[ashokrajagopal]

Originally Posted by imidnightmare

1. No. QE and lower taxes didn't land the US with Trump. If anything, Trump was brought in because policies stayed more "fiscally prudent" and "liberal" than they should have been.
2. Trump has actually been very good for the US economy. All jokes apart, and he is a despicable human being, he's actually benefited the US in terms of growth. His reign has seen higher economic growth than any recent terms. The lowest quarterly growth rate under him is 1% with most quarters breaching 2% and several breaching 2.5% and even 3%. For the US, that is tremendous.
3. More credit for productivity etc. are great in theory and in more developed and transparent economies. Won't work here.
4. Easy money does make people go for it. Proven fact. With the right checks in place, you avoid bubbles - but drive consumption. It's the only proven way to do so sustainably, specially in a situation like the one India faces right now.

Well, we can disagree on why Trump.
I dont have a contention that the US economy saw some growth, but the policies that brought that about is not what was followed previously with QE.
I do have a contention on how one can move from Easy money thru proven fact to avoid bubbles by driving consumption. Consumption could have slowed down because of so many factors and if uncertainty of future is one of them, bubbles are sure waiting to happen.

[Vipin Kumar]

There is a fundamental problem with the proposition that auto manufacturing industry (for that matter, many such industries) should be seen as one of the sites for ensuring growth and generating employment. The debate goes as if endless selling (customers buying more and more cars) of commodities like automobiles will be a solution. This is especially perplexing when, on the other hand, globally states struggle to fight all sorts of environmental hazards (from plastic to the enormously hazardous e-waste). The automobile sector has already re-configured and shrunk our space considerably. EVs and alternative fuels may temporarily offer respite to the crisis our environment faces these days, but EVs and alternative fuels will not definitely sort it for the shrinking space.

So, it will be a systematic transformation that we need, rather than some short-term gamble-solution to a crisis. Can we solve it with a solution emerging from the logic of a system that is also the cause of the crisis, we can wonder.

We are unable to imagine an alternative system of production in which we both enjoy life and drive an automobile from point A to point B (there should be a balance), in place of a system in which commodities consume us and automobiles driving us. Is it unimportant to keep our ecological commons intact?

An idea to reorient and consider social and service sectors for greater generation of employment and, therefore "growth" seems to be still quite far.

Where do our pressing environmental concerns match with steps like corporate tax cuts? One issue currently is this: where we debate economic slowdown, there is no mention of ecology; where we discuss ecology, there is no mention of economy. The reasoning in one is contradictory to the reasoning in the other. And still, surprisingly, both make our policy!

[aargee]

IMHO, this is more towards the attractions/benefits for foreign investments to be made in India. It's evident from Howdy Modi to do for the upcoming investments to be made in India at 22% tax versus China, that is likely to increase to 25% corp tax.

Either ways, corporate creates more jobs than salaried class & if corps expand or employ more, govt bites a big wet pie of tax no matter its direct or indirect, as long as they get a share.

Although I don't like it either, as long as some good measurements are taken to overcome the depression, its better to oversee any smaller hurdles for now

[Enobarbus]

Originally Posted by Vipin Kumar

We are unable to imagine an alternative system of production in which we both enjoy life and drive an automobile from point A to point B (there should be a balance), in place of a system in which commodities consume us and automobiles driving us. Is it unimportant to keep our ecological commons intact?

An idea to reorient and consider social and service sectors for greater generation of employment and, therefore "growth" seems to be still quite far.

Where do our pressing environmental concerns match with steps like corporate tax cuts? One issue currently is this: where we debate economic slowdown, there is no mention of ecology; where we discuss ecology, there is no mention of economy. The reasoning in one is contradictory to the reasoning in the other. And still, surprisingly, both make our policy!

Yes. Higher consumption leads to higher production and growth but is disastrous for the environment. Unfortunately we are stuck in a system in which reduction of consumption results in a large number of people loosing their jobs and suffering. For these people to make a simple living, others have to consume more and the rich have to make more money.
I guess we were doomed the day we invented currency and started trading value in abstract.

[ramzsys]

Originally Posted by Vipin Kumar

One issue currently is this: where we debate economic slowdown, there is no mention of ecology; where we discuss ecology, there is no mention of economy. The reasoning in one is contradictory to the reasoning in the other. And still, surprisingly, both make our policy!

We manufacture a mess; and then we create an industry to manage that mess. All of them create jobs for the growing population, and thus more consumption, and the GDP growth.

Consumption led growth might keep working for the west with lesser person/sq km; ample resources to make the mess and dump it later in the landfills; can India afford to?

We are selling a dream to the middle class- a 2 bhk, stuff to fill it, a car or two, a 2 wheeler. With a huge population comes huge market, all good in numbers but without the supporting infrastructure this translates to a pandemonium.

Engines that are capable of running lakhs of km start belching out blue smoke in 1-1.5 lakh km mileage while operating on these conditions which is another form of abuse of resources.

[Masda]

Originally Posted by Enobarbus

I think the government has not done enough to improve the purchase power of the consumer. The way I see it, this rate cut might help the corporate sector in the short term, but unless they sell more, they are still not out of the red.
And they can sell more only if the consumer can buy more.

I think the government is hoping to put the onus back on the manufacturers to sell more. The encrypted message is to use their now healthier bottom lines to push the sales up through discounts/freebies.

[arin_12]

A simple thing that I see is like that.
When OEM component manufacturer like (Tyre, Glass etc. ) pays less tax then the individual product cost goes down. That turns to whole product's price reduction.
Is this correct or am I missing some thing.

[alexpaul]

Originally Posted by arin_12

A simple thing that I see is like that.
When OEM component manufacturer like (Tyre, Glass etc. ) pays less tax then the individual product cost goes down. That turns to whole product's price reduction.
Is this correct or am I missing some thing.

I doubt that less taxation leads to reduction in cost of product. No manufacturer is saint and they are least interested in passing the reduction benefits to end user.
Infact post the reduction in tax rate , corporates will have more net profit after tax(NPAT) and thus increasing the cash in hand or wealth of investors primarily.

[srini1785]

This was only to tell the auto companies to stop firing people. There would have been understandings between the SIAM and Govt. Lay offs tend to create ruckus in parliament, dent the india growth story and is bad news for election bound states.

IMHO, Corporate tax reduction would not lead to any reduction in car prices. Its one part of the overall fiscal stimulus package that govt is giving to re start growth. The other suggestion of reducing personal IT would not also impact car sales. If you ask me, govt should slightly ease NBFCs lending norms which cater to auto loans. This runs the risk of increasing NPA's. However, a much lesser devil than absolute slowdown.

[m8002?]

Originally Posted by arin_12

A simple thing that I see is like that.
When OEM component manufacturer like (Tyre, Glass etc. ) pays less tax then the individual product cost goes down. That turns to whole product's price reduction.
Is this correct or am I missing some thing.

We cannot expect reduced price in cost when the reduction is in tax on the profit.

If ( in the 0.000001% chance ) govt. reduces personal tax, how would you like it if your employer reduces your CTC to match the take home? And pass on the savings to the customer?

[Mortis]

The government should take advantage of the US -China trade war and make conditions attractive for foreign companies to invest and set up manufacturing units. They are considering other countries like Thailand, Vietnam, Cambodia etc when we could have easily given them some support. We have enough skilled and semi skilled manpower to take on the task

[imidnightmare]

Originally Posted by Mortis

The government should take advantage of the US -China trade war and make conditions attractive for foreign companies to invest and set up manufacturing units. They are considering other countries like Thailand, Vietnam, Cambodia etc when we could have easily given them some support. We have enough skilled and semi skilled manpower to take on the task

To date, tax was a put-off. Even now though, we have several factors which make those countries more attractive:
1. Horrible, Leftist Labour laws
2. Poor IP protection
3. Poor quality of power and water supply in most parts of the country
4. Red tape

Unless we resolve the labour laws at least, we'll struggle. We desperately need more liberal and industry-friendly laws. I'm currently fighting 2 court cases on IP - and have learned the hard way that our laws are designed to screw industry and favour labour, regardless of the context.

[CarJunki]

Tax cut possibly will flow back as interest payments and making loan accounts current for some companies, for others it will act as little more available for reinvestment.
I doubt the amount of reinvestment.

Individuals will not get simplified tax rules, lower taxes or asset depreciation benefits. Reason? Tax payers are spread throughout the country hence not a single vote bank nor organized electoral funding activity.

Industry bodies are primarily there to show intent of funding to governments/powers to be ensuring the political class precisely knows cost of not listening.

[Vipin Kumar]

Originally Posted by ramzsys

We manufacture a mess; and then we create an industry to manage that mess. All of them create jobs for the growing population, and thus more consumption, and the GDP growth.

Consumption led growth might keep working for the west with lesser person/sq km; ample resources to make the mess and dump it later in the landfills; can India afford to?

We are selling a dream to the middle class- a 2 bhk, stuff to fill it, a car or two, a 2 wheeler. With a huge population comes huge market, all good in numbers but without the supporting infrastructure this translates to a pandemonium.

Absolutely. The present fire-fighting is all about managing the mess only.

It is like, since we have manufactured a mess, our efforts today seem to be to solve this mess by creating more of it. The present mess is that the mess is less.

We have competed among ourselves to bring in an economy that is fundamentally based on consumption (where individuals as consumers/customers are said to have got abundant feeling as empowered). Now, a problem caused by consumption is to be resolved by ensuring more consumption. Thus spake the policy!

Originally Posted by Enobarbus

Yes. Higher consumption leads to higher production and growth but is disastrous for the environment. Unfortunately we are stuck in a system in which reduction of consumption results in a large number of people loosing their jobs and suffering. For these people to make a simple living, others have to consume more and the rich have to make more money.

Once I had heard an argument from one person as I was walking with him outside a rich marriage pandal in Lucknow. The argument was that the extravagant marriage ceremonies ensure jobs for a lot of poor people, in catering, etc. He was basically saying that such extravaganzas are essential to our society for its own sustainability. He was surely endorsing the marriage show, without finding any problem in his logic.

This is really the unfortunate situation which we have managed to bring in at the large level of the country itself. We are stuck in it. You are right; ours is basically an approach that says that it is all between the rich and the poor--that the rich will take care of the poor by becoming more rich. We make policy decisions, then, to enable the rich to make more money, so that, by some unspecified and speculated extension, they can take care of the poor. Nothing to do directly for those who lose jobs, etc. Really no plans to reduce gaps and disparities when it comes to economics! We have zero plans to consider the situation and the people in a comprehensive fashion, in their entirety.

The point is that, by ushering in reforms, this situation is what we were enthusiastically welcoming, though within years we could read about what eventually happened to similar economic miracles such as Brazil and Mexico. Those tragedies were, however, less forceful to balance the fetish for the world of consumption.

[volkman10]

Corporate tax cut fail to build demand as companies have already rolled record high discounts to minimise the impact of higher ownership costs.

Tax cut offers very limited headroom of up to 2% for OEMs to cut vehicle prices, which, even if passedon to customers, is unlikely to trigger increased demand

Because, corporate tax cuts alone cannot build demand — or make cars sufficiently cheaper for customers to reach for their cheque books — despite EPS upgrades in the range of 6-12%. The jury is out on whether carmakers should cut prices further to lure back buyers.

For instance, the average blended discount of Maruti Suzuki reached ₹23,516 per vehicle for the September quarter(according to analysts’ estimates), compared with ₹16,941in the June quarter. Yet, sales have not fired on all cylinders, industry data showed, proving that lower prices alone would not stoke demand.

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