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Black Money – “Economics is not a moral subject”

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BLack Money
Photo: http://rashtriyaujala.com

Back in 2008, when the whole world was in a financial ruckus, India was not as affected as rather seems to be the fact. Altogether the country was extraordinarily afloat throughout the whole incident and started recovering just in a year.

And all of that was the blessing of ‘black money’.

Yes, that is what the chief economist of the World Bank and former head adviser to the Indian government, Kaushik Basu claims in his new book, An Economist in the Real world.

What is the deal?

The deal is simply that when all the nations and their banks were busy tackling the overburden of subprime loans (one that is given to people who have a previous record of difficulty in maintaining the repayment schedule) crisis. Indian almost suffered from none.

  • It is evident from the instance of 2005 to 2008, when the economic growth of India was an astounding 9% per annum.
  • But the underlining trick was in the scenery of housing and property pricing boom which had gone up to the rate of 16% between 2002 and 2006; more than the average income of India and even more than that of USA.

All because unlike most parts of the world, in India one will not find the price of the house or that of the property listed in the real estate agent’s office. The amount of the land is fixed by the seller and the person can easily demand the first half in the form of formal payment while the rest in cash. And this latter mode of payment is what constitutes the ‘black money’.

A bit more of the deal –

First up is that the moderate the payment is on the official papers, the less the risk of receiving a hefty capital gains tax bill. While the second one is that, it also benefits the buyer as they have to pay much less of the property tax.

While the UK and the USA did start charging as much as 110% more mortgage at the peak of the property boom, in India the mortgage amount has always been much lower than the actual cost of the property.

That’s why when the prices of the houses and lands fell in India back in 2008 and 2009, the

banks were still comfortably within the range of the property values.

How to solve the problem, according to Mr. Basu?

Some time back, Mr. Basu famously advised the government to criminalize the bribe-takers instead of the givers.

It will be interesting to see if the law is implemented then how the equation will affect the whole dynamics.

Though, he laments that the Indian law has not taken his suggestion into the account. It is likely that if it is ever sanctioned then the bribe-givers, freed from the threat of prosecution will automatically want to resist and be reluctant to take part in the bribe cycle again.

Ultimately, it can be concluded that his whole explanation is sound enough as proved by the fact that India’s economic growth was 7.4% in the third quarter of 2015. Apparently the fastest growth of any major nation in the world.

Kaushik Basu was talking to BBC

Next Story

India PC Market Shrinks 8% in Q1, HP Sells Most

Dell Inc retained the second position with a 25.9 per cent market share with a YoY growth of 2.2 per cent

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HP India
HP unveils 65-inch gaming display with soundbar at CES 2019. Flickr

With a market share of 28.1 per cent in the first quarter of 2019, HP Inc maintained its leadership position in the Indian personal computing (PC) market, which shrunk for the third straight quarter, the International Data Corporation (IDC) said on Thursday.

The market witnessed a year-on-year (YoY) drop of 8.3 per cent with shipments reaching 2.15 million units in the first quarter of 2019, said the report.

Despite maintaining its leadership position in the market, HP Inc saw a 9.7 per cent YoY decline, mainly due to consumer segment that shrunk 21.3 per cent over the first quarter of last year.

Dell Inc retained the second position with a 25.9 per cent market share with a YoY growth of 2.2 per cent and a quarter-on-quarter (QoQ) growth of 26.7 per cent.

HP
HP. (IANS)

Lenovo remained at third position with a market share of 25.2 per cent in Q1 of 2019 in India traditional PC market, observing a 6.2 per cent YoY growth and a 29.2 per cent sequential growth.

The India PC market remained weak outside big commercial deals due to weak consumer demand, high inventory from previous quarters and supply issues for Intel chips, IDC said.

Also Read- Tech Giant Apple Pledges to Alert Users on iPhone Performance

The notebook category contributing 61.4 per cent of the India PC market shipments witnessed a 9.8 per cent YoY decline. Within notebooks, ultra-slim category, with a 25.3 per cent share of the market, grew 86.5 per cent.

“Spending towards ultra-slim notebooks is increasing due to factors like improved mobility due to thinness of the product and enhanced aesthetics,” Bharath Shenoy, Market Analyst, PCs, IDC India, said in a statement. (IANS)