Corporate tax cut and even lower tax for new firms
could bolster profits and investment and also increase real incomes by reducing
prices... It has the potential to unlock alot of demand and spending in the
economy...
The Gov may bring the tenders for private investment
where there is a need to increase the productivity or production or supply and
incentivise the firms... Though, it has reduced the Corporate tax to 17% for
new firms which could make the existing firms a little uncompetitive and
discourage investment... which may need re-alignment...
Banks and NBFCs are in problem for wrong policies in
the past, but at the same time, both, the Gov and RBI have ensured enough
liquidity to the both... Banks must pass on rate cuts to increase business...
For banks and NBFCs the RBI is more responsible than the Gov...
As far as fiscal deficit is concerned the RBI has a
foreign exchange reserve of $ 450 billion ( approx. 40 lkh crore inr) which
might be used for investment and reduce deficit... More supply of dollar would
also reduce import cost and trade deficit... oil would be cheap, too....
According to the latest chain based method index on
base year 2017-18 last year’s growth rate was 7.9% ( or 107.90) and this year's
growth rate is 13.36% (or 113.36)...
Banks borrow short and lend long which risks
solvency if people start pulling money back, due to higher inflation and
consumption... when they should borrow long and lend short... Therefore, the
question is which rate should be higher or which should be lower.... or
borrowing cost in the longrun would be high or lending rate in the shortrun...
Generally, longrun rate is higher than the shortrun,
but according to the above condition short run rate should be higher than the
longrun rate because banks would borrow long at lower cost and lend short at
higher rates... But, the evidence from the US shows that buying longrun bonds
would also lower short run rates...
The RBI is buying longterm bonds which would reduce
longterm rates and selling short bonds which could increase shortterm rates...
which could affect credit demand... the gap between shorterm rates and longterm
rates could widen... and increase banks margins, but not good for credit
growth, in the short term borrowing cost could go up...
The question is why the RBI is selling shorterm
bonds which could increase shorterm interest rates?
Though, if banks want they could pass on the benefit
to the borrower... Same with real estate companies........
Increasing fiscal deficit target means, the Gov
would borrow more or more public debt which in a low inflation and low interest
rate scene or through counter-cyclical policy could help increase
employment/demand and spending and growth only if it increase productivity and
help stabilise prices and expectation or inflation and growth...
Inflation could reduce the value of capital if
public debt increases only demand without increasing productivity or supply...
it would also crowd out private investment, through higher borrowing cost...
Inflation and depreciation could increase foreign capital outflows...
The Gov is giving reservation to economically
backward earning less than Rs 8lkh which would cover 80% of the population,
including the existing reserved category... The Gov must walk the talk... by
providing 100% tax exemption upto 8lkh... It is also expansionary... More
spending could help higher GST collection and stable rates...
Infrastructure companies and banks, plus NBFCs and
real estate companies are expecting demand stimuli to revive the economy... The
Gov and RBI have incentivised these sectors in the form of lower taxes and
interest rate, but they are reluctant to pass on benefits to consumers...
When commercial banks condition would improve it
would also secure loans to NBFCs... and it would increase demand in the real
estate... The government has committed Rs 100 lkh crore investments in infra...
Former CEA's Economic Survey showed INDIA has a bright future...
Low prices increase the real balances with the
public and could increase demand, if lower interest rate and taxes are passed
to the consumers, this is very important to increase demand... More directly it
is like sitting on your own competitiveness... Especially banks they must pass
on rate cuts to boost demand and profits...
Irrespective of other countries currencies INDIA's
economy is several more trillion economy in Rupee terms... Multiply 5 lkh crore
dollars with 70 rupees... approx... 350 trillion or lkh crore rupees economy...
Currently it is 190 trillion rupees economy…
but, there has been quite substantial inequality in the incomes… 90% own 10% of
the wealth and 10% has 90% of wealth…
Data show that Dec q is always better than Sep q
followed by even better March and June q's... INDIA is in a cyclical slowdown
that we observe every year...
It is crucial to actively manage supply according to
demand or expected demand for skills...
Market is running on expectations, the longterm
story is intact and the policymakers are committed to growth....
Without passport none should be allowed to enter
INDIA because of security concerns... Not all are terrorist, but we should not
risk others image and security...
The Act (CAA) is not excluding anybody form getting
INDIAn citizenship; it is just against illegal immigration... It sought to
define who is a citizen of INDIA amid illegal trespassing... who can vote...
There is no rationale behind accepting refugees or
immigrants from a majority nation, if they are refusing them why should INDIA
accept them if they are a threat to stability... If their nations (Afghanistan,
Pakistan and Bangladesh)... are rejecting them... there must be some issue...
Accepting Hindus, Jains, Sikhs, Buddhists have
majority in INDIA and they are facing bitter circumstances in the above
countries…
What is the guaranty that they are not terrorist who
is trying to use another channel? Who would take that responsibility? They
could easily go to a majority nation where there rights would be preserved
after all it is a issue of brotherhood, backed by vote banks pol....
INDIA is deeply affected by terrorism... and cross
border politics... Not all are terrorist, but some of them are... Anybody can
enter INDIA if they have legal documents... there is no discrimination...
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