Reviving The Indian Economy By Cloning Indira Gandhi Methods vs Obama’s Rescuing US Economy in 2008

Reviving The  Indian Economy By Cloning Indira Gandhi Methods vs Obama’s Rescuing US Economy in 2008

Rajiv Upadhyay

Recently the two of the most foolish ideas which were floated by Babus misruling the country and destroying its economy were

1. 50 IRS officers suggesting taxing super rich with income of one crore by increasing tax rates to 40% and levying covid cess of 4 % on income above Rs 10 lakhs .
2. Reducing the retirement age of government servant to fifty years and suspending DA payment .

The origin of black money in India goes back to days when the so called super rich were levied 90 % tax in Indira Gandhi days . They were so few of them in those days . Yet it was a token step to show government cared for the poor . It ignored completely what Lincoln once said i.e. you can not make poor rich by making the rich poor . It made tax evasion an honourable necessity . It took forty years before Dr.Manmohan Singh could bring sense in Indian economic thinking .

It was just like privy purse discontinuation of erstwhile  rulers of princely states thus dis honouring the pledge government made to rulers . We have the sad spectacle of Bahadurshah or Tipu Sultan or Rani Jhansi successors living the life in penury . Personally I would like Rani Jhansi or Bahadurshah Zafars great grand children not to be living the life in abject poverty as being done today . If we can give pension to MLA and MPs surely we can look after them .

But our IRS Babus have exposed their total ignorance of economics by floating this populist but dangerous idea which can destroy what ever is left in Indian economy. We have lost about ten thousand rich indusrialists because of persecution in last six years . Similarly isolating foreign companies for taxation will drive away FDI which we so critically need . Such ideas will only make things worse.

The second idea is equally dangerous .

It has possibly comes from some highly anti service class influential think tank of businessmen or shopkeepers dominating the current government . In last seven years government has discriminated against service class and made it consistently  poorer by denying them any tax rebate and yet imposing so many consumption based taxes on them .Denying them DA now while giving incentive to every one from  industry to  farmers to unorganized labour is to say least highly discriminatory . Service class has not contributed to Covid . The cost of fighting should be borne by the whole nation and not by service clas alone. Government has to reduce expenditure and increase deficit financing now as there is no likelihood of inflation . Taxes are not a priori at present as the problem is much bigger and needs out of box thinking not known to the shopkeepers lobby currently ruling the economic thinking . This lobby must assess why India has not been able to match even Vajpayee era growth rate much less of Manmohan era .

It is not that better alternatives do not exist . But knowledgeable and better thinkers are not available in ruling elite including the pseudo patriots of the shop keeper lobyy running the government .

An inspiring  alternative could be the way president Obama steered the US Economy post 2008 crisis . The Babus in the government should formulate bold and courageous policies for reviving the India economy . Shopkeepers should not be allowed to wreck economy by ill conceived steps like lowering retirement age .

An article on US handling of 2008 crisis is enclosed for reference .
How Barack Obama rescued the US economy – FT

https://www.ft.com/content/b5b764cc-d657-11e6-944b-e7eb37a6aa8e
Given the starting point, and congressional opposition, recovery has been remarkable

Martin Wolf

How should we assess the economic success or failure of Barack Obama’s presidency?This is a difficult question to answer. After all, the incumbent of the White House cannot determine the performance of the huge and complex US economy. Indeed, policy initiatives usually have a modest impact. But the story of Mr Obama’s presidency is a little different from the usual, since it began amid the worst financial crisis since the 1930s. If we consider the disaster he inherited and the determination of the Republicans in Congress to ensure he would fail, his record is clearly successful. This does not mean it is perfect. Nor does it mean the US confronts few economic challenges. Neither statement would be close to correct. Yet it does mean he has laid a strong foundation.The latest Economic Report of the President analyses the Obama record. It is also the brief for the defence. But Mr Obama’s Council of Economic Advisers does first-rate analysis. This report is no exception to that rule. The starting point must be with Mr Obama’s inheritance: the economy was in free fall in early 2009. As the report notes, perfectly correctly: “It is easy to forget how close the US economy came to an outright depression during the crisis. Indeed, by a number of macroeconomic measures . . . the first year of the Great Recession . . . saw larger declines than at the outset of the Great Depression in 1929-30.” Responsibility for the successful recovery does not rest with this administration alone: the administration of George W Bush was responsible for the immediate response (though bearing some responsibility for the severity of the crisis); the US Federal Reserve acted effectively; and Congress passed important legislation. Yet, shockingly, most congressional Republicans opposed all significant monetary, financial and fiscal actions taken to deal with the crisis.

Related article

US employmentUS wages grow at fastest rate since financial crisis

The Obama administration implemented a number of important fiscal measures, notably the American Recovery and Reinvestment Act of 2009. It also provided strong moral support for the Fed (including the reappointment of Ben Bernanke, who had been President Bush’s nominee). The administration also restored the financial sector faster than expected and carried out a highly successful rescue of the car industry. Meanwhile, Republicans decried the fiscal stimulus, complaining about the huge fiscal deficits caused by the crisis. Yet it was as absurd to complain about deficits then as it is to slash taxes now, when the economy seems close to full employment. Some Republicans claimed Fed policies risked hyperinflation. Most opposed the re-regulation of the financial sector and savaged the bailout of the car industry. Yet President-elect Donald Trump might not be in a position to bully automakers today if they had not been rescued back then.In all, given the starting point, the performance of the economy has been remarkable. The unemployment rate has consistently fallen faster than expected. US business has also added 15.6m jobs since private-sector job growth turned positive in 2010. Real wage growth has been faster in the present cycle than in any since the early 1970s. In the third quarter of 2016, the economy was 11.5 per cent bigger than at its pre-crisis peak and real gross domestic product per head was 4 per cent above the pre-crisis peak, while that of the eurozone was still below it. Household net worth has also reached 50 per cent above its 2008 level.

Yet Mr Obama was interested in more than economic recovery. He tried to move the US closer to the universal health insurance taken for granted in other high-income countries. The Affordable Care Act (“Obamacare”) has added an estimated 20m adults and 3m children to the insurance rolls. Healthcare costs have also grown exceptionally slowly since the law was enacted, relative to past US performance. These are all genuine achievements. Yet some problems could not be cured.

First, US economic outcomes have become exceptionally unequal, despite a modestly progressive shift in the impact of fiscal policy under Mr Obama. Doing something effective about this was beyond his powers, both because it is difficult and because his opponents had no interest in helping. Second, the participation in the labour force of prime-aged males (25 to 54) has been on a 70-year downward trend, while that of prime-aged females has flatlined for three decades. This is a poor performance by the standards of most high-income economies. It is impossible to argue credibly that this is the result of particularly generous US welfare benefits or particularly high minimum wages. The failure is deeper.

Third, growth of labour productivity has slowed sharply, though it was still higher than in other members of the Group of Seven leading high-income countries between 2005 and 2015. The reasons for this slowdown are a puzzle. Possibilities include the post-crisis weakening of business investment and a broader post-crisis loss of animal spirits. It is also likely that the underlying rate of innovation is slowing. Some argue that this is the result of excessive regulation. The next administration is set to test that hypothesis to destruction.Finally, the US has a key role to play in tackling the threat of unmitigated climate change. In the absence of any consensus on this question in the US, Mr Obama relied on executive actions, which will now presumably be reversed.In all, the administration rescued the US economy and bequeathed a sound foundation for its successor to build on. But it made a big mistake: it did not go all out to punish those whose malfeasance and irresponsibility blew up the financial system and economy. This sense of injustice is one reason why the US has elected the wrecking crew that is about to take office. Mr Obama could not channel rage. Mr Trump, alas, can.