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i have written a lot about removing direct taxes for individuals and the fact that the government had to convince the bureaucracy to make income tax as nil until 12 lakh inr is kinda sad.
i’ve always hated the bureaucracy for a number of reasons. one of the most primary reason is that that they are an unelected shadow government where they are rarely held accountable to anybody and they literally control almost all of the policies that are made by the politicians.
how it works is quite easy. most of india is dumb. the politicians can’t make good policies. so let’s keep a common exam, choose the best intelligent people and make them powerful to serve the society.
but these people formed a class of their own, their own small unions and are now the praetorians that decide what caesar must say.
it’s great that the exception was granted till 12 lakh inr although i would say the income tax for individuals completely needs to go away.
you can still tax individual income through indirect taxes. stcg and ltcg can still be taxed.
plus a lot of different ways when they choose to spend/invest their money to grow their wealth.
it boosts spending with a lot of income at hand and it’s good for our economy.
one must understand through all of this - that we are a third world country and pushing in measures is very difficult than what it seems when you’ve too much friction with every move.
is the govt gonna lose income?
nah. not a lot of people pay direct income tax anyway. since this is a rebate than blanket removal, it means that people have to file their it returns to claim this. which is good.
perhaps this is also a move to make people to shift to the new regime so that the old income tax regime can be done away with.
the best reflection of this will come if and when gst is simplified as its supposed to be. gst is too bloated and too complex and it needs to be simplified. we don’t need a 28% bracket. nothing above 20% on gst.
the more i looked into each of those videos explaining the budget and its criticisms, i realized that everyone is actually super stupid and the average iq is indeed 77
without even knowing how to analyse the budget critically, i am fed up about the state of opposition that we have and the videos/statement that they release. more so on so called intelligent people who post videos and write about the same.
we have so many important things that we need to talk about collectively which is not a left/right issue but something that we all need to acknowledge.
for starters, how should a government finance its deficit?
in this budget, we are literally financing it with a near 25 lakh crore in borrowings. this is bad. when the government competes with its citizens to borrow, it drives up interest rates. inflation increases since you’ve to print more cash now.
what is our rbi repo rate now? 6.5% is too big and we need to bring it down to 3%
how will you do that with this much borrowing? you need to bridge fiscal deficit by cutting down costs. only after cutting down to the bare minimum staggered over few years, we should borrow with a repayment plan. there’s none. we’re borrowing like crazy and spending like crazy.
i usually don’t mind govt. spending on welfare schemes. i infact have a strong dislike towards people who hate all welfare plans since we need to have a plan in a tried world country like ours if you want to cater towards every citizen.
but we’ve a problem.
every welfare scheme announced increases spending without strong accountability mechanisms. zero fiscal discipline.
i am all good with subsidies. but you should subsidize expecting future growth that will repay you back. it’s essentially an investment. if that’s the case, why aren’t subsidies linked to efficient gains?
without being linked to efficient gains, i am forced to mark every. obey that’s a subsidy in our budget as permenant liabilities. they don’t return any investment except political capital that brings votes.
there’s zero exit strategies subsidies especially on rural subsidy programs and there’s zero incentive for the beneficiaries to turn self sufficient.
why are we focusing on pulses and cotton? and less attention to wheat and rice? what’s our oilseeds market cap? aren’t they essentials?
infact why is the govt entering into these?
let me rant a little on government borrowing. rbi interest rates are at 6.5%
banks are in the business of loaning out money and theirs will be higher than that pocketing the difference as their profit.
when government is competing with us to borrow from the market, interest rates become high and inflation gets higher. rbi prints more money devaluing the currency.
private businesses aren’t gonna get their credit easily. with that high interest rates, some business models get completely obliterated. even a 0.5% interest rate hike means death.
private sector investment reduces drastically. imagine we can bring outside capital to mitigate this. no. regulations by rbi and other agencies put a stop to that.
msme’s literally are built over crap credit. it’s gonna affect them heavily. so how do they keep the interest rates at the same level? print more cash. essential product prices increases.
this is a death spiral. seriously we need to cut back spending.
so, let’s go back to econ 101.
i am gonna revisit the subsidies - especially the rural ones. the msp. why? why’s there a necessity for msp for farmers?
the government wants and demands private market participation as part of the budget which itself is a huge red flag (i’ll talk more on that later) so should allow private market too take over farming and stop intruding there.
i already told about the skewed importance to certain crops instead of wheat and rice.
increasing the budget there literally pushes up rural wages and food prices triggering inflation. why? hey govt promised to buy at this rate. everyone cultivates that.
if wages rise without productivity gains, businesses will simply pass the cost to consumers. they won’t get affected. you and me will pay extra now.
let’s take pulses and cotton. increase in demand there without any supply will literally lead to inflation in food and textile prices.
why would you raise kisan credit loan to 5l inr limit without guaranteeing repayment capacity?
a chance to explain why i was cribbing about higher wages without corresponding increase in productivity.
cost-push inflation occurs when overall price level rises due to an increase in the cost of production, independent of demand.
purely driven by supply side factors rather than excess consumer demand (as it should be) - strong case for why we should allow more free market.
another is fiscal policy. govt increases public spending without cutting it - central banks increase rates. result? high inflation.
do you know why people think increase in interest rates decrease inflation?
because since borrowing becomes expensive, people won’t. they’ll spend low. consumers will save more and not spend. businesses won’t invest. currency becomes stronger with high foreign investments since interest rates are high. demand for goods and services decrease hence businesses will lower price.
this is standard.
why do you need to read econ 101? because we’ve a bunch of regulations and requirements in real life that will not let this come true.
thus, impossible.
there’s more in this.
one thing which i missed. this is about the 12l inr no income tax. if middle class households anticipate future hike in taxes or fear inflation increase (provided they’ve good finance knowledge) - they will increase savings thus reducing immediate economic stimulus which the govt is expecting to happen by spending.
this thus hear this out. we literally want those middle class who are getting an income tax break to spend more . be financially stupid and consume more. actually good for the economy :p
this is my kinda evil which i like. keep a section of the public dumb for the whole economy to benefit hoping their dumbness will prevent them from saving and spending more. please spend more.
how to fix it? make sure inflation doesn’t increase so that they will spend even if they know about it.
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