The editorial is very right in saying that by offering sops alone investors will not return to market.The market has been volatile since September 2008 when the financial meltdown began and continued without any sign of recovery.Even now the world economy is in a mess and the chances for an early recovery are remote.STT is non-inflationary in character and it is difficult to pass on to others and hence the grievance from investors and brokers.In fact,Govt should modify STT and should be made different for purchases and sales,retailers and whole salers,brokers and traders,FIIs and domestic institutions etc.STT can emerge as an important regulatory tool and it should contiue.Stamp duty rationalisation is overdue and needs to be expedited.The confidence in market needs a boost and for that the GOVT and SEBI should put on some coordinated efforts.The Govt has to ensure that its fiscal deficit will be contained through improved administration and policy initiatives followed by actions.
from: T.V.Gopalakrishnan.
(This appeared in the Hindu-business Line Dt 30/09/11).
Friday, September 30, 2011
Wednesday, September 28, 2011
Talk of taxing the rich at last.
Dr.T.V.Gopalakrishnan (Fort Worth, Tx)
At last Mr Chidambaram is talking sense.All over the world the move is to tax the richest and wealthiest people to take the economy out of the woods and in India the Govt thinks of abolishing the Security Transaction Tax which is paid basically by people who enjoy excess funds and speculate in the market out of greed and make more wealth. The rich who invest in markets earns dividend in crores of Rs do not pay any tax. They are not affected by inflation as they have both black money and white money to exploit the economy in all possible ways. They trade in commodities like gold and silver and that too using cash. They also trade in real estate like stocks and escape all forms of taxes. The limit for wealth tax has been substantially hiked and many do not pay wealth tax. The economy expects to fill its kitty by direct and indirect taxes making the life of common man miserable. It is time to have an asessment of the gap between the rich and poor over the last two decades in particular and evaluate the performance of the Govt. Rich has become richer and the poor has become poorer. The rate of growth of wealth has been exhorbitant and the black money generation is at its peak. The economy after the reforms has done well but the benefits have gone to the well off of the society is a fact to be recognised.The laws favour the wealthy and they rule the economy. Earlier the Govt realises the folly, the better for the Govt and the people.The FM needs a change of his mindset to act.
(This appeared in ET dated 28/09/11).
At last Mr Chidambaram is talking sense.All over the world the move is to tax the richest and wealthiest people to take the economy out of the woods and in India the Govt thinks of abolishing the Security Transaction Tax which is paid basically by people who enjoy excess funds and speculate in the market out of greed and make more wealth. The rich who invest in markets earns dividend in crores of Rs do not pay any tax. They are not affected by inflation as they have both black money and white money to exploit the economy in all possible ways. They trade in commodities like gold and silver and that too using cash. They also trade in real estate like stocks and escape all forms of taxes. The limit for wealth tax has been substantially hiked and many do not pay wealth tax. The economy expects to fill its kitty by direct and indirect taxes making the life of common man miserable. It is time to have an asessment of the gap between the rich and poor over the last two decades in particular and evaluate the performance of the Govt. Rich has become richer and the poor has become poorer. The rate of growth of wealth has been exhorbitant and the black money generation is at its peak. The economy after the reforms has done well but the benefits have gone to the well off of the society is a fact to be recognised.The laws favour the wealthy and they rule the economy. Earlier the Govt realises the folly, the better for the Govt and the people.The FM needs a change of his mindset to act.
(This appeared in ET dated 28/09/11).
Tuesday, September 27, 2011
Poverty, Statistics, Politics and the common man
The editorial Poverty of Statistics is very apt. The Planning Commission's submission to the Supreme Court that a person who earns Rs 32( not 31 as indicated ) in urban area and Rs 27 in rural area should be treated above poverty line only reflects poor understanding of the poverty, or of the value of the rupee, or the inflation level prevailing in the economy, or the credibility of data by its Members. It also reflects poorly, the concern that the Members have for the people particularly the poor.It is okay if these poor people have access to some canteens maintained by the Govt and the food is made available at these rates.It is time to admit that there is no accuracy of data with regard to the poor people and the method of arriving at the poverty level has no consensus. The amount of subsidies and various poverty linked programmes do not benefit the poor are common knowledge. The UID is the only hope left now and hope some lasting solution to remove poverty will be found soon.
Dr.T.V.Gopalakrishnan.
(This appeared in The Hindu-Business Line Dt 27/09/11).
Wrong Approach of the Finance Minstry to abolish STT
The proposal to cut STT and rationalise stamp duty to give a boost to the sagging stock market is welcome. The STT introdoced in 2004-05 budget has several benefits and can emerge as a leveller of the marketfluctuations and a source of recurring revenue to the exchequer without any inflationary implications. The revenue earned through STT at Rs 2223 crores this fiscal may appear less and lower than the expectations, this can be attributed to the volatility seen in the market due to the poor performance of the domestic and international economy.STT can be used as a tool to contain volatility and excessive speculation.STT should be different for purchase and sales,individuals and institutions,various cut off limits,equtuity and bonds,Govt securities of different maturities, Gold and silver,Forex etc.It should emerge as an administrative tool to regulate the various markets in Financial System, replace capital gains tax over a period.The need to retain STT is essential but with changes.
Dr.T.V.Gopalakrishnan
( This appeared in The Hindu-Business Line on 27/09/11).
Dr.T.V.Gopalakrishnan
( This appeared in The Hindu-Business Line on 27/09/11).
Abolition of Security Transaction Tax -A blunder
The move of the capital market division of the Finance Ministry to abolish the STT is not in the interests of the economy. This tax introduced through 2004 budget has been fetching easy revenue, non inflationary in caharacter and sparing the aam aadmi. It is basically affecting those who with their surplus income enter the capital market with a basic motive to save and speculate.Investors and brokers cannot ever favour such tax as their greed and clamour to curry favour from the Govt for all concessions and reliefs at any cost have always been considered, heard and adhered to. In case the Govt yields to this demand and abolish the tax the loss is substantial and it will be difficult to reintroduce at a later date. This tax needs to be reformed to emerge as an important administartive tool to regulate the capital market from the angle of controlling excessive speculation, volatility, raising recurring revenue without any inflationary implications, removing all other taxes like stamp duty, capital gains etc. The approach to abolish STT is only shortsightness and the Govt will repent later on. This levy needs to be made more dynamic and should vary from transactions to transactions.This tax should be different for retailers and whole salers based on certain cut-off limits,for individuals and institutions,for FIIs and domestic investors, equty, bonds and commodities, forex,etc. This will eventually lead to have a track of events in Financial market.
Dr.T.V.Gopalakrishnan
(This appeared in Et dated 27/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in Et dated 27/09/11).
Friday, September 23, 2011
Gold Reserves to the rescue of world economic crisis
The Gold price has been on the increase for the past several years and the demand for gold got an unprecedented boost since September2008when the financial crisis erupted in US.Gold became attractive as an investment avenue and storage medium from the angle of safety,liquidity and profitability.The Central banks of the world started purchasing Gold for Reserve purposes which resulted in steep increase of gold prices.Investors who speculate in commodities found an opportunity to make easy money and accummulation of wealth started purchasing gold ignoring the prices and gave a boost to gold market.Developing countries particularly India, where inflation is persisting at high level and black money circulation is very high,found gold as a best hedge against inflation and store of value.India alone imports gold on an average1000 tonnes per annum wasting the precious foreign exchange.Now the economic crisis is becoming a reality and US,Europe and other economies are finding it difficult to survive the crisis creating a panic situation.It is time for the leading institutions like world bank,IMF and central banks of advanced and developing nations to turn to Gold reserves and arrive at a solution to resolve the crisis.The World leaders have to cooperate and find some workable solution to convert gold into productive assets and rescue the badly affected economies.Globalisation integrates economies and Gold Reserves should facilitate it and resolve the economic crisis. Will it happen?
Dr.T.V.Gopalakrishnan
Dr.T.V.Gopalakrishnan
Rich and Poor A Paradoxical Situation in India
My response to the editorial"Teach people to Fish" appeared in ET dated 22/09/11.
The link is here
Your editorial Teach people to Fish is thought Provoking and commendable.The planning Commission's affidavit to Supreme Court that any one with a monthly expenditure of Rs 965 in urban area and Rs 781 in rural area would be deemed not poor is an indication that the members of Planning Commission are totally unaware of the ground realities as to how much Rs 965 and Rs 781 can fetch in the market taking into consideration the fall in the value of Rs and rise in the value of products. In urban areas,water costs Rs 15 a bottle,milk costs Rs25-30 a litre, fuel costs Rs 375 a cylinder and the lists go on. Rs 965 a month at best can help a person to live for 15 days and starve for the next 15 days.This sort of definition of poverty level only reflects the poor understanding of the market realities and the actual living conditions of the masses.This lack of knowledge reflects poorly in all policy formulation.The number and conditions of people below poverty level have not changed for past six decades after independence. It is time to acknowledge the naked truth that Rs 32 a day can fetch nothing in the present day inflationary situation and this awakening is needed among the policy makers that economic policies so far pursued have miserably failed and widened the gap between the rich and the poor. The fact that dividend earned in crores of Rs is tax free,wage of Rs 32 earned through hard physical labour is above poverty level is a paradox and the Govt is answerable for that.
Dr.T.V.Gopalakrishnan
The link is here
Your editorial Teach people to Fish is thought Provoking and commendable.The planning Commission's affidavit to Supreme Court that any one with a monthly expenditure of Rs 965 in urban area and Rs 781 in rural area would be deemed not poor is an indication that the members of Planning Commission are totally unaware of the ground realities as to how much Rs 965 and Rs 781 can fetch in the market taking into consideration the fall in the value of Rs and rise in the value of products. In urban areas,water costs Rs 15 a bottle,milk costs Rs25-30 a litre, fuel costs Rs 375 a cylinder and the lists go on. Rs 965 a month at best can help a person to live for 15 days and starve for the next 15 days.This sort of definition of poverty level only reflects the poor understanding of the market realities and the actual living conditions of the masses.This lack of knowledge reflects poorly in all policy formulation.The number and conditions of people below poverty level have not changed for past six decades after independence. It is time to acknowledge the naked truth that Rs 32 a day can fetch nothing in the present day inflationary situation and this awakening is needed among the policy makers that economic policies so far pursued have miserably failed and widened the gap between the rich and the poor. The fact that dividend earned in crores of Rs is tax free,wage of Rs 32 earned through hard physical labour is above poverty level is a paradox and the Govt is answerable for that.
Dr.T.V.Gopalakrishnan
Thursday, September 22, 2011
MNCs and Labour Unions in India
The following is my comment on the article"MNCs cannot wish away union"
appeared in The Hindu Business Line Dated 22/09/11.
The write up justifies the need for recognising workers right to unionise and fight for their just rights by MNCs. The exploitation of workers has been going on for years and taking labourers on contract basis without any welfare or terminal benefits has been the order of the day. No doubt, making the workers to discharge their duties and responsibilities is sine qua non for any economy to register growth, it is also equally the responsibility and duty of the employers to see that workers are not exploited to satisfy their greed to amass wealth. The reforms in Labour laws are long overdue and it is the ideal time for the Government to take all the Unions into confidence to initaite and finalise meaningful laws to ensure smooth functioning of companies without any sort of exploitation of workers. They have to be compensated for their labour and militancy should never be tolerated. Politicisation of unions should be avoided and reforms of laws need to reflect this strongly.
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 22/09/11)
appeared in The Hindu Business Line Dated 22/09/11.
The write up justifies the need for recognising workers right to unionise and fight for their just rights by MNCs. The exploitation of workers has been going on for years and taking labourers on contract basis without any welfare or terminal benefits has been the order of the day. No doubt, making the workers to discharge their duties and responsibilities is sine qua non for any economy to register growth, it is also equally the responsibility and duty of the employers to see that workers are not exploited to satisfy their greed to amass wealth. The reforms in Labour laws are long overdue and it is the ideal time for the Government to take all the Unions into confidence to initaite and finalise meaningful laws to ensure smooth functioning of companies without any sort of exploitation of workers. They have to be compensated for their labour and militancy should never be tolerated. Politicisation of unions should be avoided and reforms of laws need to reflect this strongly.
Dr.T.V.Gopalakrishnan
(This appeared in The Hindu Business Line E paper dated 22/09/11)
Wednesday, September 21, 2011
RBI 's lone role to contain inflation
My comment on the article "RBI Governor: The loneliest job in India" appeared in ET dated 21/09/11. The link is here
The author is right in saying that the Governor's job is the loneliest. The Reserve Bank has raised the interest rates 12 times Since March 2010 to combat inflation without success.Had the Reserve Bank not hiked the rates, perhaps,inflation would have been much higher and done more damage to the economy is a fact to be acknowledged both by the Industrialists and the Government.The Govt cannot claim to have taken any fiscal or administrative measures to support the monetary measures to contain inflation which is driven by excess demand,supply constarints and external factors where the Reserve Bank has very limited control.On the contrary, the prices of petroleum products have been hiked several times though warranted,challenging the monetary measures and creating diffidence in the whole management of the economy keeping at heart the welfare of aam admi.The Govt had several other issues other than managing the economy during the last several months and the the issue of containing inflation became the solitary responsibility of the Reserve Bank.
Speculation in commodities particularly gold and silver has been at its peak and the black money generation in these transactions has always been the rule rather than an exception.Corruption, black money, maladministration in the procurement, processing,storage, transportation,distribution, export and import of commodities which affect the supply and demand where RBI has absolutely no say have an inflationary impact and the Govt can play an effective and supportive role to bring down prices. Agricultural credit has been on the decline for the past several years and it needs to be tackled to improve agricultural productivity and marketing of the agricultural products. Here Central Govt, State Govts and NABARD can contribute a lot leaving RBI.Industrialists have a tendency to clamour for more from the Govt and Banks and this time they find RBIthe scapegoat for their failure.It is time they realiseit.
Dr.T.V.Gopalakrishnan
The author is right in saying that the Governor's job is the loneliest. The Reserve Bank has raised the interest rates 12 times Since March 2010 to combat inflation without success.Had the Reserve Bank not hiked the rates, perhaps,inflation would have been much higher and done more damage to the economy is a fact to be acknowledged both by the Industrialists and the Government.The Govt cannot claim to have taken any fiscal or administrative measures to support the monetary measures to contain inflation which is driven by excess demand,supply constarints and external factors where the Reserve Bank has very limited control.On the contrary, the prices of petroleum products have been hiked several times though warranted,challenging the monetary measures and creating diffidence in the whole management of the economy keeping at heart the welfare of aam admi.The Govt had several other issues other than managing the economy during the last several months and the the issue of containing inflation became the solitary responsibility of the Reserve Bank.
Speculation in commodities particularly gold and silver has been at its peak and the black money generation in these transactions has always been the rule rather than an exception.Corruption, black money, maladministration in the procurement, processing,storage, transportation,distribution, export and import of commodities which affect the supply and demand where RBI has absolutely no say have an inflationary impact and the Govt can play an effective and supportive role to bring down prices. Agricultural credit has been on the decline for the past several years and it needs to be tackled to improve agricultural productivity and marketing of the agricultural products. Here Central Govt, State Govts and NABARD can contribute a lot leaving RBI.Industrialists have a tendency to clamour for more from the Govt and Banks and this time they find RBIthe scapegoat for their failure.It is time they realiseit.
Dr.T.V.Gopalakrishnan
Federal reserve's Stimulus to revive the US economy
FOMC meet: Is Federal Reserve running out of options to boost slumping US economy?
The following is my comment on this issue.
The monetary policy in the long run should encourage savings and investments and the stimulus it provides to banks should result in investment out of savings. The policy should aim at to take the banks out of the mortgage mess and for that a Fed Reserve can think of some innovative ways to attract idle funds lying in the economy to banks through some incentives. Banks should offer better rate of interest on savings and credit off take by individuals for consumption purposes needs to be drastically curbed. Consumption should come out of savings and credit combined or out of savings only. It may take some time for the economy to achieve this,but the result will be worh the waiting. Too many products and too much of capital market investments need to be closely monitored. Safety of funds should get priority over profitability and Risk taking and Fed Reserve's policies should be aiming at this. Production oriented investments of banks should be encouraged for job creation in the economy.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated21/09/11)
The following is my comment on this issue.
The monetary policy in the long run should encourage savings and investments and the stimulus it provides to banks should result in investment out of savings. The policy should aim at to take the banks out of the mortgage mess and for that a Fed Reserve can think of some innovative ways to attract idle funds lying in the economy to banks through some incentives. Banks should offer better rate of interest on savings and credit off take by individuals for consumption purposes needs to be drastically curbed. Consumption should come out of savings and credit combined or out of savings only. It may take some time for the economy to achieve this,but the result will be worh the waiting. Too many products and too much of capital market investments need to be closely monitored. Safety of funds should get priority over profitability and Risk taking and Fed Reserve's policies should be aiming at this. Production oriented investments of banks should be encouraged for job creation in the economy.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated21/09/11)
Sunday, September 18, 2011
Petrol Politics, Inflation and Indian masses
This is in response to the write up on "For petrol, Indians shell out the most in the world". The link is here
The only explanation for high prices of oil in India is the total mismanagement of the economy and utter disregard for the concern of the people's suffering. It is a solid example that pricing in india is not based on any rationale.The tax,wastage, extravaganza of companies who deal in petroleum products, maldistribution and wrong method of transportation and excessive cost on tranportation will account for the mismanagement. Black money, corruption and other mal practices like adulteration also add to the cost to the ultimate consumer. Governance is literally absent and accountability is virtually missing. People are helpless and they silently suffer. This is one of the major reasons for continued persistence of high inflation and the Reserve Bank has its own limitations in such matters like pricing of essential consumable items having inflationary impact.
Dr.T.V.Gopalakrishnan
The only explanation for high prices of oil in India is the total mismanagement of the economy and utter disregard for the concern of the people's suffering. It is a solid example that pricing in india is not based on any rationale.The tax,wastage, extravaganza of companies who deal in petroleum products, maldistribution and wrong method of transportation and excessive cost on tranportation will account for the mismanagement. Black money, corruption and other mal practices like adulteration also add to the cost to the ultimate consumer. Governance is literally absent and accountability is virtually missing. People are helpless and they silently suffer. This is one of the major reasons for continued persistence of high inflation and the Reserve Bank has its own limitations in such matters like pricing of essential consumable items having inflationary impact.
Dr.T.V.Gopalakrishnan
Indians and Gold
This is in response to the article "Do we know something about gold the world doesn’t?" appeared in ET. The link is here
The author has not come out with any suggestion or new insights in the presentation. Indian economy cannot afford to import gold at the presnt inflated value of gold and unfavourable exchange rate. It is time the sentiments attached to gold gradually disappear and the holdings of gold in India get converted into productive assets. India is far behind in infrastructure and this needs to be developed to make it a vibrant and fast growing economy. The money lying in the form of gold needs to be converted into cash and put into use for infrastructure development.The Government should discourage investment in gold and import of gold to save both money and valuable foreign exchange. The craze seen of late,to speculate on gold price volatility needs to be nipped in the bud itself. The rush after gold is widening the inequallity between haves and havenots and it is not good in the long run for the society.The approach by the Govt should be1) To Set up a Gold Bank and see that all gold holdings which include institution's and family holdings are taken as deposits on payment of some interest 2)Convert the Gold into cash and put into productive use in the economy3)Discourage speculation in Gold 4) Ensure that gold imports are well regulated 5) Gold encourages black money hoardings in the economy and it is the responsibility of the Govt to see that Gold hoardings are tracked.6)Purchase and sale of Gold above a cut off limit to be tracked by insisting payments through cards, cheques and internet and indicating PAN numbers.7) Educate the public not to run after gold and bring discipline through dowry prevention regulations.
8) The income tax wealth tax and sales tax for gold needs to be reviewed and reformed.
It is time for investors to realise that gold does not enjoy an intrinsic value and internal rate of return. The Govt should carry out a survey to assess roughly the Gold holdings and take appropriate steps to put them into optimum use to develop the economy.
Dr.T.V.Gopalakrishnan
The author has not come out with any suggestion or new insights in the presentation. Indian economy cannot afford to import gold at the presnt inflated value of gold and unfavourable exchange rate. It is time the sentiments attached to gold gradually disappear and the holdings of gold in India get converted into productive assets. India is far behind in infrastructure and this needs to be developed to make it a vibrant and fast growing economy. The money lying in the form of gold needs to be converted into cash and put into use for infrastructure development.The Government should discourage investment in gold and import of gold to save both money and valuable foreign exchange. The craze seen of late,to speculate on gold price volatility needs to be nipped in the bud itself. The rush after gold is widening the inequallity between haves and havenots and it is not good in the long run for the society.The approach by the Govt should be1) To Set up a Gold Bank and see that all gold holdings which include institution's and family holdings are taken as deposits on payment of some interest 2)Convert the Gold into cash and put into productive use in the economy3)Discourage speculation in Gold 4) Ensure that gold imports are well regulated 5) Gold encourages black money hoardings in the economy and it is the responsibility of the Govt to see that Gold hoardings are tracked.6)Purchase and sale of Gold above a cut off limit to be tracked by insisting payments through cards, cheques and internet and indicating PAN numbers.7) Educate the public not to run after gold and bring discipline through dowry prevention regulations.
8) The income tax wealth tax and sales tax for gold needs to be reviewed and reformed.
It is time for investors to realise that gold does not enjoy an intrinsic value and internal rate of return. The Govt should carry out a survey to assess roughly the Gold holdings and take appropriate steps to put them into optimum use to develop the economy.
Dr.T.V.Gopalakrishnan
Saturday, September 17, 2011
Interest Rates and industrial growth
This comment in response to the Article "RBI right in sticking to its guns" appeared in The Hindu Businessline dated 17/09/11.
The author is right in the sense that the interest cost cannot be cited for the problems faced by the industrial sector.The credit off take is more than the expectations and the credit deposit ratio has been on the higher side indicating continuous demand for credit and banks are meeting them thanks to the liquid adjustment facility made available by the Reserve Bank.Industrialists by nature clamour for more facilities and concessions as they do not want to sacrifice a bit of profit though they have umpteen ways to cover up the small interest cost caused due to RBI's monetary policy. The inventory management and luxurious style of living by our corporates' bigwigs add to the cost of production and it is time special measures are taken to avoid excess inventory, avoidable waste and introduce austirity measures in the over all expenditures of the company. The accountability of auditors has been virtually absent in our corportae accounting practices and this needs to be reviewed.
Dr.T.V.Gopalakrishnan
The author is right in the sense that the interest cost cannot be cited for the problems faced by the industrial sector.The credit off take is more than the expectations and the credit deposit ratio has been on the higher side indicating continuous demand for credit and banks are meeting them thanks to the liquid adjustment facility made available by the Reserve Bank.Industrialists by nature clamour for more facilities and concessions as they do not want to sacrifice a bit of profit though they have umpteen ways to cover up the small interest cost caused due to RBI's monetary policy. The inventory management and luxurious style of living by our corporates' bigwigs add to the cost of production and it is time special measures are taken to avoid excess inventory, avoidable waste and introduce austirity measures in the over all expenditures of the company. The accountability of auditors has been virtually absent in our corportae accounting practices and this needs to be reviewed.
Dr.T.V.Gopalakrishnan
Thursday, September 15, 2011
Dividend and Income Tax.
Link to the article in ET is here.
It is time dividend earned beyond a cut off limit of Rs 1 crore and above should be brought under Income Tax net. A salary income of Rs 1.80 lakh is taxed. Out of this income, the person has to maintain family, take care of medical expenses, education of children and all sorts of expenses which include bribing to get small things done. It is difficult to understand Indian Taxation policy. Those who earn very high income beyond the imagination of ordinary people silently enjoy and talk of morals and ethics. politicians and bureacrtas who make unaccounted money enjoy life at others cost and advise people to lead a simple life with high thinking. They also liberally quote Bhagavat geetha, Ramayana and Gandhian thoughts for people to follow. It is time for industrialists to voluntarily contribute for common peoples' welfare as the money they earn by way of dividend is in a way public money. Make education free as far as possible and see that common people do not struggle to lead a life having atleast two time ordinary meals. With inflation ruling high, poor people have no means to survive.There is no moral, economic and social justification to exempt dividend from Income Tax under the name of double taxation. Taxation policy and the implementation of the policy have done maximum damage to our economy and the people. Will the authorities have the conscience to compare the tax and income of the Rich and the Ordinary taking into account the inflation factor and the living standards?
It is time dividend earned beyond a cut off limit of Rs 1 crore and above should be brought under Income Tax net. A salary income of Rs 1.80 lakh is taxed. Out of this income, the person has to maintain family, take care of medical expenses, education of children and all sorts of expenses which include bribing to get small things done. It is difficult to understand Indian Taxation policy. Those who earn very high income beyond the imagination of ordinary people silently enjoy and talk of morals and ethics. politicians and bureacrtas who make unaccounted money enjoy life at others cost and advise people to lead a simple life with high thinking. They also liberally quote Bhagavat geetha, Ramayana and Gandhian thoughts for people to follow. It is time for industrialists to voluntarily contribute for common peoples' welfare as the money they earn by way of dividend is in a way public money. Make education free as far as possible and see that common people do not struggle to lead a life having atleast two time ordinary meals. With inflation ruling high, poor people have no means to survive.There is no moral, economic and social justification to exempt dividend from Income Tax under the name of double taxation. Taxation policy and the implementation of the policy have done maximum damage to our economy and the people. Will the authorities have the conscience to compare the tax and income of the Rich and the Ordinary taking into account the inflation factor and the living standards?
Tuesday, September 13, 2011
IMF and World Economic Stability
Dr.T.V.Gopalakrishnan (Fort worth, Texas)
13 Sep, 2011 10:51 PM
It is good to hear that IMF has proposed a set of tools financial regulators could use to detect buildup of risks that can lead to financial crisis. The IMF being an international institution set up exclusively to help its members to come out of forex and balance of payment crisis and bring in some sort of economic stability world over has a major role to play to help resolve the European and U S economic crisis. It is time IMF comes out with an innovative approach taking the support of all member countries and its own gold and other reseves to come to the rescue of US economy in particular in finding a solution for its debt crisis. The economic scenario under globalisation and integration of world economies has undergone a sea change and it is time for IMF to review its own role in the changed scenario and work towards world economic stability using its command over the entire world. The role of gold reserves in ensuring world economic stability needs to be defined and IMF which has huge reserves of Gold should be in a position to bring the much needed economic stability through out the world by converting gold into productive assets and help the nations to work as per its directives till some semblence of economic order is achieved.Time has arrived for IMF to emerge as a world leader institution to look forward to by all member countries including advanced economies.Gold Reserves of various central banks of the world also needs to be put into productive use.
(This appeared in ET E Paper dated 13/09/11).
13 Sep, 2011 10:51 PM
It is good to hear that IMF has proposed a set of tools financial regulators could use to detect buildup of risks that can lead to financial crisis. The IMF being an international institution set up exclusively to help its members to come out of forex and balance of payment crisis and bring in some sort of economic stability world over has a major role to play to help resolve the European and U S economic crisis. It is time IMF comes out with an innovative approach taking the support of all member countries and its own gold and other reseves to come to the rescue of US economy in particular in finding a solution for its debt crisis. The economic scenario under globalisation and integration of world economies has undergone a sea change and it is time for IMF to review its own role in the changed scenario and work towards world economic stability using its command over the entire world. The role of gold reserves in ensuring world economic stability needs to be defined and IMF which has huge reserves of Gold should be in a position to bring the much needed economic stability through out the world by converting gold into productive assets and help the nations to work as per its directives till some semblence of economic order is achieved.Time has arrived for IMF to emerge as a world leader institution to look forward to by all member countries including advanced economies.Gold Reserves of various central banks of the world also needs to be put into productive use.
(This appeared in ET E Paper dated 13/09/11).
Sunday, September 11, 2011
Import of Gold and Import Duty
Dr.T.V.Gopalakrishnan , Fortworth, Texas , says:
Investments in gold take away the capital intended for productive use. Further, it has become a speculative habit even among middle class to invest in gold thus taking away the savings of the economy for economic development. If there is some arrangement to covert gold into productive asset by some means like setting up a gold bank and converting hold hoardings into cash, there is no harm in permitting gold imports. Higher import duties should not, however, result in smuggling of gold and generation of black money. In india administration is a weak area and prone to corruption and hence higher import duties should not lead to such undesirable practices.
(This appeared in ET E Paper Dt 6 Sep 2011, 2247 hrs IST).
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Investments in gold take away the capital intended for productive use. Further, it has become a speculative habit even among middle class to invest in gold thus taking away the savings of the economy for economic development. If there is some arrangement to covert gold into productive asset by some means like setting up a gold bank and converting hold hoardings into cash, there is no harm in permitting gold imports. Higher import duties should not, however, result in smuggling of gold and generation of black money. In india administration is a weak area and prone to corruption and hence higher import duties should not lead to such undesirable practices.
(This appeared in ET E Paper Dt 6 Sep 2011, 2247 hrs IST).
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Should the Indian government have a sovereign wealth fund to invest overseas?
Dr.T.V.Gopalakrishnan , Fort Worth, Texas , says:
India's present economic status does not permit for such luxuries. India has to make its economy strong in terms of improved GDP,percapita income,inflation and standard of living for its people. Charity begins at home and India should not venture for such adventures at least for another decade.Overseas markets are also not very conducive of late to attract investments. There are lots of uncertainities.Better to secure India's economy first and then think of entering overseas market. What is the source of Soverign wealth? Has India got the wealth?
(This appeared in ET E paper,9 Sep 2011, 1950 hrs IST)
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LATકો
India's present economic status does not permit for such luxuries. India has to make its economy strong in terms of improved GDP,percapita income,inflation and standard of living for its people. Charity begins at home and India should not venture for such adventures at least for another decade.Overseas markets are also not very conducive of late to attract investments. There are lots of uncertainities.Better to secure India's economy first and then think of entering overseas market. What is the source of Soverign wealth? Has India got the wealth?
(This appeared in ET E paper,9 Sep 2011, 1950 hrs IST)
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LATકો
Saturday, September 10, 2011
SLR, Fiscal Discipline and Banks
Gopalakrishnan (Fort Worth, Texas)
This refers to your editorial on SLR reduction and Govt's fiscal discipline. The reduction of SLR is ideal provided the banking system is otherwise sound and the Govt is prudent in its fiscal management. If reduction in SLR is permitted,the banks exposure to credit will expand and consequently, it will have to provide additional capital to meet the capital adequacy standards, provide more towards provision for bad debts and find good demand for credit expansion which is not there due to high interest rate, high inflation,lack of congenial atmosphere / comfort level for investment by the private sector etc. No doubt, the need for reduction in SLR is justifiable to discipline the Government's fiscal management and dependence on dependable bank finance, will it be possible in India taking into consideration poor professionalism in banking, compulsions to finance weaker sections of society, lack of discipline among borrowers to conduct their operations with banks and public money etc is a million dollar question ? How far RBI's autonomy if at all if it is there, can permit it to run the banking system the way it wants? is another issue to be debated in the matter.
( This appeared in ET E Paper dt 10/09/11)
This refers to your editorial on SLR reduction and Govt's fiscal discipline. The reduction of SLR is ideal provided the banking system is otherwise sound and the Govt is prudent in its fiscal management. If reduction in SLR is permitted,the banks exposure to credit will expand and consequently, it will have to provide additional capital to meet the capital adequacy standards, provide more towards provision for bad debts and find good demand for credit expansion which is not there due to high interest rate, high inflation,lack of congenial atmosphere / comfort level for investment by the private sector etc. No doubt, the need for reduction in SLR is justifiable to discipline the Government's fiscal management and dependence on dependable bank finance, will it be possible in India taking into consideration poor professionalism in banking, compulsions to finance weaker sections of society, lack of discipline among borrowers to conduct their operations with banks and public money etc is a million dollar question ? How far RBI's autonomy if at all if it is there, can permit it to run the banking system the way it wants? is another issue to be debated in the matter.
( This appeared in ET E Paper dt 10/09/11)
Friday, September 9, 2011
New Version of Loan Mela and the PSBs
The Govt's plans to dole out Rs 10000 to aam aadmi to boost rural economy through PSBs is nothing but replica of the 1980s loan melas and do not sound good economics or good politics. The banking system though financially sound thanks to Reserve Bank's regulation and supervision,but it is still under the Govt's direction is a curse.Particularly PSBs at this rate cannot be expected to be run on professional lines whether they come under RBI or not,as longs as Govt's interference is there. The system of financing agriculture is in a mess and the contribution of agriculture to the GDP is dwindling year after year. The presence of NABARD exclusively set up to develop rural and agricultural development is never felt and the RRBs, Local area banks and cooperative banks have equally failed to give a boost to the rural segment.Six decades of independence have not been beneficial to the rural masses is a stigma to our political system and economic management.Giving out doles like this to the poor only indicates that people can be fooled and they have not come out of their ignorance to have an independent thinking to assess our system of administration of the economy. This approach is nothing but an intelligent way of exploitation of the poor. This is another form of corruption perpetrated on the poor in our economy by the Government. It is time to change and see that real economic activities are introduced in our rural areas using the institutions set up with public money. Will the Govt act ?.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 10/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 10/09/11).
Obama's Package for Job creation in US
Obama's proposals merit consideration, but will the politicians' agree? is the major issue. The economic crisis in US is more of political making than anything else. It is unfortunate that the politicians even in most advanced nation like US are behaving like the politicians of undeveloped / underdeveloped economies. Politics spoils the best of intentions whether they come from Obama or someone else. Obama has universal welfare in his actions and thoughts but the politicians of US have their own greed for power, money and self interests. Nothing can be done in such circumstances.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 9/09/11).
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dated 9/09/11).
Wednesday, September 7, 2011
The Great US Bank Robbery
It is pathetic that tax payers money is liberally spent / wasted to save banks and bankers for their greed and mindless risk taking with investors money. This only reflects poorly on the regulatory system and the regulator's performance. The raw material to run banks is public money and banks should not be allowed either to face a run or run away with that money. There should be a built in mechanism in banks to save themselves from risks by creating a fund taking contributions from banks themselves from out of investment income, investment managers from their bonuses and regulators from their income earned from regulated entities. Making tax payers, depositors including retirees to bear the burden for someones' faulty investments out of greed is something beyond tolerance and there is no business ethics in that. The author is fully justified in his arguments that money invested to save banks should have gone for some productive investments to fetch better return.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt 7/09/11)
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt 7/09/11)
Obama to call for extended pay Roll tax
Along with tax cuts for employees and employers, it is desirable to introduce some tax incentives for savings.Economic security should precede social security and there should be some measures to aim for economic stability. The Government can think of creating a fund 'Economic Stabilisation Fund' by mobilising funds from all segments of the economy. There can be two parts for this fund ie Refundable and Non-refundable. The country has billionaires,millionaires, and large multi-national corporations with lots of wealth in the form of gold, real estates, huge reserves and cash balances. By providing some incentives , the Government should be in a position to attract a small portion of these resources either on a refundable or non-refundable basis. The economic recovery is in the interest of all and there should not be any hesitation to come forward to contribute. The Govt can also consider introducing some levies in the form of Speculation tax on large deals in forex, capital market, commodity market and others, greed tax on casinos and other gambling areas, luxury tax for owning and operating very high end cars more than two and aircrafts, extravaganza tax on consumption, entertainment, marriage, festivals etc. USA has all the resources, talent, expertise and skill and the present situation is only a temporary upset which can be easily overcome without much fuss. The political bickerings need to be kept aside and efforts should be made only on economic recovery.
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt/7/09/11
Dr.T.V.Gopalakrishnan
(This appeared in ET Epaper dt/7/09/11
Tuesday, September 6, 2011
CBI Action on illegal Mining
At last CBI has started acting and it should be welcomed by all right thinking citizens. The loot of the common property by any body and any where needs to be eliminated and the present action of CBI is an eye opener. This enhances the sagging image of CBI in the eyes of the public and they deserve all appreciation and support. This is what is expected of CBI and other law enforcing agencies in India. Such actions will prove to be deterent in containing illegal activities. The enforcement of the existing laws will itself go a long way in tackling corruption and black money in India. Will this trend continue or stop as usual with political influence and interference?
Dr.T.V.Gopalakrishnan
This appeared in ET E paper dt 6/9/2011
Dr.T.V.Gopalakrishnan
This appeared in ET E paper dt 6/9/2011
Probe into black Money by Income Tax Dept and ED
The probe by IT and ED into the black money is welcome and keenly watched by Indian masses as they have a big stake. The money if collected should be fully put into eradication of poverty and Government can take full credit for the black money recovery and its proper use. The modus operandi used to transfer and accummulate black money abroad needs to be studied in detaail and all the loopholes need to be plugged. Checks and balances should be in place to see that such instances do not recur anymore. The Government has to instill the confidence among public that it is back in action and it will not tolerate violation of laws of the land. This has been missing for decades in India and the economy has suffered and has been suffering.
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt06/09/ 2011
Dr.T.V.Gopalakrishnan
(This appeared in ET E paper dt06/09/ 2011
Sunday, September 4, 2011
The US economy -The way forward
The US economy - The way forward-some random thoughts.
The US economy is in a big mess. The GDP growth (less than 2 %) is not picking up as per expectations. Unemployment (9.1%) is increasing beyond expectations. The debt and deficit are going beyond the means. The rating has been lowered from AAA+. The attempts so far made to improve the economy which include two installments of Quantitative Easing of money have not made any tangible impact. On the contrary it has aggravated the problems. To make the matters worse, the other economies particularly Europe for some reason or other have not been doing well. The economic situation has created a politically tense situation. For the status of US, the present damage to its image, is something unimaginable and not digestible. The think tank of the economy is engaged in arriving at a solution acceptable to the political thinking and improving the economic status. Maintaining the social security without the real backing of the economic security is becoming a challenge. The talk of a double dip recession is going around adding fuel to fire. The situation is abnormal, demanding an abnormal solution. One possible way to come out of this rut is to think of an Economic Stabilisation Fund and use the resources mobilised for infrastructure development, expansion of research and technology, improving skills all around to fill up the existing gap between demand and supply of skilled workers, finding alternate resources particularly for oil and electricity where wastage and extravaganza are visible, educating the people to save and then go for consumption with the support of credit if needed backed by repaying capacity etc. The need for reducing the greed of many is an area where value education is also desirable in a big way.
How to mobilise the resources for the 'Economic Stabilisation Fund' in a fund starved economy is an issue to be tackled? This should not be a problem for this advanced and rich nation. The wealth spread over in the economy with individuals, institutions, multinational companies in the form of gold, shares, high value commodities, real estate or in any form needs to be assessed and the possibility of getting a small share either by way of refundable loans or non refundable contribution to revive the economy has to be explored.
Refundable Basis:
An insignificant percentage of profit or writing down huge reserves of multinational companies towards contributing to this fund with or without interest if necessary by providing a tax incentive can build up the fund fast.
Individuals, institutions, multinational corporates having huge cash reserves can transfer part of the funds to this Stabilisation Fund on refundable basis. They can be paid reasonable rate of interest.
Part of Pension, Provident Funds and other funds of similar nature can be diverted towards this fund instead of investing in capital markets. Reasonable rate of interest can be paid.
Contributions from super rich and wealthy people can be accepted towards this fund and to encourage such contributions some tax incentives can be considered.
Non refundable Basis :
Since the fund is meant for ensuring economic stability on an endurable basis , the Government can consider levying some surcharges or cess from those segments of the society who can really afford without any burden. The following type of levies can merit consideration:
Greed Tax: Those who indulge in heavy gambling and speculation can be made to pay a small percentage of their investment towards this fund. In case they earn on such investments, a separate tax on such income i.e. different from income tax can be levied at a higher rate than the normal income tax. The gambling centres like casinos can contribute a considerable sum from their profit towards this fund.
Turn over tax: Multinational Companies, corporates, dealers, traders, brokers etc whose turnover is more than a cut off limit say $1billion can contribute a very small percentage of 0.01 or even less towards this fund till such time economy recovers/stabilises and overall position becomes comfortable.
Deal/ Transaction tax: Every purchase and sale in all exchanges like commodities, stocks, securities, bullion, foreign exchange etc can be taxed at some lower rates. While purchase transaction can have a very low rate compared to a sale transaction as the latter is generally to make some profit and should attract a higher rate. Short sale transactions should attract a different rate altogether.
Wealth tax and Estate Duty: The economic stability is in the interest of all segments of the society, the expectation from very wealthy and super rich segment to come to the rescue of the economy is naturally high and there is every justification to charge a little extra tax on this category.
Extravaganza Tax:
The concept of expenditure tax particularly on large expenditures on marriages, festivals, parties, clubs etc above a cut off limit can be introduced and funds thus collected can be contributed towards this fund.
Luxury tax:
The tendency to go in for very high end cars and own aircrafts is very much prevalent in the society. This type of luxury can be brought under luxury tax till such time the economy recovers and there is full employment in the society. The objective is not to curb the freedom of luxury but to the timing of indulging in such luxuries when a large segment of people are unemployed /underemployed and the economy is struggling to meet the social safety standards.
The measures suggested can be considered in combination or in isolation.
The economic security should precede social security and from this angle, build up of economic security is sine qua non and should be on the top of the agenda of the Government. The country has everything at its command in terms of human talent, skill, expertise and natural resources and the present economic crisis is not something beyond its control. It has an able, competent, excellent, and committed leader in Mr Barack Obama who aspires the welfare of not only the US citizens but the whole universe and it is an opportune moment to show solidarity and back him with all support to take the economy out of the present predicament. The need of the hour is to regain the lost confidence and for that some extra ordinary measures like creation of Economic Stabilisation Fund should be able to take care of the problem.
Dr.T.V.Gopalakrishnan
Fortworth, Texas
The US economy is in a big mess. The GDP growth (less than 2 %) is not picking up as per expectations. Unemployment (9.1%) is increasing beyond expectations. The debt and deficit are going beyond the means. The rating has been lowered from AAA+. The attempts so far made to improve the economy which include two installments of Quantitative Easing of money have not made any tangible impact. On the contrary it has aggravated the problems. To make the matters worse, the other economies particularly Europe for some reason or other have not been doing well. The economic situation has created a politically tense situation. For the status of US, the present damage to its image, is something unimaginable and not digestible. The think tank of the economy is engaged in arriving at a solution acceptable to the political thinking and improving the economic status. Maintaining the social security without the real backing of the economic security is becoming a challenge. The talk of a double dip recession is going around adding fuel to fire. The situation is abnormal, demanding an abnormal solution. One possible way to come out of this rut is to think of an Economic Stabilisation Fund and use the resources mobilised for infrastructure development, expansion of research and technology, improving skills all around to fill up the existing gap between demand and supply of skilled workers, finding alternate resources particularly for oil and electricity where wastage and extravaganza are visible, educating the people to save and then go for consumption with the support of credit if needed backed by repaying capacity etc. The need for reducing the greed of many is an area where value education is also desirable in a big way.
How to mobilise the resources for the 'Economic Stabilisation Fund' in a fund starved economy is an issue to be tackled? This should not be a problem for this advanced and rich nation. The wealth spread over in the economy with individuals, institutions, multinational companies in the form of gold, shares, high value commodities, real estate or in any form needs to be assessed and the possibility of getting a small share either by way of refundable loans or non refundable contribution to revive the economy has to be explored.
Refundable Basis:
An insignificant percentage of profit or writing down huge reserves of multinational companies towards contributing to this fund with or without interest if necessary by providing a tax incentive can build up the fund fast.
Individuals, institutions, multinational corporates having huge cash reserves can transfer part of the funds to this Stabilisation Fund on refundable basis. They can be paid reasonable rate of interest.
Part of Pension, Provident Funds and other funds of similar nature can be diverted towards this fund instead of investing in capital markets. Reasonable rate of interest can be paid.
Contributions from super rich and wealthy people can be accepted towards this fund and to encourage such contributions some tax incentives can be considered.
Non refundable Basis :
Since the fund is meant for ensuring economic stability on an endurable basis , the Government can consider levying some surcharges or cess from those segments of the society who can really afford without any burden. The following type of levies can merit consideration:
Greed Tax: Those who indulge in heavy gambling and speculation can be made to pay a small percentage of their investment towards this fund. In case they earn on such investments, a separate tax on such income i.e. different from income tax can be levied at a higher rate than the normal income tax. The gambling centres like casinos can contribute a considerable sum from their profit towards this fund.
Turn over tax: Multinational Companies, corporates, dealers, traders, brokers etc whose turnover is more than a cut off limit say $1billion can contribute a very small percentage of 0.01 or even less towards this fund till such time economy recovers/stabilises and overall position becomes comfortable.
Deal/ Transaction tax: Every purchase and sale in all exchanges like commodities, stocks, securities, bullion, foreign exchange etc can be taxed at some lower rates. While purchase transaction can have a very low rate compared to a sale transaction as the latter is generally to make some profit and should attract a higher rate. Short sale transactions should attract a different rate altogether.
Wealth tax and Estate Duty: The economic stability is in the interest of all segments of the society, the expectation from very wealthy and super rich segment to come to the rescue of the economy is naturally high and there is every justification to charge a little extra tax on this category.
Extravaganza Tax:
The concept of expenditure tax particularly on large expenditures on marriages, festivals, parties, clubs etc above a cut off limit can be introduced and funds thus collected can be contributed towards this fund.
Luxury tax:
The tendency to go in for very high end cars and own aircrafts is very much prevalent in the society. This type of luxury can be brought under luxury tax till such time the economy recovers and there is full employment in the society. The objective is not to curb the freedom of luxury but to the timing of indulging in such luxuries when a large segment of people are unemployed /underemployed and the economy is struggling to meet the social safety standards.
The measures suggested can be considered in combination or in isolation.
The economic security should precede social security and from this angle, build up of economic security is sine qua non and should be on the top of the agenda of the Government. The country has everything at its command in terms of human talent, skill, expertise and natural resources and the present economic crisis is not something beyond its control. It has an able, competent, excellent, and committed leader in Mr Barack Obama who aspires the welfare of not only the US citizens but the whole universe and it is an opportune moment to show solidarity and back him with all support to take the economy out of the present predicament. The need of the hour is to regain the lost confidence and for that some extra ordinary measures like creation of Economic Stabilisation Fund should be able to take care of the problem.
Dr.T.V.Gopalakrishnan
Fortworth, Texas
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