[PGA]

Why can't Govt just print some more money and add a bit more to deficit than to go about doing this big charade.

Fuel at present rates adversely impacts household savings which in turn impacts overall demand, it considerably reduces profitability of bulk fuel consumers, wonder what is in the mind of our qualified planners and administrators to let it follow a linear upward trajectory. Either a disconnect with ground reality or some super idea which mango people are unable to comprehend.

[Quoter]

Originally Posted by PGA

Why can't Govt just print some more money and add a bit more to deficit than to go about doing this big charade.

Printing money to fund deficit is not allowed under FRBM Act, 2003 except in cases of war, national emergency etc. But even if it were allowed by considering Covid to be a national emergency, printing money is a sure shot way to increase inflation, followed by higher fiscal deficit through public borrowing. Inflation is well known to impact the poorest the most and the richest the least.
On the other hand, taxes on fuel prices are more socialist in nature as they impact a private car owner the most, a two wheeler owner less and public transport user the least.

[lurker]

Originally Posted by Quoter

a two wheeler owner less and public transport user the least.

leads public transport undertaking/service provider to ruin as well as turns airline companies and truck operators into red.

Other than that all good.

[aaggoswami]

CNG kit is now roaming in my grey cells, guess it will also have long queues. Few states are not ready for GST on fuel may be because they are not ready to lose on revenue. Already states had loss of revenue when GST was implemented as GST is consumption based. So states needs whatever they can earn from fuel. With advent of EV, its very, very serious time for all of us to think as a nation about revenue loss from tax on fuel, that is the extent to which petrol and diesel are taxed. Despite work from home fatigue, I am becoming a fan of it due to fuel prices, driving is becoming very troublesome thanks to high traffic density coupled with lack of discipline and poor road conditions in my city.

[FrozeninTime]

Originally Posted by condor

On the other hand, defence spending is a dire necessity in the current global geo-political scenario. From what I hear from other sources, next couple of years will be critical and we can see some not comfortable times. What is going on are like under-currents that are not visible to us public, but the govt must be prepared for such situations.

Care to elaborate on these sources of yours. What situations are you talking about?
P.S Last decade has taught me one thing prices will go north and may touch RS 200/litre in a next few years as government has found an easy source of revenue. Better to accept this fate and move on.

[longhorn]

Originally Posted by condor

Some posts here are like the FM doesnt know finance or economy, ...

This is the fact. Who gives a supply side stimulus to a demand problem? No one in their right mind who understands macroeconomics would do this. Yet this is exactly what was done last year. Corporate tax was reduced by 5% to stimulate demand. Corporates are flush with money. They are not spending (building capacity) due to lack of demand. What good would a corporate tax reduction do in this scenario? Instead of putting money in the hands of the people (reduce taxes), more money was put in the hands of corporates. Hence the banking system was flush with money, leading to a drop in FD interest rates.

[condor]

Originally Posted by FrozeninTime

Care to elaborate on these sources of yours. What situations are you talking about?

War, for one. Covert or Overt. Military, Economic, Civil. India, and other places. Unrest, inside & outside.

Originally Posted by longhorn

This is the fact...

Which one of it is a fact ? That the FM knows or doesnt know ?

What I find hilarious is:
Required Data is with the government. They have the details, the view AND the kind of analysis that goes into using Big Data / Analytics is HUGE. And people sitting outside, far away from the govt, without any of this, commenting like they know the best, and the government is dumb nit-wit.

@Longhorn, not directed to you. I dont care which way you think.

One more point to all such people who criticize the government, esp on Fin & economy. I know many in my personal life too. If all these people were so good at fin & economy, then they should have been at least 1% of Warren Buffet or Rakesh Jhunjhunwala. If they have the knowledge, then what's stopping them from building a fin empire. Even a Jhunjhunwala or a Harshad started small. Why are such brilliant minds still where they are today ? Whether with a Honda Civic or a Jag - why not further ?

[carboy]

Originally Posted by condor

Required Data is with the government. They have the details, the view AND the kind of analysis that goes into using Big Data / Analytics is HUGE. And people sitting outside, far away from the govt, without any of this, commenting like they know the best, and the government is dumb nit-wit.

Doesn't all this hold good for most discussions common people have on any forum on most topics? I mean what is the point in discussing anything related to govt because govt has most data & they know best. So best to not discuss at all anything related to govt.

Forget govt, even when we discuss like strategies made by Tata Motors or Fiat or something, is there even a point to the discussion? I mean Tata Motors or Fiat have far more data about everything related to cars & the car market & the car market in India. So I guess we should just shut up & not pick on any decisions they make.

Why discuss team selection & on the field strategies in the cricket thread? I mean, the BCCI has all the data about which player is the best & they also have all the best minds to understand that data.

We will just use internet forums to link press releases published by the Govt, the Car companies & the BCCI & sit tight.

[condor]

Originally Posted by carboy

Doesn't all this hold good for most discussions common people have on any forum on most topics?

You are correct.

So imagine the amount of "discussion" all over, by people who dont have even 1% of relevant info. Just opinions being thrown around, and even those based on very little real data.

*******

Btw, this is the reason I stay away from such threads. Just happened to open this thread and my posts here. I am moving back to the other threads.

Have fun, guys.

[AZT]

Originally Posted by longhorn

This is the fact. Who gives a supply side stimulus to a demand problem? No one in their right mind who understands macroeconomics would do this. Yet this is exactly what was done last year. Corporate tax was reduced by 5% to stimulate demand. Corporates are flush with money. They are not spending (building capacity) due to lack of demand.

This is an underrated point. My friend is into FMCG manufacturing and told me he's running at 70 - 75% capacity. Debt is cheap but he has no incentive to do more Capex till he sees demand rising. GST collections are high because GST itself is high, no other reason.

[NaXal]

Every single refill seems be setting one new record after another.



Diesel is over Rs. 80/- per ltr in Kolkata. First time I guess & I don't think dead people like me can do anything even if it crosses 90-100 & beyond

Frustrating

[msdivy]

Originally Posted by pavi

We used to have strikes and what not when there was an increase in fuel prices even by 50 paise.

What is surprising is whenever there was a fuel price increase in the past, dependent services, however small their fuel expense was, increased their price. So fuel price increase was followed by bus ticket, rail ticket, air ticket price increase, auto, taxi fare increase, milk & other essential price increase and like such. The current Govt seems to have broken this link.

Originally Posted by carboy

I mean what is the point in discussing anything related to govt because govt has most data & they know best. So best to not discuss at all anything related to govt.

Isn't that true , just like Skoda knows their cars better than anyone and the service of their cars must be best.

Originally Posted by condor

They have the details, the view AND the kind of analysis that goes into using Big Data / Analytics is HUGE. And people sitting outside, far away from the govt, without any of this, commenting like they know the best, and the government is dumb nit-wit.

What if the Govt has a malicious intent? How will your belief in Govt help you in such cases?

[warrioraks]

Originally Posted by longhorn

This is the fact. Who gives a supply side stimulus to a demand problem? No one in their right mind who understands macroeconomics would do this. Yet this is exactly what was done last year. Corporate tax was reduced by 5% to stimulate demand. Corporates are flush with money.

+1. Quoting my comment from the economics thread on the FY22 budget. In short - Until government fixes the demand side, we seem to be heading towards a cliff.

I am not a student of economics but my 2 paise as the mango man:

- India cannot afford low growth-low inflation scenario considering millions are still living in poverty
- That does mean that the government will have to compromise somewhere to fuel growth (inflation, fiscal prudence, etc)
- Excess of anything is bad but it is hard to quantify what does ‘too-much’ mean when it comes to debt-gdp ratio and other similar parameters.
- One thing for sure, these supposedly bold measures from the budget are only one sided and will take our country towards instability if the other side is not fixed
- By that, what I mean is - announcements like creating bad banks, reinstating DFIs are done with an expectation that it fuel credit growth which will in turn lead to real-economy growth. The question is, will it really work in a scenario where we already have so much liquidity in the system and hardly anyone lining up to avail these loans?
- The issue that needs to be addressed is how can a congenial environment be created which encourages businesses to borrow money and invest for future. I seriously see that sentiment missing

[dark.knight]

Originally Posted by msdivy

What if the Govt has a malicous intent? How will your belief in Govt help you in such cases?

Stockholm syndrome is a worldwide phenomenon, it plays on people's minds that a organization such as government, which has so dutifully helped them survive with facilities such as water, power, security etc, can do no wrong ever, and that every move, howsoever dubious or malicious, has to have a reason for it in the interest of larger good. People also are selfish by nature (I don't blame them, survival of self and family comes first), so the demographic that has risen to the higher ranks of society by exploiting or leveraging government policies will very likely, support them to the hilt and not look at the many millions that have slipped through the cracks by such policies.

Stockholm syndrome is prevalent irrespective of political parties, their agenda or their religious inclinations (God, was after all, the first example of the syndrome).

Open your eyes and you can see that no government in the history of world since the time after monarchy, has ever or will ever work in the true interest of the people, and harking back to my statement of people being selfish, since the government is essentially, people, they too, work for their survival and nothing else.

The government wants your money, pay them for the sins of owning a car, cooking convenience via LPG, drinking water, using electricity etc, or else drive less, cook less and consume less and avoid the "unforgivable" sins in this pseudo-socialist-pseudo-capitalist diktat.

[Sanjunair5]

I think the bigger question is why is government having to tax fuel to hell? The problem is government's biggest source of revenue - GST - is struggling. Why is it struggling? Two reasons;
- Issues in the collection mechanism, both technology and processes that allow for leakages
- Slump is growth - if the economy was still booming, revenues would have been higher and government would have had more money to spend

In my pea brain, a more visionary or strategic approach that brings the economy back on track, to the 9-10% GDP growth trajectory is needed. Government is trying to do it by doubling down on Infra spending etc. But as others have pointed out, in that very same pea brain of mine I feel, addressing the demand side is more important than incentivizing supply side. Reducing corporate taxes was a bad move, it gives corporates money, but they wont spend if there is no demand.

Originally Posted by Quoter

A better question to ask might be - Where is the government spending it's tax revenue. Every revenue item is used for funding government expenses in some way or other. If not fuel, government has to raise taxes by either:
- Increasing income tax rate at same slabs (Big No in an inflation prone economy like ours)
- Increasing corporate tax (Can't do if you want to increase domestic manufacturing)
- Increase tax on luxury goods such as expensive cars, 5 star hotels etc. (Already so high that it is impeding consumption)
- Increase tax on sin goods such as cigarettes, alcohol etc. (Again, already so high that it is increasing smuggling)
- Bringing untaxed sectors such as agriculture in tax net (Not for a few decades)
- Increase import duties (Already done in the budget plus already high enough that it is going to impact our export competitiveness)
- Borrow even more from the market (Our fiscal deficit is already at very high levels that it might cause high inflation in another 12 months)

In fact the situation is such that wherever tax rate is increased, it is going to cause problems because it's so high everywhere. To make it sustainable, government has to start looking at reducing its expenditure, especially the recurrent expenditure such as wage bills, subsidies etc. since these provide only short term benefits vs capital expenditure such as roads and ports which give long term benefits. It's easier said than done though !!

PS: The agri cess on fuel will actually not change end consumer prices immediately though states might increase their share of taxes to compensate for revenue shortfall. This in itself may not be a bad solution as each state has different requirements. More rural states might want to reduce diesel prices while more urban states might want to tax diesel more.