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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: Satish C. Shah who wrote (3849)	3/6/1999 10:57:00 PM
From: Mohan Marette	Respond to of 12475

Weekend Ruminations by T N Ninan (Investors,Salaried people and the budget) Hi Satish: An interesting take on the budget from Mr.Ninan of Business Standard. ================================= A nation of punters? A core feature of the budget for 1999-2000 is that the salaried have been taxed more, and investors have been taxed less. A nation of shopkeepers, Napoleon said disparagingly of the British. So what does Yashwant Sinha think Indians are? The answer, judging from his second budget, is that we are a nation of investors, punters on the stock market. And if he is proved right in his assessment, then some fundamental notions had better change. A core feature of the budget for 1999-2000 is that the salaried have been taxed more, and investors have been taxed less. Indeed, there is an almost arithmetical correlation between the amount of extra taxes being raised from the salaried class, and the extra money that has been doled out to investors. For, the 10 per cent surcharge that has been levied on income tax will fetch just under Rs 2,000 crore next year, and this is roughly equal to the amount that has been given away to the mutual funds and to investors in general through the halving of the tax on long-term capital gains. The markets have responded with evident joy, while the salaried class seems to have accepted stoically the demands being made on it. In an earlier age, this would have been inconceivable, given notions of equity and the need for a progressive tax system, not to speak of the shakier proposition that “unearned” income must be taxed at a higher rate than “earned” income. In fact, while there has been a good deal of comment that the direct tax rates put in place by P Chidambaram in 1997 gave India income tax rates that were lower than in most parts of the world, the fact is that as far as investors are concerned, India is now a veritable tax haven. The long-term capital gains tax of 10 per cent beats most countries. Apart from that, dividends are tax-free in the hands of the receiver. And now some categories of mutual funds can declare tax-free dividends as well. The principal categories of wealth holding (one house per taxpayer and shares) are exempt from the wealth tax as well, and, of course, the estate duty has been abolished. Taken together, these constitute a fantastic tax package for the better-off (I hesitate to use the term “well-heeled” because of its pejorative connotations). Add to this some peculiarly Indian realities. If you go by the statistics that are bandied about, India has twice as many investors on the stock market as income tax payers. The numbers are said to be 30 million and 14 million. If the numbers are not completely skewed by double-counting, this suggests that every second investor on the stock market is not paying income tax. Certainly, ordinary every-day evidence of the kind of people who pick up share prospectuses and application forms at street corners would suggest that many of them are petty businessmen and traders who probably don't pay tax on their income. So we have a class that is already avoiding or evading income tax, which then gets tax haven treatment from the government. In comparison, the salaried class has few avenues for escaping tax and therefore contributes the bulk of the income tax that is collected by the government. This is not necessarily a great injustice, since the tax rates have become eminently reasonable, but in comparison with the treatment given to investors, the contrast is striking. Before readers who are investors start wondering why we should try to spoil the new round of partying on the stock exchanges, the point of focusing on this is not to say that the budget's tax proposals should be rejected. There could well be arguments about needing to inject a feel-good factor into the system, of stimulating growth and spending by sending up asset values, and so on. So Mr Sinha may have done his calculations just right. Still, we do need to ask what constitutes the core of the middle class, in terms of the political-cum-economic group to whom most budgets are addressed. If the calculation is that investors have displaced the salariat, then India has been transformed in more fundamental ways than even the trumpeters of the equity cult might have imagined.

To: Satish C. Shah who wrote (3849)	3/7/1999 10:37:00 AM
From: Mohan Marette	Read Replies (2) \| Respond to of 12475

Clinton's Karma-'A mild case of Indophilia'? Hi Satish: Here is little something I picked up from Times of India. ========================== (Source:Times Of India) Clinton's Karma The clearest evidence yet of the United States's keen interest in India may have come our way almost by chance. On holiday in Utah, President Clinton was unable to use an expired credit card to pay for a selection of books in a shop and had to take a short-term loan from a secret service agent. As usual with news trivia, the press became preoccupied with the presidential purchases and found a surprising list. Mr Clinton had bought Stanley Wolpert's India and Octavio Paz's In Light of India, along with a couple of thrillers. The Indiacentric reading list could give pause for thought to those who accuse the US of riding roughshod over the sentiments of the world's largest democracy and inclining instead towards neighbouring Pakistan. The Americans have always denied this, but Indophiles charge them with protesting too much. Now the US president, no less, has been caught with a mild case of Indophilia, something that should accord well with his stated intention of a year ago that he would seek ''constructive engagement'' with South Asia. Of course, it would not be particularly surprising if Mr Clinton were to have succumbed to a fascination with all things Indian. Despite the geopolitical strategy pursued by their government, the American people have long confessed to an admiration for what they see as Indian spirituality. It is no coincidence that most Indian cults, such as those of Rajneesh and Mahesh Yogi first became widely popular in the US. And it might even be fitting if Mr Clinton were to begin believing in the Hindu concept of Karma after all his recent troubles. But cynics say that Mr Clinton's reading list does not illustrate a sudden interest in India, or indeed anything else. Like all things about the Clintons, the mini-drama over the presidential purchases is believed to be that golden paradox -- a carefully staged impromptu occasion. If so, this is no bad thing. After all, it was once said of Winston Churchill that he devoted the best years of his life to preparing his impromptu speeches, a nice bit of irony that only goes to underline the extent of preparation required to contribute quotable quotes to the world's speechwriters. Of course, some might overdo careful preparation, as did writer Katherine Mansfield, who recorded in her journal, ''Whenever I prepare for a journey I prepare as though for death. Should I never return, all is in order''. timesofindia.com