3 ms·

This was due. It was disguised due the euphoria of the election year. I think the current government is going to find out the hard way that one cannot tame the

by sifar 7y ago

This was due. It was disguised due the euphoria of the election year. I think the current government is going to find out the hard way that one cannot tame the economic beast. There are things like delays, feedback, international events, the weather which you cannot control and can render your models ineffective. Huge expenditures were lined up expecting increased tax revenues which declined due to faulty policies/increasing compliance cost leading to a downward spiral. No transparency in handling the NPAs. Instead we get bank mergers, saddling good ones with the bad. Also the increased exposure to sovereign debt denominated in foreign currency will be a greater risk. Everything is glossed over/tinged by nationalistic fervor which makes admitting you were wrong or you made a mistake an anathema.

sbmthakur 7y ago
> Also the increased exposure to sovereign debt denominated in foreign currency will be a greater risk. Borrowing from outside could be good if the interest rates are lower.
- sbmthakur 7y ago
  To expound further, the government borrows roughly INR 5 lakh crores net per year. In the next year, the estimate of revenue that we want to collect just taxes, Indians will collect about 16 lakh gross, the government will pay 6.5 lakh crores in debt interest payment. About 40% percent of all of money that you're paying as a tax, is going not to build infrastructure, not to feed the hungry, not to pay farmers for food. It's going towards interest payments on the debt they borrowed in the past. Why would this be a problem? because we borrow debt at extremely high rates part.[1] 1. https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLmxpYnN5bi5jb20vcnNz&episode=NzM3YTRlNjc3NGFlNGU4MzhjMjk1MDU5NGFmYWNhYTI https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLm...
  - sifar 7y ago
    I know most of the revenue goes into interest payments. The solution to that is not to borrow more at lower interest and waste on profligate projects which won't generate revenue.
    - sbmthakur 7y ago
      We cannot exactly determine in advance if a project is going to be a waste. The Government has to get more money in one or the other for purchasing weapons, infrastructure building and financing social schemes. One way is to increase taxes which we all hate, the other way is to borrow. So, why not borrow at low interests?
      - sifar 7y ago
        >> We cannot exactly determine in advance if a project is going to be a waste. Really ? Please stop the doublespeak. Purchasing weapons, social schemes (read subsidies/guaranteed income), mega infrastructure projects are all wasteful. Borrowed money when not invested in revenue generation is an extra tax on future generations.
        sbmthakur 7y ago
        Obviously, those things will not bring in revenue and they are wasteful from that perspective. But they are still required for national security, upliftment of poor and to facilitate people of the country. > Borrowed money when not invested in revenue generation is an extra tax on future generations. That's true. But Government isn't a business, they've to finance a plethora of things.
- sifar 7y ago
  In theory yes. Except you don't have control over the interest rate nor the exchange rate. When the double whammy hits you, you have no cover. If a government has internal debt, i.e in it's own currency, it can print the debt away which would cause inflation and some distress. If the government has external debt i.e foreign currency, it is at the mercy of those creditors who can now dictate policy.

by sifar 7y ago

sbmthakur 7y ago

> Also the increased exposure to sovereign debt denominated in foreign currency will be a greater risk. Borrowing from outside could be good if the interest rates are lower.

sbmthakur 7y ago
To expound further, the government borrows roughly INR 5 lakh crores net per year. In the next year, the estimate of revenue that we want to collect just taxes, Indians will collect about 16 lakh gross, the government will pay 6.5 lakh crores in debt interest payment. About 40% percent of all of money that you're paying as a tax, is going not to build infrastructure, not to feed the hungry, not to pay farmers for food. It's going towards interest payments on the debt they borrowed in the past. Why would this be a problem? because we borrow debt at extremely high rates part.[1] 1. https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLmxpYnN5bi5jb20vcnNz&episode=NzM3YTRlNjc3NGFlNGU4MzhjMjk1MDU5NGFmYWNhYTI https://podcasts.google.com/?feed=aHR0cDovL2NhcGl0YWxtaW5kLm...
- sifar 7y ago
  I know most of the revenue goes into interest payments. The solution to that is not to borrow more at lower interest and waste on profligate projects which won't generate revenue.
  - sbmthakur 7y ago
    We cannot exactly determine in advance if a project is going to be a waste. The Government has to get more money in one or the other for purchasing weapons, infrastructure building and financing social schemes. One way is to increase taxes which we all hate, the other way is to borrow. So, why not borrow at low interests?
    - sifar 7y ago
      >> We cannot exactly determine in advance if a project is going to be a waste. Really ? Please stop the doublespeak. Purchasing weapons, social schemes (read subsidies/guaranteed income), mega infrastructure projects are all wasteful. Borrowed money when not invested in revenue generation is an extra tax on future generations.
      - sbmthakur 7y ago
        Obviously, those things will not bring in revenue and they are wasteful from that perspective. But they are still required for national security, upliftment of poor and to facilitate people of the country. > Borrowed money when not invested in revenue generation is an extra tax on future generations. That's true. But Government isn't a business, they've to finance a plethora of things.
sifar 7y ago
In theory yes. Except you don't have control over the interest rate nor the exchange rate. When the double whammy hits you, you have no cover. If a government has internal debt, i.e in it's own currency, it can print the debt away which would cause inflation and some distress. If the government has external debt i.e foreign currency, it is at the mercy of those creditors who can now dictate policy.