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Old 4th September 2017, 15:32   #121
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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Again, you are talking from a car enthusiast POV. Policy makers don't care about that, and they shouldn't.

True development comes when rich people use mass transport, and not when poor people use cars. Government must focus on that that goal.
Absolutely not, in-fact nowhere I mentioned the agony that a car enthusiast has to go through. GST + CESS is a very small % of the total taxes I pay to own and run my car. My real anger is with the blanket specification of what defines a luxury car. There needs to be a reclassification to this distinction. The Honda City is not a luxury car, and forcing people to choose a smaller car (and forgo the safety features, added space and creature comforts) is just wrong. Especially if they are hard working tax paying citizens who want the best for their family.

My real point was in a country which is majority rural increasing taxes on cars will have a negative effect on GDP/Output since most smaller towns/villages have almost nothing in the form of public transport. The line above is not applicable here because our population is just not concentrated like other smaller developed countries. So many people got a chance to have a job and work on their own times in the form of Uber/Ola etc.
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Old 4th September 2017, 15:48   #122
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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Absolutely not, in-fact nowhere I mentioned the agony that a car enthusiast has to go through. GST + CESS is a very small % of the total taxes I pay to own and run my car. My real anger is with the blanket specification of what defines a luxury car. There needs to be a reclassification to this distinction. The Honda City is not a luxury car, and forcing people to choose a smaller car (and forgo the safety features, added space and creature comforts) is just wrong. Especially if they are hard working tax paying citizens who want the best for their family.
The quantum of the cess has not been defined yet for a particular variety of car

http://www.firstpost.com/business/gs...y-4005559.html

So please do not agonize yourself yet. It may take time and it should. There is nothing called foolproof planning. It has to be an improvisation when it comes to real execution. Also, I think a car beyond a simple hatch back is simply discretionary and not mandatory for any citizen of this country. They should be taxed heavily.
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Old 4th September 2017, 15:55   #123
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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The Honda City is not a luxury car, and forcing people to choose a smaller car (and forgo the safety features, added space and creature comforts) is just wrong. Especially if they are hard working tax paying citizens who want the best for their family.
For the 92% families that doesn't own a car, any car is a luxury. My brother doesn't own a car, and takes two buses to reach his office. My dad never owned a car. He had the same lambretta for 23 years, and after that he relied on bus and auto until the day he passed away at 82. Most of my employees come to work in the bus. Most Indians are like this, they rely on mass transport or public transport. Try telling them Honda City is not a luxury car.

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My real point was in a country which is majority rural increasing taxes on cars will have a negative effect on GDP/Output since most smaller towns/villages have almost nothing in the form of public transport.
I grew up mostly in rural area, and now my office is located in a village outside of Manipal. Villagers heavily depends on mass transport since most houses don't have cars. Looking back 20-30 years, I can recollect that most adults in my extended family used mass transport. Every trip to anywhere was in a bus or train. It is only in my generation that many of us got to own cars.
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Old 4th September 2017, 16:33   #124
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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For the 92% families that doesn't own a car, any car is a luxury. My brother doesn't own a car, and takes two buses to reach his office. My dad never owned a car. He had the same lambretta for 23 years, and after that he relied on bus and auto until the day he passed away at 82. Most of my employees come to work in the bus. Most Indians are like this, they rely on mass transport or public transport. Try telling them Honda City is not a luxury car.
I agree with everything you mentioned, both my grandparents had only a bicycle despite being in a sarkari Naukri as postmasters. My dad was the first among his 6 other siblings to buy a car. Everyone of his siblings now has a minimum of 1 car.

Times have changed. The relative meaning of luxury always exists. A Benz owner might consider a Rolls Royce as luxury. An Alto owner might consider Ciaz a luxury.

Hence, consider a Honda City as a mid segment luxury car. It should not be taxed the same as a S Class , let us consider it as an example of high end luxur car. Hence , the need of the hour is for government to segmentalize luxury.

The government can't stick to the 1960's Raj era meaning of luxury. The car industry produces vehicles on a massive scale employing millions . The taxation on cars above 4 metres is already outrageous at 43%. The old tax rate was stifling at 53%.

A ten % tax cut thanks to GST will enable the government to 43% taxes on a greater number of cars sold as small car owners can upgrade to bigger cars if they are a bit affordable. If people don't upgrade, the government will be stuck collecting only 29% from the same customer.

Last edited by Ragavsr : 4th September 2017 at 16:43.
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Old 4th September 2017, 17:23   #125
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

Small cars are dangerous on highways. Look at the standard of safety and protection in small cars and then check whether these are highway safe. All Marutis will fail any modern crash/collision test.

So what govt is indeed saying is, go ahead and drive unsafe small cars, if you or your family lose their life in process, nothing goes of our father. What is important to govt is their image of being pro-poor and they need to maintain this facade with a blind eye given for increasing oil prices to highest in world. In case of oil pricing suddenly govt doesn't give a fig about its image. This is the dichotomy and irony of this govt.

Last edited by aah78 : 16th September 2017 at 01:05. Reason: Typo / grammar.
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Old 4th September 2017, 18:02   #126
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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forcing people to choose a smaller car (and forgo the safety features, added space and creature comforts) is just wrong. Especially if they are hard working tax paying citizens who want the best for their family.
+1 to that.

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The relative meaning of luxury always exists. A Benz owner might consider a Rolls Royce as luxury. An Alto owner might consider Ciaz a luxury.

Hence, consider a Honda City as a mid segment luxury car. It should not be taxed the same as a S Class , let us consider it as an example of high end luxur car. Hence , the need of the hour is for government to segmentalize luxury.
Brilliantly put! The term 'luxury' would always be relative. Night shelters for somebody who is homeless would be a luxury while at the same time, those already living in night shelters would aspire to live in a flat, a flat with bare minimum space/facilities, but a flat indeed. A luxury. Human nature. But would you keep these two in the same tax bracket? Likewise, two different cars from two different segments would always have different values; basis income level, aspirations etc. You really have to tax them categorically.
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Old 4th September 2017, 21:33   #127
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

Government and people who are supporting this hike in this luxury tax are extremely shortsighted. They think that by increasing the tax by 10% they will be able to collect more tax and punish the rich at the same time. They certainly have no knowledge of demand and supply economics.

GST is a 21st century tax and has to be reasonable so that ample amount of demand is created for all segments. Imagine the amount of new car showrooms that will come up. So much new investment will flow to create new factories and cars. So much new employment will be generated at production factories, at sales showrooms, and in tranportation/logistics sectors. All those people and new companies will pay income tax and many more GST taxes. Those employees will go out and spend more money on new consumption. The entire new GDP growth cycle starts by having reasonable taxes.

The increase in sales of cars(due to low prices) will end up generating more GST than current levels. Income tax etc will top it up by many times. But who in government has the time or vision or patience to see those results in 2-3 years. They just want to tax heavily and get money today, than waiting for new factories, new showrooms, new jobs to generate overtime. May be the GST department is only worried about their this year collection and is least bothered about Income tax collection 1-2 years down the lane.

GST has clearly defined that once cess goes away, 40% is maximum tax there could be on any item sold in India. It's time to respect that figure and bring these taxes to reasonable levels. If nothing else, this will help poor people upgrade from scooters to small cars and middle class to upgrade from small and unsafe cars to relatively stronger built cars. Any life saved by travelling in a safer car would be big blessing which this government will never have the vision to understand.
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Old 4th September 2017, 23:11   #128
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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Again, you are talking from a car enthusiast POV. Policy makers don't care about that, and they shouldn't.

True development comes when rich people use mass transport, and not when poor people use cars. Government must focus on that that goal.

During my first Japan visit in 2013, I was hanging around with some journalists at Kyoto train station. They spotted somebody getting down from the train with his wife, and ran to talk to him. It was the former CEO of Maruti Suzuki, travelling in train like a normal person. He was quite surprised to find so many Indian reporters who knew him.
I am sorry but did not want target you, I completely agree with you but there are factors that come into play. I have lived in Europe majorly Nordic countries for a year. You have to realize that public transport in India is particularly bad, autos are not monitored there is no professionalism they are rather supported by political parties for there hooliganism. Buses are not enough and up kept well or have dedicated lanes and rules to follow. Our govt. solely lives on after though, they want to tax more cars as cess for political gains, if they really cared about the poor or anyone they would have heavily invested in public transport like Europe where cars are taxed heavily but who needs one. I have 3 cars at home but I prefer to take a metro whenever possible but my wife does not as she does not feel safe and an auto never agrees to go beyond a certain point. Let me give an example of the shortsightedness:
Ola and uber use private cars abroad to ferry people that is there model but Indian government being shortsighted forced taxi number to come on road so that they can generate more revenue but now they are fighting an uphill task against increased cars and pollution and reconsidering that we should allow private cars under ola/uber to ease traffic. Also, most taxi's in Europe has a camera that provides feed to central location for safety, this can never be implemented here again due to vote bank politics.
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Old 5th September 2017, 01:25   #129
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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Government and people who are supporting this hike in this luxury tax are extremely shortsighted. They think that by increasing the tax by 10% they will be able to collect more tax and punish the rich at the same time. They certainly have no knowledge of demand and supply economics.
Nice try... Actually, those of us who are supporting it, have much nuanced view of economics involved.

Unfortunately, most of us studied economics in business schools, which only gives the capitalist view point on economics. Those who study via BA/MA route probably have a much balanced approach. But business schools intentionally lead us away from the balanced view because it is not good for business.

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GST is a 21st century tax and has to be reasonable so that ample amount of demand is created for all segments. Imagine the amount of new car showrooms that will come up. So much new investment will flow to create new factories and cars. So much new employment will be generated at production factories, at sales showrooms, and in tranportation/logistics sectors. All those people and new companies will pay income tax and many more GST taxes. Those employees will go out and spend more money on new consumption. The entire new GDP growth cycle starts by having reasonable taxes.
You are basically describing trickle down economics, which has been thoroughly debunked by now. But the theory does have lots of fan following in the business community because it benefits them.

As business owner myself, I can tell you that any mature company mainly focuses on profit maximization. If you cut taxes to improve car sales, it will increase the profit of the company. But it won't compel them to invest in new plants and hire whole lot more people. They might just decide to delay your delivery. New plant may eat away all the profit, so why bother with it. This is a common problem for any company. When demand exceeds supply, do you increase supply or just raise the price and move left on the demand curve. Simple understanding of demand/supply curve will tell you that moving left on the demand curve is much more profitable.

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You have to realize that public transport in India is particularly bad, autos are not monitored there is no professionalism they are rather supported by political parties for there hooliganism. Buses are not enough and up kept well or have dedicated lanes and rules to follow.
I used nothing but public transport in the first 22 years of my life. So I am not exactly unfamiliar with it.

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if they really cared about the poor or anyone they would have heavily invested in public transport like Europe where cars are taxed heavily but who needs one.
This is where we need to go. But it takes time because our country is so corrupt. They tax the cars, but little of it goes to building mass transit.

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Ola and uber use private cars abroad to ferry people that is there model but Indian government being shortsighted forced taxi number to come on road so that they can generate more revenue but now they are fighting an uphill task against increased cars and pollution and reconsidering that we should allow private cars under ola/uber to ease traffic.
Uber/Ola concept is very flawed, that is why governments all over are cracking down. The companies are making money by exploiting the drivers.

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Old 5th September 2017, 01:35   #130
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You are absolutely right. Whether some people believe in it or not, but car ownership has gone up many folds in the rural areas and it is very much needed as well.
Twice now, I have carried patients to hospitals in case of emergencies, including my own dad. In a city, I might have been able to hail a cab or an ambulance might have arrived quickly, but over here in villages, we are left to defend for ourselves on most occasions. Local public transport is mostly in the hands of private operators who drive rashly. Even then, you will find it very hard to find a bus after 7pm. Even the inter-city bus service hasn't grown to the levels required. Yes, I can hop on a Volvo if I can afford to, but the number of regular buses are abysmally low compared to the population. Recently, I decided to take a chance and had to travel the whole 10hrs standing. Now, I prefer to take my car and subsidize my fuel expenses by picking up a few travellers from the bus stand instead.
So, I have to concur, especially since I moved from a city like Chandigarh ( where I could find an auto or cab 24x7) to a village/town situated on a NH in Himachal, small affordable cars, no matter how unsafe they might be, have become a little bit of a necessity for rural people as the public or private mass transport service are woefully inadequate outside of major cities.

P.S. - Does anyone know of a case where someone has sued the state government roads department for the quality of roads in lieu of the road tax they had or have to pay.
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Old 5th September 2017, 09:56   #131
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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For the 92% families that doesn't own a car, any car is a luxury. My brother doesn't own a car, and takes two buses to reach his office. My dad never owned a car. ... Most Indians are like this, they rely on mass transport or public transport. Try telling them Honda City is not a luxury car.

I grew up mostly in rural area, and now my office is located in a village outside of Manipal. Villagers heavily depends on mass transport since most houses don't have cars. ....
I agree 100% with your facts and I grew up in a very similar social condition as well. However, going by that logic, 95% households earn <10L per annum. So if tomorrow Government declares the Income Tax for people earning more than 10L would be increased to 50% from 30% to tax the rich more, would you wholeheartedly accept that too ? How about increasing the taxes 2-3 times for businesses that generate more than 1 Cr profit ? We have to think about the broader picture here. If the Govt were using all the taxes and cess collected from cars to directly build better public transport, especially in the cities then I'd support this move.

Personally I have no problem paying higher taxes if that tax money is spent on improving the country, support its people who need it and build better infra structure but we all know where most of that money goes. For example, I'd not be angry to pay the highest road tax in India if I had access to the best roads in India as well. As for taxing luxury cars, I think Govt already get their coffers full thanks to the insanely high CKD/CBU duties which adds to the astronomical prices so why add cess again for mainstream cars ?
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Old 5th September 2017, 10:12   #132
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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For the 92% families that doesn't own a car, any car is a luxury. My brother doesn't own a car, and takes two buses to reach his office. My dad never owned a car. He had the same lambretta for 23 years, and after that he relied on bus and auto until the day he passed away at 82. Most of my employees come to work in the bus. Most Indians are like this, they rely on mass transport or public transport. Try telling them Honda City is not a luxury car.

I grew up mostly in rural area, and now my office is located in a village outside of Manipal. Villagers heavily depends on mass transport since most houses don't have cars. Looking back 20-30 years, I can recollect that most adults in my extended family used mass transport. Every trip to anywhere was in a bus or train. It is only in my generation that many of us got to own cars.
Just because the 92% don't own cars, doesn't mean they don't have to rely on cars in some way or the other for last mile connectivity. It's great that your brother, father and employees have the option to take public transportation and it works out for them but you have to consider not all places in India have the same topography, weather, roads, metro, buses or even rickshaws available. I would love to walk to a metro station in the morning and reach work, but even the 100-metre walk from parking to office in the morning destroys my sanity in the scorching Delhi heat.

Why should a Honda City owner pay as much tax as someone buying a Phantom? Why should someone importing a Yacht worth 100's of crores pay just 25% basic duty while a person buying intending to buy a Rs 5 lakh motorcycle pay 100%? Just because the majority of our population is in poverty doesn't mean the middle class who are supporting them via taxes and adding to the GDP of the country are forced to be taxed at obscene levels.

You are lucky to be in a place where you don't have to face the plight of urban middle-class commute, battling the elements and fighting your way through roads filled with people who don't have the faintest idea to drive. It's already well known that majority of people in working class suffer from mental health problems and stress. Do we really deserve more taxes on our basic rights? Maybe our basic rights are a luxury for many, but somebody needs to pay the bills for socialism to work. Its a ticking time bomb waiting to explode.
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Old 5th September 2017, 10:12   #133
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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Nice try... Actually, those of us who are supporting it, have much nuanced view of economics involved.

Unfortunately, most of us studied economics in business schools, which only gives the capitalist view point on economics. Those who study via BA/MA route probably have a much balanced approach. But business schools intentionally lead us away from the balanced view because it is not good for business.

You are basically describing trickle down economics, which has been thoroughly debunked by now. But the theory does have lots of fan following in the business community because it benefits them.

As business owner myself, I can tell you that any mature company mainly focuses on profit maximization. If you cut taxes to improve car sales, it will increase the profit of the company. But it won't compel them to invest in new plants and hire whole lot more people. They might just decide to delay your delivery. New plant may eat away all the profit, so why bother with it. This is a common problem for any company. When demand exceeds supply, do you increase supply or just raise the price and move left on the demand curve. Simple understanding of demand/supply curve will tell you that moving left on the demand curve is much more profitable.

I used nothing but public transport in the first 22 years of my life. So I am not exactly unfamiliar with it.

This is where we need to go. But it takes time because our country is so corrupt. They tax the cars, but little of it goes to building mass transit.

Uber/Ola concept is very flawed, that is why governments all over are cracking down. The companies are making money by exploiting the drivers.

I am not sure what exactly your ideal rate of tax is, but your economics fundamentals make very little sense to me. I would really appreciate if you correct my understanding on the following points:

1. I invest in car company shares, so I study car maker profits in detail, when the 15% cess was announced, almost all car companies passed most of the cess reduction to customer. Most stock research analysts projected profit growth of car companies because of sales growth because of lower prices, not because car companies won't pass on the cess to customer and hence would profit themselves.

2. Maruti just put up a new plant in Gujarat. Toyota is running full capacity at its plant where it produces Fortuner/Innova. If demand increases due to low prices, they have to put up a new factory, or else the competitors will take away their share. Only an Indian mentality CEO would say that "I only want to profit from this factory and not put up a new factory, let my competitors take my share". He would surely be fired very soon for having this regressive view.

3. It might take about 20 years to come up with a decent public transport in India in every city and village. Half of India's population (i.e. women) feel unsafe or harassed to travel on public transport on their own. So, half of India is sitting at home and not being able to work because commuting is such an issue. Some girl who is 25 years of age today, do you want to make cars more affordable for her to feel that independence to go anywhere on her own or do you expect her to stick around at home for next 20 years and come out at the age of 45 when public transport system is up and running. Public transport is only an option in cities which have good metro system running, with security cameras etc. Tier 2-3 cities are really bad when it comes to transportation safety of women. That is why you see such low participation of women in workforce (percentage wise) compared to bigger cities.

4. Same taxes were applied by government on luxury item called "cell-phones" back in 2000. There were probably couple of cell phone shops in the entire city at time. Look at the explosive growth once taxes were reduced and how much it benefited every single person since then. Look at how much employment it generated in every city. Look at how much real estate it took up. Look at how many homes it fed.

There is something called convenience also. Air Travel was taxed heavily till now, and I salute Modi government for taking the bold decision to lower taxes on Air Travel. Look at the explosive air travel growth that India is going through. So many new people are able to afford 2000-4000 rupee tickets. It is making the whole industry so economically viable, creating thousands of new jobs and making travel way more convenient and safer for millions of Indians who had railways as their only option till now.

So, I don't understand when you say that lower or moderate taxes don't create demand or spur a new growth cycle in a particular industry. I can name atleast 1000 so called luxury products which if taxed a bit lower, would make setting up their shops viable in every city of India, would create new businesses, new owners, new employees. Go to any tier 2-3 city of India, half of commercial properties are lying vacant because rents are too high, and low sales of a highly taxed high priced product would not make opening a business viable. There has to be a balance.

5. My biggest problem is with tax uncertainty and flip-flop. Cess is only temporary for 5 years or less, till the time state governments need to be compensated by the centre for revenue loss. So, earlier you had a tax of about 53% (which was partly due to tax on tax). In 5 years you have to come down to 28% (which is the highest slab right now), unless government decides to tax luxury cars at the highest defined rate of 40% in the Constitution. So, a move of 53% > 43% > 40% or 53% > 43% > 28% made so much more sense than 53% > 43% > 53% > ??.

6. Last issue is safety. People paying same price in western countries are able to afford much safer and stronger cars. We are paying 50% plus taxes for completely unsafe cars. I would switch from Swift/City to XUV 500 for the safety of my family, if it is priced lower. More than a lakh people die every year on roads due to unsafe cars. Doesn't a common Indian person have the right to move to safer cars or do you only want the safer cars only for the rich?

Last edited by JoyPangli : 5th September 2017 at 10:32.
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Old 5th September 2017, 12:09   #134
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One of the few sectors of the economy apart from IT services, on which India has made a mark in the world stage, is automobile manufacturing. The very fact India is able to export its cars to Europe, North & South America as well Middle East & rest of Asia is a testament to the quality of Indian manufactured cars. (Look at how many advanced countries Indian cars are exported vs those from Chinese companies).

Auto manufacturing provides millions of well paying jobs to low-skilled & semi-skilled people in the industry. If the quality & volume is achieved, these global manufacturers would export from Indian facilities as well. Look at how Hyundai, Suzuki & VW have been exporting from India. When these companies initially set up shop in India, I don't think anyone thought that they would one day export products from India.

This 60s socialistic mentality of treating manufacturing & businesses as 'enemies of the people' and to view few creature comforts people long for as 'luxury' is what is weighing down Indian manufacturing. We don't have the long-term vision that the Chinese have.

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Old 5th September 2017, 13:48   #135
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Default re: GST cess on midsize sedans, SUVs & luxury cars hiked

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I used nothing but public transport in the first 22 years of my life. So I am not exactly unfamiliar with it.

This is where we need to go. But it takes time because our country is so corrupt. They tax the cars, but little of it goes to building mass transit.

Uber/Ola concept is very flawed, that is why governments all over are cracking down. The companies are making money by exploiting the drivers.
I have also used public transport in my school and college days, i see you are based in Bangalore where the bus service is much better than cities like Delhi and Gurgaon. In Gurgaon it does not exist, but would you travel in an auto in Bangalore happily? with the given weather of Bangalore i would prefer to travel in an auto but again its not a viable option. I was quoting my example from experience in Gurgaon - no buses (forget AC buses in summers), Autos do not even have a meter!

My point regarding ola/uber was not about drivers but about how are government does not have a foresight for possible problems it can raise. I remember when Ola/Uber went on strike i used to reach my office in half the time of what i take usually.

Well i am no economist but Indian govt. should learn from Singapore, toughen and make cars super expensive but then Public transport should be made as good before it is implemented. The problem is they are trying to make everyone happy especially the people who are not even adding to the GDP growth.
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