Analysis of Indian news dated 05-Jul-2012
July 5, 2012
Indian government expenses are rising. Also, the rate at which expenses are rising is also increasing.
This is not only bad for Indian economy; it is the primary reason that Indian economy is in poor shape.
- It will cause increase in current account deficit. It will increase inflation.
- It will cause increase in taxes.
- More resource consumption by government means lesser resources available for private sector. This leads to poor growth or decline in production / jobs.
So the Indian economy is getting worse.
Home loan borrowers will get interest subsidy at the rate of 1% for loans up to Rs 15 lakh. This is expected to cost the tax-payer Rs 400 crores in current financial year. The same scheme, with different limits, has been in place for nearly 3 years now.
Is this scheme good or bad for most Indians? At first look, it seems to be a scheme to help the poor. So it appears to be a good scheme. But every coin has two sides.
If it is a good scheme, then why not extend it i.e. why not give a 2% subsidy, 3% subsidy or a full subsidy? When subsidy is given to some one, the cost has to be borne by some one else. Here, tax-payers have to bear this burden of Rs 400 crore yearly. Would tax-payers prefer lower taxes or would they prefer to pay more taxes for this subsidy? Of course, given this option, most tax payers would want lower taxes.
Also, why is Indian government subsidizing homes of poor people? Why not give subsidy for purchase of bicycles to help poor people commute? Why not give subsidy for all mobile phones worth less than Rs 1,500, as they are purchased by poor people? Why not give subsidy for purchase of under wears worth less Rs 50, as they will be used only by poor people? The list is endless. If the Indian government REALLY wanted to help the poor, it would raise the income-tax exemption limit or lower taxes for everyone earning below say Rs 5 lakhs per year. The Indian government does not want to help the poor, it wants to help the real-estate companies. Hence, it gives this subsidy.
Does this subsidy help the nation? Any subsidy distorts free market. So now more investments will be made in real estate than in production of bicycles, mobile phones, under wears, etc. Jobs and taxes from other areas will be diverted to real estate. This will not necessarily result in any net growth for the nation. This again proves that this subsidy is given by a corrupt government to help real estate companies. Without income tax deductions / subsidies on home loans / purchases, the cost of real estate would be much lower. The high cost of real estate benefits the real estate builders and hurts the citizens the government claims it is trying to help.
Hence this subsidy should be removed. It is a mechanism to transfer wealth from tax payers to real estate companies, under the garb of helping the poor. India needs lower taxes and fewer subsidies. The Indian government keeps increasing taxes (Service tax from 1-July), giving new subsidies and increasing existing subsidies.
Iran says the USA and Europe have imposes the most punitive sanctions imposed on any nation, even though they have no proof that Iran is manufacturing nuclear weapons. Iran can fire at oil tankers taking oil to nations that imposed sanctions on Iran. USA would like nothing better. USA wants an excuse to attack Iran. An attack on Iran will be start of World War III. Of course, western nations will blame Iran for starting this war.
LIBOR rate manipulation is now Lie-More. This is the biggest banking scandal till now. It impacts not just UK, Europe, USA; but also India. All loans given / taken by Indian government and corporates in foreign currencies were at a fraudulent rate, not at their fair market rates.
Give a man a gun and he can rob a bank; give a man a bank and he can rob the world. I say, this is not a mistake; it is fraud. People, across the world, should demand prosecution of people involved; just resignation of some bank executives or public apologies are not good enough. Death penalty is not enough for guilty bankers. Billionaires / millionaires have cheated the poor, widows, old persons and developing nations of higher interest on their savings.
Which country leads in innovation? Countries with maximum economic freedom (minimum bureaucracy and taxes) lead e.g. Singapore. Countries with minimum economic freedom (maximum bureaucracy and taxes) lag e.g. India.
Buy physical gold and silver to protect yourself. If you cannot touch it, you don’t own it. Exit all paper investments including ETFs, stocks, PF, PPF, NSC, etc.
goldsilvereconomy 