Gold merchants are holding the
entire country to ransom with their strike against FM's budget proposals to hike
tax on import of gold, besides other taxing proposals on cash sales of gold over
Rs.2 lacs etc.I feel the strike by Gold Merchants is irresponsible for many
reasons. For centuries, these merchants have been fleecing the womenfolk with
their bizarre methods of weighing,making charges, and under-billing and
sometimes no billing ("Take "Estimate/Quotation" instead of bill madam").
Economics means looking not merely at the immediate but at the longer effects of
any act or policy; it consists in tracing the consequences of that policy not
merely for one group but for all groups. Most of the fallacies in economics are
a result of ignoring this lesson. You look only at the immediate consequence of
an act or proposal and then look at the consequences only for a particular group
to the neglect of other groups. Gold Merchants are looking at only their
self-interest and not at what the FM wants to re-direct priorities to from this
measure.
Let's keep aside the fact that Gold Merchants are inherently incentivised to cheat public and the government for decades due to lax tax policies and innocent women who "have to" buy gold. From the government's point of view, Gold is an unproductive import. In 2000, we were importing around $ 4 Billion worth of gold. That same year we imported $ 15 Billion worth of crude oil. While I don't know what our GDP was in 2000, I have been tracking the corresponding figures over the years of various imports we do which were leading to inflated current account deficits. Last year or so, we have imported about $ 54 Billion worth of Gold and $ 154 Billion worth of crude oil. That means, at the current GDP of $ 1.50 Trillion, we are importing $ 154 Billion of Crude oil and using up our precious dollars for driving growth. This is happening at a time when per capita car consumption is around 6-7 cars per 1000 people. Imagine what will happen over the next five or eight or ten years as our GDP jumps to $ 3 Trillion or eventually $ 5 Trillion over the next 10 years. We need to continuously import Crude oil and maybe other commodities priced in dollars like Coal etc. to drive our infrastructure and overall growth in the economy. In one stroke, the Govt. has imposed import duty to drive home the hard truth that Gold is unproductive and need not burden our exchequer when we can't live without other crucial items like crude oil, coal, energy etc. The whole country should stand in one voice against the irresponsible Gold Traders for taking up cudgels against the government for their selfish motives. They are basically dishonest, don't pay taxes even on 30 per cent of the gold imported or 50 per cent of the gold sold to the retail households, cheat on the quality, branding of gold, underpay the labour, under-report cash sales, generate more black money adding to the present woes, and never give genuine discounts to the public. Its always been a fool's paradise for them now that they are making a picture as if government is the culprit. We need to coinserve every dollar we spend importing crude oil before its cascading effect on the GDP. We have already about $800 Billion Gold reserves in the country's households (excluding whatever reserves temple excavations reveal). Thats roughly Rs.4 lac crores.
Whereas for every dollar of crude oil we import, there is a multiplier effect and more importantly, economy moves. (Of course, there is huge wastage of crude oil in items of conspicuous consumption but lets's park it aside). I personally invest in Gold too on pressure from wife and mom but detest the large-scale immorality rampant in gold retailing shops. I am no Nagarjuna to shout on rooftops with megaphones on the malpractices but definitely feel its high time somebody rein in the gold merchants into the tax stream. Import Duty and the cash sale tax is a progressive measure in that direction. Gold, in any case, is an honorable exception to the law of demand and supply. Generally, if prices rise, demand drops. But Gold has aspirational value besides scarcity and is well counted as an exception to the law of demand (Its called "Giffin's Paradox"). So, what are the Mackenna's Gold Merchants worried about? Pay your bloody taxes and get on with the sales. Don't give lame excuses and avuncular laments.
Let's keep aside the fact that Gold Merchants are inherently incentivised to cheat public and the government for decades due to lax tax policies and innocent women who "have to" buy gold. From the government's point of view, Gold is an unproductive import. In 2000, we were importing around $ 4 Billion worth of gold. That same year we imported $ 15 Billion worth of crude oil. While I don't know what our GDP was in 2000, I have been tracking the corresponding figures over the years of various imports we do which were leading to inflated current account deficits. Last year or so, we have imported about $ 54 Billion worth of Gold and $ 154 Billion worth of crude oil. That means, at the current GDP of $ 1.50 Trillion, we are importing $ 154 Billion of Crude oil and using up our precious dollars for driving growth. This is happening at a time when per capita car consumption is around 6-7 cars per 1000 people. Imagine what will happen over the next five or eight or ten years as our GDP jumps to $ 3 Trillion or eventually $ 5 Trillion over the next 10 years. We need to continuously import Crude oil and maybe other commodities priced in dollars like Coal etc. to drive our infrastructure and overall growth in the economy. In one stroke, the Govt. has imposed import duty to drive home the hard truth that Gold is unproductive and need not burden our exchequer when we can't live without other crucial items like crude oil, coal, energy etc. The whole country should stand in one voice against the irresponsible Gold Traders for taking up cudgels against the government for their selfish motives. They are basically dishonest, don't pay taxes even on 30 per cent of the gold imported or 50 per cent of the gold sold to the retail households, cheat on the quality, branding of gold, underpay the labour, under-report cash sales, generate more black money adding to the present woes, and never give genuine discounts to the public. Its always been a fool's paradise for them now that they are making a picture as if government is the culprit. We need to coinserve every dollar we spend importing crude oil before its cascading effect on the GDP. We have already about $800 Billion Gold reserves in the country's households (excluding whatever reserves temple excavations reveal). Thats roughly Rs.4 lac crores.
Whereas for every dollar of crude oil we import, there is a multiplier effect and more importantly, economy moves. (Of course, there is huge wastage of crude oil in items of conspicuous consumption but lets's park it aside). I personally invest in Gold too on pressure from wife and mom but detest the large-scale immorality rampant in gold retailing shops. I am no Nagarjuna to shout on rooftops with megaphones on the malpractices but definitely feel its high time somebody rein in the gold merchants into the tax stream. Import Duty and the cash sale tax is a progressive measure in that direction. Gold, in any case, is an honorable exception to the law of demand and supply. Generally, if prices rise, demand drops. But Gold has aspirational value besides scarcity and is well counted as an exception to the law of demand (Its called "Giffin's Paradox"). So, what are the Mackenna's Gold Merchants worried about? Pay your bloody taxes and get on with the sales. Don't give lame excuses and avuncular laments.
