The IIP was at 4.4% for the April-Mar2018 month.
This was the result of a long journey, as macro numbers usually are.
A couple of years ago, a need was felt to increase tax collections. There were 2 obvious ways to do it - 1. Increase the tax payers' base, and 2. Keep tax rates high or raise them further on at least some items.
Obviously, the most direct effect of that was on the middle class.
Here are the 2 things that the government did not prepare for:
1. Faced with a strange tax regime and the suspicion placed upon all high value purchases, the middle classes will pull their purse strings tight.
2. The sheer magnitude of the Indian middle class, and the butterfly effect action(1) above will have on the rest of the economy.
The squeeze was on the individual, but observe the Domino effect...
Everyone made small changes. Someone stopped eating out as often. Someone else postponed a big TV purchase. Someone stopped the tuition teacher. But the numbers of the Indian middle class are such that even one action by one household (and it was not as tiny as that) led to a huge overall impact.
How big is the Indian middle class? Find out for yourself:
https://www.economist.com/briefing/2018/01/11/indias-missing-middle-class
http://www.bbc.com/news/world-asia-india-41264072
https://www.livemint.com/Opinion/TvcFydQcN6KEFkvdW7BprM/Indias-burgeoning-middle-class.html
This was the result of a long journey, as macro numbers usually are.
A couple of years ago, a need was felt to increase tax collections. There were 2 obvious ways to do it - 1. Increase the tax payers' base, and 2. Keep tax rates high or raise them further on at least some items.
Obviously, the most direct effect of that was on the middle class.
Here are the 2 things that the government did not prepare for:
1. Faced with a strange tax regime and the suspicion placed upon all high value purchases, the middle classes will pull their purse strings tight.
2. The sheer magnitude of the Indian middle class, and the butterfly effect action(1) above will have on the rest of the economy.
The squeeze was on the individual, but observe the Domino effect...
 |
| The Domino Effect on the economy of squeezing the middle class under taxation |
Everyone made small changes. Someone stopped eating out as often. Someone else postponed a big TV purchase. Someone stopped the tuition teacher. But the numbers of the Indian middle class are such that even one action by one household (and it was not as tiny as that) led to a huge overall impact.
How big is the Indian middle class? Find out for yourself:
https://www.economist.com/briefing/2018/01/11/indias-missing-middle-class
http://www.bbc.com/news/world-asia-india-41264072
https://www.livemint.com/Opinion/TvcFydQcN6KEFkvdW7BprM/Indias-burgeoning-middle-class.html
2 comments:
well that's quite an apt demonstration! our governments are so foolish. I never understand why....
hope all is well in your neck of the woods,
love
kj
Hi Kj: Its always soo good to hear from you.
Yes, all is well here. But the economy isn't looking good anywhere in the world, so maybe something really big has failed all over the world.
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