Jobs will make people richer. Not taxes.

"The recently submitted report of the committee on household finances shows that only 5% of the average Indian household's wealth is in financial assets," wrote M Chakravarty. "The other 95% is in physical assets -- 77% in real estate, 7% in durables such as vehicles, livestock and equipment and 11% in gold." This report was from the Reserve Bank. However, these figures do not reveal the real picture. Value of property owned by a household in the bottom 20% of the population is just Rs 22,000, which means a hovel, as a protection from the weather. Even the rich do not invest in financial assets because they are probably hiding their wealth in real estate. Only the educated invest in financial assets because most of them are employed in the formal sector. Tax evasion is difficult for salaried people. All this means that Indians are very poor, earnings of 70% of farm households are not enough to pay for consumption expenses. Therefore, the fact that only 27.9 million people filed income tax returns this year is not because vast numbers are cheats but that they do not earn enough. In the US 31% of workers are self-employed, compared to 75% of our labor force, wrote R Chakraborty. Out of 60 million enterprises only 18,000 have a paid up capital of Rs 100 million. "This huge self-employment is not some overweight entrepreneurial gene among Indians; the poor cannot afford to be unemployed so they are self-employed." Russian economist, Alexander Chayanov called it 'self-exploitation', wherein people do not pay themselves so as to make just enough to survive. "Over a million people enter the job market every year but only 10,000 find jobs," wrote S Ray. Why? Because young people prefer an education to get white collar jobs and so avoid going to skilling centers set up by the government. If the self-employed are wallowing in poverty why would anyone want to be skilled? Engineers with formal degrees want jobs, especially government jobs, where they are assured of a regular salary and are able to plan for the future. A survey by the RBI in June of this year showed that people feel that their incomes are not growing, employment conditions have worsened in the last year and economic conditions are getting worse. Employment in manufacturing is hardly increasing at all. Because of their mistrust of the economy and earning prospects people buy gold. But here too taxes are very high: 10% import tax, 3% GST and 5% on the making charge. The RBI says that there will be "gains to growth" from the introduction of GST. Why increasing taxes will increase growth is not obvious to us. But then we are not economists.