Modi the Magician or Modi the Doctor?

The question being asked - did Mr. Modi con the nation with his tag line "Acche Din Annewale hai" (Good days are coming)? The answer to those raising such a question - you have been had. Honestly; what were those people thinking? Did they believe that the malaise of 15 years will get cured in 15 days? Were they voting for a Prime Minister or a Perfect Magician?

I for one was glad that Mr. Modi took some bold and unpopular steps - which I thought were a step in the right direction. My happiness was quashed in no time when the rise in rail fares was retracted to suit the needs of the BJP and alliance partner in Maharashtra keeping the State elections in mind. Why? A political victory takes priority over the repair of the Nation I guess. I am sure there were other ways to placate the population of the State and particularly Mumbai City. Anyway it's too early to do a critique of a Government just about a month old. Good thing is that it is hearing the people's voice - good or bad. Maybe administering a full dose of bitter pills at one go is not such a great idea. But, treating the disease is going to be painful and a slow solution will prolong if not compound the ill effect.

Dr. Modi's prescription for bringing India back to health will be announced on 10th of July. My own guess was that his team wanted to raise the tax free slab from Rs 200,000 to Rs 500,000 as a trade off for the increase in prices that would come about from withdrawal of subsidies; and also a measure of bringing in better tax compliance. I don't know if this will happen now. The DTC draft that was floated in 2008 was revolutionary and had it been implemented the Nation would have been on a different trajectory. But it was so watered down that it made little difference between the old and new. The tax structure is totally out of sync with reality. On one hand there are announcements of billion dollar deals and on the other taxation starts at a measly US$ 5000 per annum? In a nation where barely 3% ( 36 million) pay any amount of personal income tax and only about 43,000 pay tax over Rs 1 million ( US$ 15,000) it is hard to reconcile the fact that India has over 200,000 UHNW families and close to 1 million homes with over US$ 1 million in wealth. The honest taxpayer happens to be the non governmental working class. Reason is obvious. Most government employees do not declare their other income and the super rich have accountants who find the available loopholes to escape larger tax.

Why then have Income Tax at all? Why not dismantle the mechanism that creates black money to begin with and simply move to a simple form of indirect consumption tax (already there) with just capital gains and wealth tax? Well everyone in this nation consumes and everyone has assets. It was reported that in this year's elections; several candidates reported assets over US$ 1 million (with a couple over a billion). If the yardstick of million dollar plus homes; luxury cars - boats - planes is applied; India would certainly see a reported ten fold jump in the number of UNHW and HNW individuals and families. If there is no income tax then there is no need to give subsidies either. Prices will go up and so will the GST (Goods and Services Tax). Better governance means a trimer government. Smart people will always find a job or become entrepreneurs.

It is said easier to give advice and easier said than done. There are clever people in the bureaucracy and cleverer people in politics. I have a simple mind and it says to remove corruption just remove the reason for it. Will it happen? - I don't know. Will we see happy days?That depends. Will Mr. Modi be the Magician or Doctor for India? he can be both or end up as the biggest Devil. Reason? The Nation has trusted him to deliver and if he fails - India will be worse than hell.

Two plus two equals whatever when it comes to wealth in India

The Indian nation is feeling good. Real good. The "Modi Effect" seems to be better than the "Axe Effect". If one has money who needs a deo to attract the "honey"; and everyone seems to have suddenly become richer with the markets jumping up 25% in under a month.

A table on Global Wealth caught my eye. It says India with 175,000 US$ millionaire households and 248,000 households with wealth of over US$ 100 million - the super rich or Ultra High Net Worth (UHNW) households is ranked 15th  and 13th on the global scale.

I don't have an issue with the second statistic but I think the former has missed a one or two in front of the 175,000 figure. Going by what I have observed and/or heard and/or read - everyone in India behaves like a dollar millionaire. Don't believe me - just walk into an exclusive brand showroom or of a luxury car brand. Simpler, just take a flight or a stay in a hotel. I think India has over a million or two households with an investable net worth exceeding US$ one million. If one includes some rich non tax paying farmers (agro income exempt from personal income tax); the figure would jump to nearly ten million millionaires I assume. In a Country of 1.2 billion + people; the figure would still remain under 1% of the total population.

But then, why are there only 43,000 tax pay payers paying a tax of over Rs. 1 million (US$ 15,000) per annum? It just does not add up.