Parliamentary democracy has another problem. When opposition decides to oppose anything and everything, the Parliament becomes irrelevant. As it is happening this year, the affair of budget has shifted out side the Parliament. Finance Minister may have read budget speech in July in Parliament but it was far from over. Amid slowdown, which is partially cyclic, Finance Minister had been making hectic consultations with different section and announcing a slew of relief from tax, every week. This weekend however arrived with the big icings on the cake.
Reduction in Corporate Tax:
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Budget 2015 misses the important questions:
Budget of India for 2015 passed by Parliament of India with usual rhetoric and careful negligence to important aspects. Opposition which was in power till yesterday is as bereft of constructive criticism as it was out of ideas when in power.
Finance Minister called the economy as recovering economy in his budget 2015 speech. That sums up. Like recovering patient, the economy is in hospital and can not do much for others. Therefore it has to be nursed before it can do anything for others. So what the finance minister did? Raise the tax rate for all citizens and reduce the corporate taxes. His logic is that corporations are needed to invest and to revive economy.
Thus except for small matters, this budget is a status quo.
Economic problem of India:
The worst problem for economy is the Government Expenses and Interest payout on borrowings. 98% of revenue goes into these two heads. Continue reading →
Today Finance Minister of India i.e. Pranab Mukherjee will resign from cabinet. His credit is that he presented a most direction-less budget that too at a time when economy was reeling under high inflation in food prices and low growth in all sectors.
His reward for this mess: He will be elevated to the post of Head of the State i.e. President of India. But why?
Reason is simple. This way neither the Finance Minister (Pranab Mukherjee) nor the ruling alliance will have to admit its blunders in handling the economy. The country will have first Bengali as President. Bengal is the place of special interest. Not because the crown prince of ruling Congress Party’s girl friend is from Bengal, but because it wants to consolidate its political gains in the State.
It is a good manipulative plan. Only that it is neither honest nor fair. But Congress Party always used the post of President as retirement of inconvenient politicians. As regards economy, it can wait.
© Sandeep Bhalla
The Great Pause in Civilization
On 25th October the Reserve Bank has again raised the Repo rates by 25 BP. Thus the Repo Rate Now stands at 8.5%. It is the highest anywhere in the world. The Rupee has reacted sharply to this and there has been an appreciation of Rupee by over 2% in a single day on 28th October 2011.
The reason for this increase and the past increases as well is stated to be that it will contain inflation. I find it illogical. For two reasons:
1. The depreciation of Rupee by 10% in past about a month itself had been inflationary.
2. The increase in repo rate by the Reserve Bank itself is inflationary. The Repo rate is the base lending rate for the Banking Industry. If lending rate goes up, it carries with it the cost of production as it is also an input component for goods produced.
I am no economist but I do not feel it right. It is compounded by the fact that same medicine which has already been administered by the Reserve Bank for many times in the past one year has not produced any result. I wish this persistence may bring some tangible result this time.
© Sandeep Bhalla