in general. Could there be any system where in taxes could be collected without elaborate tax collection machinery? Could there be any system where in complex rules and laws are not required to be applied? Could there be any system where tax collection by the government is not very much felt by the people as pinching and painful?

It is possible in my opinion. But the only requirement in that case should be that the government should not think of using the law for the whimsical benefits of those who are occupying the seats of power and governance. They should not think of using the laws against some one whom they want to settle the scores. They should only think of getting the money needed to run the governmental functions smoothly and efficiently and nothing more than that. They should not have hidden agendas of using the laws for personal benefits or for perpetuation of corruption.

If they are honest in this, then tax laws could be much simpler. Tax collection would be simple and non pinching to the citizens. They also would not need huge establishments for tax administration which directly and indirectly cause peoples money to be wasted unnecessarily. All the more, governments and peoples' representatives that form the governments would less likely be treated as anti-people!

It is not that economists and leaders who are knowledgeable in economics do not understand these things. The Harvard educated economist and political leader in India, Mr Subramanian Swamy has favored the scrapping of income tax. Think tanks of major political parties are now realizing the anger of the people of India against the governmental establishments as reflected by the victory and popularity of the Aam Admi Party (AAP) and are seriously considering sweeping changes in the direct tax laws for gaining people's support to their favor. [Read : Can Income Tax Be Really Abolished in India?] 

As a common citizen who keeps a common sense  interest in the non-academic and theoretical aspects of economics, I do agree with the idea of scrapping the regressive income tax as it prevails in India. If it is done and replaced with some other indirect tax system it would definitely be of advantage to the citizens and the country.

But what type of an indirect tax? Some people have been suggesting expenditure tax. But I would rather suggest some kind of transaction tax for transactions of money done through banks. It could apply to all transactions of money transfer between accounts and could apply to the transactor at a low percentage of say 0.5 % of the amount transacted for any purpose. All transaction tax so collected by the banks should go to the government account periodically. All these accounting of deduction of transaction tax and transferring it to the government account should be responsibility of the banks done automatically through appropriate computer software systems.

This system would be equally applicable to all citizens and it is not so harsh in real terms. For large transactors the amounts would be large but for smaller transactors the amount of transaction tax would be negligible. The more the transactions, the more the tax, just as we have in the stock markets.

Assuming that I have a total income of Rs.1000000 per annum. When I get it I pay a tax of 1000000* 0.005 = Rs.5000. When I consume it by paying others, I pay another Rs.5000 and the government gets Rs.10000/- The more I transact, the more I pay taxes. If I get some interest of Rs.100000, I pay Rs 500 as transaction tax. Imagine the potential of collection of tax by the government and its easiness to implement! It is not going to pinch any one as the transactions are done distributively and the rates of transaction tax is low. When the present income tax is abolished, the whole of the income tax establishment and its maintenance costs could be saved. 

I know that there are those internal experts of the IT administration who might argue in favor of the income tax again by saying that the maintenance cost of income tax administration is much low. They say that it is less than 1%. Even then, is it necessary to harass the citizens in the name of income tax? Or is it prudent only to get the necessary income for the government for its necessary functions?

Of course, the people now associated with the income tax administration may not agree with this and they are very likely to find thousand and one reasons against any such new ideas. It is understandable.

But governments are required to work for the people and not for fulfilling some desires of some of its employees! No doubt, government employees are also citizens of the country. Their jobs need to be protected. But just for that avoiding some better system is not justifiable. Governments of modern civilized worlds should try to transform their functions as real service to its people in letter and spirit and not for ruling the people with their powers in the name of service. And public servants should be service oriented and not oriented dictatorially for each and everything. 

In a society which is a mixture of mature and immature citizens, the percentage of the latter exceeding much above the former, it may not be so easy for government staff to be gentlemanly always. There is a danger of the immature beings taking that gesture as a sign of weakness. Whips do have some pacifying effect on immature beings. But then only mature beings know how to use whips and carrots judiciously!

But in my personal opinion, a time has come to experiment with new systems of taxation. There is a need to change to a system which honors honesty and motivate mature people to function as living examples to those who are not so mature. And taxation laws should encourage people to enhance desirable and productive economic activities rather than discouraging. 

Of course, it would not be easy to discard income tax altogether and introduce a new taxation system such as the transaction tax. This has to be done in phases with proper studies conducted before implementation. But such studies should be done honestly by expert groups and not by any one who come up with their reports under duress and pressure, as usually done in such cases.

All the above are opinions and suggestions from an ordinary citizen of India. An aam admi to be more precise! 

And I know very well that there could be only a few other aam admi s (common people) who could understand and agree to what I have opined and no possible supporters from any of those who are in power positions of decision making!  

Because those enjoying power positions never have any time to listen to the aam admi s. Even otherwise, power positions do block the receptive faculties of human bodies!

   

Some Ridiculous Income Tax Provisions of India !

Income Tax or IT is a taxation tool in the hands of the Finance Minister of India Union to use against the Indians every year in the month of February during the secretive ceremonial presentation of the Union Budget in the Parliament.

I am not against the government taxing its citizens. After all that is what the governments are for !

But I am a bit confused and surprised at the manner in which it is done year after year.

Decades ago, the IT never used to be a major contributor to the national exchequer. It used to the the indirect taxes such as excise duty, sales tax, customs duty, etc on the goods. Later services used to be introduced in the tax net and now service tax has become a major contributor. Another new taxation idea that came up in the recent past is the value added tax or VAT.

When some of the irrational taxation stipulations in IT, for example the high rates as high as 90%,  were removed,  IT also became a major contributor to the national exchequer in the recent years. Perhaps, more and more people started giving the income tax, instead of evading it.

The highest income tax rate in India for some years has stabilized at around 33 % of the  taxable income of the individual or the corporate. The taxable income used to be different from the gross income because the former was deduced after giving some rebates and allowances in the latter.

Earlier IT rebate used to be  a long list. Those with a good knowledge of the loop holes of the tax system could use their knowledge to their convenience to get their tax liability reduced considerably. Income tax consultants thrived on this. Top officials of the government and top executives in some private industries used it well for their advantage.

For example perquisites or perks of the salaried class were not covered in the income tax. The private sector companies in many instances therefore used to pay their employees more in perks than in actual salaries. Cash awards received by individuals were another thing which was not taxed. If a high influential officer gets a cash award of say a few lakh rupees it used to be tax free !

However in recent years most of the perks became taxable. 

In this process tax authorities introduced some ridiculous provisions that make some of the employees of the Public Sector Undertakings (step children of the government !) in utter disadvantage as compared to their elite fellows in government service or private sector service.

For example, they introduced this concept that if any employee is given any accommodation by the employer then it is deemed as a perk having some value. Regardless of what the employer charges for the housing facility, the government introduced a ridiculous rule to calculate the value of the housing perk.

If the employee stays in any accommodation provided by the employer in a metro city, the value of the housing perk is 30% [ In tier two cities it is 20% and in cities of lower population it is 10%] of the basic salary. This value (not actually paid) is then added to the income of the individual and taxed as income tax.

Now let us see how this works out for three different people employed in Delhi.

First let us take three types of employees, A , B and C,  getting the same basic pay , say Rs.50,000/-

A is a government officer, B is a PSU officer and C is a private company officer.

If they do not avail the quarters provided by their respective employers both A and B can get 30% of their salary (Rs.15,000) as House Rent Allowance or HRA and for C it can be any thing as per his company policy. This HRA if availed will be taxed in this case at the maximum rate and effectively they get a net of about 10,000 in hand as net HRA. They might get a rented 2-3 bedroom flat in delhi by paying another 10,000 from their pocket. Or they can think of getting their own flat by taking a loan and the net HRA would help in paying their EMI to some extent. [Considering the cost of a 2 BR flat in Delhi at more than Rs 100,00,000/- it would be just impossible for these people to own a flat in Delhi with their income from salary alone! And that is another point to be noted !)

Now there is a possibility that A who is a government officer could get a decent quarters in Delhi. For B, the chances of getting a quarter from his government owned company depends on which company it is. For C, the company might get him a leased accommodation if it is a reputed one. In all these cases, the type of accommodation and the facilities that these three people get widely vary. If fortunate and well connected, the government officer might get the most spacious bungalow as his residential quarters having a potential market rent that is substantial. If not so lucky, both A and B might get some dilapidated substandard quarters some where.

But if they take the accommodation that is provided by the employer, regardless of its quality or facilities, the IT rules ridiculously stipulate that its perquisite value should be at 30% of their basic pay. Thus their gross salary is deemed as risen by Rs.15000/- per month and an IT of 5000/- per month drains out from their salary income. The government takes out Rs.5000/- from them as IT per month on account of them staying in a dilapidated 'sarkari' quarters !

Now  a person who happens to be provided with a decent well maintained accommodation, will not cry for this, perhaps. But that is not the case with  his colleague who is forced to live in a shabby dilapidated quarters paying the same tax on account of the housing provided by the employer. In reality a good majority of the employers, whether they are government departments, PSUs or private organizations or academic institutions, do not give much importance to maintain their townships and housing facilities that had been built up in the past decades. Any one travelling in India can well distinguish the employee quarters provided by these organizations because of the extreme neglect of these by the respective organizations ! 

It is quite possible that the government officers who assist the Finance Minister in preparing the budget proposals live in good government accommodations and are blind to the actual realities elsewhere !

Thus a person who opts for HRA gets Rs 15000/- per month in hand extra while the one who lives in a shabby accommodation provided by his employer gets poorer by Rs.5000/- per month. The disparity widens as all these calculations are done on the persons basic salary with no consideration whatsoever to the facility provided.

The best approach in this would be that all employers should give HRA to their employees and the employees should be allowed to choose the accommodation either rented or their own. The employers should offer the quarters by declaring their rents.

There are many more such ridiculous rules and stipulations that need to be rationalized.

For example the IT rebate for housing loan interest that is declared from time to time does not help any one considering the cost of housing as it stands today.

Education has become the costliest affair now in India as the government has washed it hands from that responsibility.

But it is more of a ridiculous insult when the government offers rebates to the tune of few hundred rupees to a person who spends thousands or lakhs as fees to educate his wards ! It is better that such rebates are not offered at all !

Self employed and business people are allowed to deduct depreciation of their cars and certain other items from their income while no such facility is available to the employed class. This makes the business people to change their vehicles every 5 years while their salaried fellows with equivalent incomes look on enviously with no such IT bonanza for them . Perhaps this makes some of them look towards other means of earning income by adopting corrupt practices !

There are many such ridiculous things in the Indian income tax rules that keep changing and swinging as per the whims and fancies of the Finance Ministers and their advisers.

I am just waiting to see what is in store this year !

Read also this:

Income Tax e-Filing in India : Did Anyone Foresee These Problems Before Making it Mandatory?

[View the linked list of all Blogs of the Author Here ! ]

Generating Employment for Indians- A Layman's Suggestions !

I am not an economist nor an expert in finding solutions to the complex problems of a complex nation like my own !

But like many others like me, I do keep a watch on developed nations such as the United States of America or China or Japan, that have been making visible material progress. Their Gross Domestic Product (GDP), per capita income ,  human development indices (HDI), etc., amply correlated by visible physical features vindicate their superiority!

For example, my country India has been with a shamefully low per capita GDP of about $ 3700 . The actual purchasing power of the citizens of India are much lower than this figure. Regrettably, it appears that the Indian policy makers no longer feel the shame ! [See the GDP per capita income list of the world's nations here !]

Indians keep justifying the low per capita GDP on account of the huge population. But then they forget about China whose population as well as the per capita GDP are much higher ! This clearly shows that the Indian situation is on account of poor governance , administrative policies and gross mismanagement of public affairs! Perhaps all these happen due to the defective democratic governance system that the country has adopted ever since it had become a modern republic. 

Indians are too keen to watch the politics and policies of America rather than their own. I too am no exception. What makes me salute the American system is the importance that they give in generating employment to the citizens of the country. A US president is evaluated as good if he could implement policies which generate employment to the US nationals.

But unfortunately no Indian politician talks about employment generation. Neither is employment a factor for evaluating the Indian government!

There are thousand an one ways by which the Indian government can generate employment for millions of its unemployed so that they can at least have a decent living and surely elevate them much above the poverty line.

" Give me a fish, I eat for day; teach me to fish, I eat for a life time!"

This famous quote, supposed to be the favorite of Mahatma Gandhi is not unknown to those in the higher ruler ship of India. Regrettably they keep thinking of the ways in which such a teaching can be imparted to the millions only to conclude that such a thing is not practical in a country populated so heavily!

When thousands of Indians could make a decent living by the so called medical transcription work, I couldn't help saluting the US policy makers who could force their medical practitioners to shell out some of their incomes to others down the line who are only skilled for some lower level clerical jobs!

The westerners are advanced because they have realized the overall advantage of distributing the abnormal wealth at some hands to those who are not so privileged or fortunate. They too were having the mindset of the present day Indians before they faced the 'great economic depression after the world war-I'. But that had made them learn a lesson. And that lesson was about the importance of sharing the profits of business and industry to the larger populace for sustaining economic activities. 

The great depression forced economists to analyze the reasons for such a failure of economy when industrial production was at its peak! They found that all productions are useless unless there is a market that absorb the products and services. And such a sustainable market is possible only when business and industry willingly share their profits with their employees and the workers thereby enhancing the purchasing power of the people as a whole!

They learnt that the profits held up by large Corporate entities are not going to make the country or the economy progress. If they keep producing and accumulating profits for some time without enough sharing, there would not be any markets for their products and services and eventually their businesses would come to a grinding halt.

So, for longer sustainability of business, business tycoons and business leaders have to find ways to distribute their huge cash surplus held up by a few of them to a larger group of people, so that the latter could get some decent  income margins to be spent for more goods and services.  

Again at every such transaction, the government is going to earn from the taxes.

Indian corporates and government  are going to repeat the mistake that the westerners did early in the 20th century which triggered the Great Depression of the 1929.

Why I say this ?

Read this report : Large Indian companies sitting on Rs 4.2 lakh cr excess cash  !!

Had they distributed even 10 % of this cash, which in any case they have amassed by paying less to their employees in comparison to the world standards, the Indian markets would boom. The Indian government would gain substantially in taxes, both income tax and other taxes.

The cash surplus of the Indian corporates are because of their reluctance to pay dividends to their share holders and their reluctance to pay better wages to their lower rung workers and employees.

The cash surplus with them cause them to show a higher book value for their shares. This in turn causes poor investors to shell out their hard earned cash to purchase shares of these companies at higher margins. The investors do not get any return from the company as such. The investors seem to make profits by selling their high margin shares to other gullible investors. The corporates have nothing to lose !

Why such a situation which actually do not help the majority of the Indian public to enhance their incomes so that they have some better  incomes for acquiring better goods and services ?

Whatever the low income, the government tax them heavily. What is the logic in taxing an individual who makes Rs 150,000/- ( ~ $ 3000) per month and the corporate which makes Rs 150 million at the same rate ?

The individual is left with Rs. 100,000 /- where as the corporate is left with Rs.100 million. Since both are individual entities, the money deprivation shock to the individual is much more. The excess money accumulated by the corporate does not do any good for the country ordinarily. Because it it blocked so long as they find some means of spending it. The individual on the other hand has many unfulfilled needs. He could have released that 50,000 immediately to the market had it not been cut by the government as tax. The government would have got an equivalent amount or much more had this money were used by the individual for meeting his unfulfilled needs.

This kind of illogical mind sets in the policy planning levels actually make India a poor nation. They do such things which causes the money generation points dry before they mature.

Killing the goose ?

India can become the richest nation in the world, had the negative growth policies made out by egoistic know-all mindset of those concerned decide to ease out a bit by relaxing their muscles and minds.

Instead of distributing money for various labour generating schemes  here and there, if the government allows all higher income group salaried people who pay more than say Rs.300,000 per year as income tax to have a regular personal assistant for jobs like driver, gardener, security, etc and the payments made to such people to the extent of say Rs.200,000 as fully exempted from tax, can you imagine the number of regular employment generated in India overnight ?

Of course, some people might always do some manipulations. That should not be the reason for not trying out some innovative methods.

That kind of an initiative can make the government popular overnight . Not only they become popular, the economy would boom. It is a kind of action that can force the higher income of the upper strata of society to percolate downwards immediately.

In reality the government's income is not going to get reduced. It will also boom !

There could be many such moves. But for that the government should be ready to take suggestions from all, even from laymen like me. If the suggestions are good for the country they should be broadminded to implement it.

How long they keep themselves isolated in self made chambers of petty politics ?

The country needs people of a different mindset  for thinking and implementing such radical thoughts !

Let us hope we get such thinking people by 2020 !


View the linked list of all Blogs of the Author Here ! ]

Indian Budget: Killing the Goose that lays Golden Eggs!

There is a likelihood that some of you might have heard of the folklore about the foolish man who killed his magic goose which provided him a golden egg every day. His greed for amassing wealth as quickly as possible compelled him to take the decision of killing his goose to take out all the golden eggs from its belly all at once !

While watching the news channels that beamed this years budget proposals made by the Hon'ble Finance Minister of India Union, some how the above said story came to my mind.

I am not an economist or expert in the economic nitty-gritties of a massively populated and complex country like India.

The minister and his team of experts know better than me about running the country's finances.

No doubt about that.

Yet, common men like me are compelled to think otherwise.

Are the so-called financial experts administering the country trying to kill its economy and its people by their tax administration and taxation policies?

I do not say that citizens should not be taxed. But taxation should not be such a way that it forces the very sources to get dried up and initiates negative growth.


It is the common man with some income who is the fundamental element that keeps the country in shape. The common people are the base for the country's existence, its markets , its richness and its governmental system.

The government in any case takes a cut of its own on every rupee that is transacted in each and every money exchange or transactions by various kinds of indirect taxes. Every goods and services have an indirect tax component embedded in them. As long as people buy goods and services, the government makes money as taxes, even when the business men do not make a profit.

Take for example the airline ticket charges. Even if the airline is ready to take you free, the government will not allow them to do it. A few thousand rupees per hour of flying per seat is mandated to be paid to the government as various kinds of taxes.


If this is the ground reality, if the government wants to enlarge its coffers, what should it do?

Should it cut the source of money or encourage the people to have more transactions ?

If you are thinking like the man who killed his goose, you would rather opt for the first choice !

That is taking away the money of the common man by taxing him at the source of his income by the so-called income tax !

Is it prudent to think of cutting the income of a person who is finding it hard to adjust his own personal budget ?

Some amount of money is required for meeting his essential expenditure of his house hold. That means he or she would spend that much money almost compulsorily. There is not much choice for saving any from that. The person is not likely to have any substantial sum of money with him at any time.

He earns some money and he keeps spending it for his needs.

And what he spends is directly going into the market economy of the country with the government benefiting first by way of indirect taxation. Indirect taxes like excise duties, sales tax, service tax and the like totalling 10 percent or more goes to the government in every transactions involving goods and services.

The money gives out by an individual for purchasing goods and services goes into the hands of service providers who in turn uses the money to source their inputs. This way financial transactions keep taking place.


If the same amount changes hand 10 times an year, the government gets an amount equal to the original amount as indirect taxes. If the number of transactions increase, the major beneficiary is the government. The government will have more to spend on priorities of its own, making further boost to the economy by enhancing the opportunities of income to the individual citizens. The cycle of progress proceeds in positive trend in this case.

Thus governments that are run by wise and intelligent people would create a situation wherein the above said positive economic trend is maintained.

Such a government would have main economic priorities with an objective of enhancing individual incomes at the lower levels and creating more opportunities for people to come into the income generation bracket.

In simple terms, this means their priorities would be to create more and more employment and to see that the lower level incomes of citizens are raised progressively so that they can afford more and more goods and services.

Once this is ensured, the government need not worry much about its sources of income for meeting the expenses for providing a better administration.

Hence a wise thinking government would never think of taxing its ordinary citizens by the so-called income tax which essentially cuts down the source of money which supports the country's market for goods and services.

It would perhaps consider to impose direct income tax only when there is a probability of excess  income beyond the capacity of the individual to spend for his needs on goods and services. This excess is likely to be kept idle without any possible transactions in the year or later. An individual who makes an income much more than he needs to maintain his lifestyle would have such an 'idle' excess income which accumulates in his bank account. This excess income accumulation in more and more individuals would cause some individuals to spend loosely creating unjustified price rise in certain kinds of goods, services or assets. There is not much harm if the government tries to cut some of that idle income of an individual by income tax. Essentially, this is the purpose of income tax. It should not be used as the primary means of income generation by the government, if the government is wise !

Now let us see how much money a typical middle class Indian nuclear family needs to sustain their lives in their middle class way of living.

If the head of the family has an income more than this, there is the likelihood of an idle income for this person and he or she could be a probable candidate for 'income taxation'.

By the phrase 'typical middle class Indian nuclear family' I mean a family consisting of a husband and a wife with not more than two dependant children, living in an urban area, with one of the adult member having a regular income from some kind of economic activity.

Now let us examine what could be the most realistic monthly expenditure this Indian family unit would have on a conservative and realistic approach.

For this analysis, I take the first quarter of 2012 as my base and the expenses as given are typically applicable on an average for such a family.

The members of this family are careful with their income and expenses and are responsible citizens with no vices or bad habits to drain out their incomes.

All expenses are on a monthly average basis and the numbers are in Indian Rupees (INR).

The following gives the monthly expense account for this Indian family:

1. Rice (30 kg ) :              1000

2. Wheat flour (20 kg) :    600

3. Pulses (4 kg) :              350

4. Vegetables :                 600

5. Milk (1.5 L):                1400

6. Cooking Oil (4L):        400 

7. Spices/salt etc:            200

8. Misc eatables:            1200

9. News Paper  :              200
10. Domestic fuel :          450

11. Electricity :               600

12. Local transport :      2000
13. House rent (2 BR):  5500

14. Telephone/Mobile:    600

15. DTH/Cable TV :        350

16. Education Expenses: 2000

17. Clothing (prorata) :   2000

18. Health Insurance:      2000

19. EMI for loans:         15000 

20. Vacation travel:        2500
21. Other services:         3000

       Total ---------         41250 ; Say, 40000 per month or just $ 800 per month.

This amounts to nearly INR 500,000 or less than $ 10,000 annually.

In my simple common sense, India government should not consider taxing any of its citizens having an income less than this amount by way of income tax.

Any income above this may be deemed as the surplus or taxable income which could be taxed in a few slabs at the rate in the range 10-70 %.

The above should be applicable only for individuals.

Since corporates are entities who are engines for economic growth, their incomes should be taxed at a lower rate, allowing them to sustain and grow.

These are just suggestions from a common man.

Past history tells that those in authority and position do not listen to the voices of the common man while they enjoy such positions and powers.

Any way whether to kill the golden goose or not is up to its owner !

[When color TV and telephones were common things in most parts of the world, for Indians they were super luxuries before 1980 !  Indian leaders controlling the goverment used to consider electronic goods as a luxury and never allowed these things to be brought to India even from abroad.

Bringing any kind of electronic consumer goods to India was treated as a sin and an offense of the highest order. With this mind set they kept the country away from contemporary progress for over three decades. Things changed when the old leadership got changed.

If this is any lesson, people should think of supporting young leaders for getting effective and radical changes in the government policies in accordance with the common man's thoughts. Progressive financial management thoughts and policies can only come from younger brains ! A UP like wave is needed for the whole of India !]