[vsrivatsa]

Originally Posted by OrangeCar

Point is - if taxes remain where they are, its a huge relief.

Agree with you completely - this is the main thing I checked and hoping they don't tax the already taxed even more. #AcheDin

[aniyo]

I have always had this question, Why does the government print money as a one time stimulus. I know this risks inflation or hyper inflation, but that generally happens when there is no production and high demand.
In our case we have lot of potential of production wherein businesses have invested in capacity and there is no demand either in service or manufacturing.

[Samurai]

Originally Posted by xway

So most people want reduction in taxes so that they get some thousands more over the lacs they earn. Another set want reduction in GST to boos buying cars, houses, tvs.

Government coffers are running out fast and may soon dry down completely.

I am very confused how you are interpreting the comments of others.

Our biggest problem right now is the velocity of money (transactions). It has significantly slowed, which has caused all the other problems. Even the labourers are walking thousands of kilometers with no food and shelter, because the velocity of money has slowed down.

The act of reducing direct and indirect taxes will increase the velocity of money by stimulating consumption. I don't know your background in economics, so I will give a simple example.

Take a car which has 29% tax rate. So a 4L ex-factory car will cost 5.16L ex-showroom. Same car with 15% tax will cost 4.6L ex-showroom. The demand curve is rather steep in that segment of cars. If 100 cars sell at 5.16L, dropping the price to 4.6L will sell 200 cars.

If 100 cars are sold at 29% GST, the government will get 116L in tax.
If 200 cars are sold at 15% GST, the government will get 120L in tax.

So the government can get more tax by reducing tax rates. Also, when you sell twice the number of cars, you need more workers to build cars, more workers at the workshops, more spare parts... it literally doubles the velocity of money in that ecosystem. This is how economy is stimulated.

Since you appear to imply government has done the right thing, please do educate us how this so called stimulus package will increase the velocity of money.

[ZenMaster]

If loosening the rope on giving out loans and allowing anybody with a business to get a loan is the government's great idea behind the so called "relief package"- aren't they doing the exact same thing the previous (UPA) govt. was accused by the current government of doing which led to the current banking Crisis and the rise of super star loan defaulters and NPAs?

This entire 20lakh crore labelling seems like the 80-90% "BONANZA" offers I see on e-commerce websites which many times offer no real value or difference in the end.

Please correct me if I'm wrong and if possible, shed light on how this will play out in the next 10 years.

Who is there to stop the next Mallya or Choksi from running away with the money or the shell companies that bankroll the political parties and the 1000 crore "BUYOUTS" of MLAs during the Indian political "Silly season"

As always the middle class and their dwindling savings will be the victims.

[sdp1975]

Reduction of PF from 12% to 10% likely to be a net loss for employees.

https://economictimes.indiatimes.com...w/75730688.cms

[srini1785]

Originally Posted by Samurai

Take a car which has 29% tax rate. So a 4L ex-factory car will cost 5.16L ex-showroom. Same car with 15% tax will cost 4.6L ex-showroom. The demand curve is rather steep in that segment of cars. If 100 cars sell at 5.16L, dropping the price to 4.6L will sell 200 cars.

If 100 cars are sold at 29% GST, the government will get 116L in tax.
If 200 cars are sold at 15% GST, the government will get 120L in tax.

So the government can get more tax by reducing tax rates. Also, when you sell twice the number of cars, you need more workers to build cars, more workers at the workshops, more spare parts... it literally doubles the velocity of money in that ecosystem. This is how economy is stimulated.

A questionable train of thought. It assumes that there are 200 people waiting to buy at 4.6L. Economic decisions cannot be based on conjectures.

[DigitalOne]

Shekhar Gupta's take on what he calls as Part -1 (of 5) of the stimuli. Per his words the first part was just concerning Liquidity. Land, Labour, Law, Infrastructure, Demand growth reforms are yet to be announced.

Made a lot of sense to me. Let's reserve our judgement for the entire package to be announced.

https://www.youtube.com/watch?v=FV-ZbtqmK80

[Samurai]

Originally Posted by srini1785

A questionable train of thought. It assumes that there are 200 people waiting to buy at 4.6L. Economic decisions cannot be based on conjectures.

You don't believe in demand curves? Economic planning is always based on demand and supply curves. Otherwise, how do you plan?

[saket77]

This is what happens when the Government runs the country as a business house. I’m highly disappointed by the announcements so far which actually don’t count too much if you start making a hisaab on paper. They have just ‘flattened the curve’ of their tax inflows at the most. There should have been a lot more for people in a more direct form. Doesn’t the government know that there is a huge number of private sector employees who don’t even have a PF? That there’s a big unorganised sector which generates employment? Agree that you cannot put money directly in everyone’s account but the capital gains tax on investments should have been struck down for a few years.
A lot of many other reason and that is why the stock marker which is considered as the barometer of the economy has responded negatively to this whose so called stimulus package.

[srini1785]

Originally Posted by Samurai

You don't believe in demand curves? Economic planning is always based on demand and supply curves. Otherwise, how do you plan?

Agreed. Demand and Supply curve is a general topic. My question was on how you came to the round figure of 200. You are again making the assumption that as taxes go down, the demand would increase. What if 4.6L is a figure that is still unreachable to the remaining 100 people.

Another perspective : What if the 100 that bought the car at 5.2L would have also bought it at say 5.9L. In that case Govt earns more at same tax slab.

Buying decision depends on the available income that a person wants to spend on a particular item and how comfortable he / she feels at spending that amount.

[srishiva]

Originally Posted by Samurai

Take a car which has 29% tax rate. So a 4L ex-factory car will cost 5.16L ex-showroom. Same car with 15% tax will cost 4.6L ex-showroom. The demand curve is rather steep in that segment of cars. If 100 cars sell at 5.16L, dropping the price to 4.6L will sell 200 cars.

If 100 cars are sold at 29% GST, the government will get 116L in tax.
If 200 cars are sold at 15% GST, the government will get 120L in tax.

Since you appear to imply government has done the right thing, please do educate us how this so called stimulus package will increase the velocity of money.

That assumes, the customer will buy cars ! With jobs in question, income itself in question (for non-salaried class), nothing is certain. My friends with startups are struggling with fixed cost charges still being there but income has come down.

This is not a normal low demand environment that we have. There is no certainty for anything.

I support your argument since there is no other means except helicopter cash money. Even that might not suffice since people will think twice except on essentials

[Samurai]

Originally Posted by srini1785

Demand and Supply curve is a general topic. My question was on how you came to the round figure of 200.

Round figures are easier to deal with when explaining a concept. I am surprised you are focusing on the number. It can be 167, instead of 200. Then the government will make 99L instead of 120. Then the government will be making sacrifice in tax intake to improve the velocity of money.

Originally Posted by srini1785

You are again making the assumption that as taxes go down, the demand would increase. What if 4.6L is a figure that is still unreachable to the remaining 100 people.

Are you saying the demand curve is wrong?

Nothing in Economic planning is accurate. Planning is based on data and we should be happy if it merely goes in the same direction, variations are accepted part of the equation.

Originally Posted by srini1785

Another perspective : What if the 100 that bought the car at 5.2L would have also bought it at say 5.9L. In that case Govt earns more at same tax slab.

That depends on the demand curve.

I really don't want to explain demand curves and how they shift and change, etc. That will be totally OT here.

[smooth indian]

Originally Posted by aniyo

I have always had this question, Why does the government print money as a one time stimulus. I know this risks inflation or hyper inflation, but that generally happens when there is no production and high demand.
In our case we have lot of potential of production wherein businesses have invested in capacity and there is no demand either in service or manufacturing.

I think demand was picking up until the crisis hit. Also isn't demand itself dependent on availability of cash?

[ashokrajagopal]

Originally Posted by Samurai

Are you saying the demand curve is wrong?

Nothing in Economic planning is accurate. Planning is based on data and we should be happy if it merely goes in the same direction, variations are accepted part of the equation.

That depends on the demand curve.

Well, you chose an example with a very weird price elasticity in India, so expect more comments from others too. Demand for cars usually depend on general mood, and they may be a wrong example. Best examples for Indian case would be everyday retail stuff, but we know they are also affected by this event. Looks like a lot of Economics will be rewritten.

[Miyata]

I have yet to absorb the implication of this "stimulus package," but what did occur to me was that the entire response would have been LOT different had we been closer to May 2024 instead of May 2020 - the great general elections would have had the entire leadership retinue falling over themselves to reach out to the farthest of corners with some REAL stimulus package to help both themselves and the citizens in distress.

Although questionable, no one would question the source of that stimulus, while its impact could be substantial. Money would have reached people in the hands, in their bank accounts, in the eWallets, and just about any other means (even impossible ones).

Wrong timing for the heartless nCov - should have just right shifted four years!