Move From Small Savings To Small Spends

In India small savings have been promoted like an economic creed for all these decades since 1947. It has proved illusory savings instrument in terms of purchasing power. It was a wrong decision made by small investors who had no knowledge of economic climate of the country and the globe. Those of us who opted to lead a simple life and save every penny possible feel so cheated at the end of 40 years of employment that wisdom dictates us to abandon the small savings altogether. Let me explain: a saving of 100 rupees per month (25% of wages, regularly adjusted to increase in monthly income) will give not more than 150000 rupees. It is not sufficient even to pay the booking amount for a third class one room flat measuring 220 sq feet carpet area in any city! As against such ill advised savings, the person who managed short term loans from family and friends and got the flat 30 or more years ago for 12000 rupees turned out to be a smarter small saver. This kind of saving has affected even the Indian economic growth. If people don’t consume even small amounts, how can the economy grow? If the market is small, manufacturing will also be small; if the manufacturing is small, services too will be small; if profits will be small, growth will also be small.
Absurd theories of taxation, largely under the misguidance of institutions like the World Bank, make it impossible for an average wage earner in India to even think of consumption beyond essential food items. Does such a shrunken market encourage production and marketing of branded goods? That explains why India has yet to establish one or two branded products developed, manufactured and marketed exclusively by its companies. The time now has come for the Indian economy to shift gear and encourage more consumption by the people. That is possible if taxes are brought down to reasonable levels. Any surplus after meeting kitchen expenses is bound to be spent on industrial products. The people understand their needs like those for computers or mobile phone, but can’t afford them. If some part of their incomes is left in their hands, they will buy such products. It will boost industrial production, which will create more jobs. Above all the government will get higher revenues from excise and customs than what it will collect from income tax. This  shift in the economic philosophy of the government looks distant for the moment. Even the present government will find it difficult to break the spell of the sophistry of the economic rhetoric of the past 67 years, but any forward looking government has to do that as soon as it is able to appreciate the benefits of such radical change.

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