Can you please show the back-of-the-envelop step-by-step calculation of 2Trillion (2 lakh crore) that government will be left with, starting from
- GDP
- 6.5% revenue growth and
- fiscal deficit of 4.5%
Even if the number is inaccurate, I will learn a lot from the steps of your calculation.
You also calculated 1-lakh-crore extra in hands of people due to the tax rebate. This, I guess, is 0.3% of GDP (assuming 322.87 lakh crore 2024 GDP).
So 0.3% of GDP will be spent and invested by citizens, rather than the government. General wisdom is that people-spending is of better 'quality' than babu-spending. Will that create any significant good effect? Or is it all a wash since we are talking about only 0.3% of GDP?
I think the argument here is that the estimated 1 lakh Cr in the hands of individuals may not necessarily be spent by citizens, rather a high percentage could be saved for future use - in which case, the growth in GST revenues for the Govt. might not be as buoyant as they might be expecting from this tax cut.
But investment/saving has good effect too. I invest in stocks, or save in deposit/bond. In case of bond/deposit, that money is getting loaned. Just like spending, when saving/investing is done by private individuals with own money, the 'quality' of that investment/saving is bound to be higher.
I am fairly sure this has all been analyzed quantitatively and in detail, by economists in the past - and they have multiplier effects for Tax cuts (and rises). Obviously specific cases might vary - for e.g., a Goa or a Sikkim doing some tourism promotion thingy might get a lot of footfall during holiday season after these tax cuts -> their own GST can zoom.
I think the larger point here is that the multiplier effect that the Govts/Economists estimate based on past datapoints, might not necessarily hold and that might ruin fiscal targets. I mean, I saw a thread on X of a consumption multiplier effect of 5 after tax cuts, lol.
yes indeed.
Can you please show the back-of-the-envelop step-by-step calculation of 2Trillion (2 lakh crore) that government will be left with, starting from
- GDP
- 6.5% revenue growth and
- fiscal deficit of 4.5%
Even if the number is inaccurate, I will learn a lot from the steps of your calculation.
You also calculated 1-lakh-crore extra in hands of people due to the tax rebate. This, I guess, is 0.3% of GDP (assuming 322.87 lakh crore 2024 GDP).
So 0.3% of GDP will be spent and invested by citizens, rather than the government. General wisdom is that people-spending is of better 'quality' than babu-spending. Will that create any significant good effect? Or is it all a wash since we are talking about only 0.3% of GDP?
I think the argument here is that the estimated 1 lakh Cr in the hands of individuals may not necessarily be spent by citizens, rather a high percentage could be saved for future use - in which case, the growth in GST revenues for the Govt. might not be as buoyant as they might be expecting from this tax cut.
But investment/saving has good effect too. I invest in stocks, or save in deposit/bond. In case of bond/deposit, that money is getting loaned. Just like spending, when saving/investing is done by private individuals with own money, the 'quality' of that investment/saving is bound to be higher.
I am fairly sure this has all been analyzed quantitatively and in detail, by economists in the past - and they have multiplier effects for Tax cuts (and rises). Obviously specific cases might vary - for e.g., a Goa or a Sikkim doing some tourism promotion thingy might get a lot of footfall during holiday season after these tax cuts -> their own GST can zoom.
I think the larger point here is that the multiplier effect that the Govts/Economists estimate based on past datapoints, might not necessarily hold and that might ruin fiscal targets. I mean, I saw a thread on X of a consumption multiplier effect of 5 after tax cuts, lol.