Assured returns needed if savings are to increase.

Normally we Indians enjoy a spectacle called the Budget once a year, but this year, instead of presenting a vote on account just before the general election, as is the protocol, stand-in Finance Minister Piyush Goyal presented a full interim budget on 1 February when Finance Minister Arun Jaitley flew off to the US for treatment. Taxpayers in India do not get any pension or healthcare from the state. Today, new Finance Minister Nirmala Sitharaman is the star of the show as she gets to present a post-election-victory budget. Prime Minister Modi has demanded that India should become a $5 trillion economy by the next general election in 2024, so the Economic Survey presented yesterday suggested several simple steps to get there. There are three small challenges for the Finance Minister. Economic growth has slowed down even if the present Chief Economic Adviser (CEA) denied it. Fiscal deficit of center plus states is 9% of gross domestic product (GDP). Figures for economic growth and fiscal deficit have been cooked and cannot be trusted. The CEA denied that is weak growth but the Governor of the Reserve Bank (RBI) has cut interest rate 3 times and shifted the stance from neutral to accommodative, promising more rate cuts, because the economy is "losing traction". New investments are needed to create jobs and increase tax collections. But in the quarter ending 30 June, "Investments in the manufacturing sector decreased particularly sharply, falling by 75% compared to the March quarter and 68% compared to the same period last year. Investments in the services sector also fell sharply (94% compared to the previous quarter and 98% compared to the same period last year)," wrote S Alexander. "History shows that no country has succeeded in accelerating growth rate without raising the domestic saving rate to close to 40% of GDP," wrote R Nagaraj. "The domestic saving rate has declined from 31.4% in 2013-14 to 29.6% in 2016-17". "The aggregate savings rate has fallen by around 4 percentage points since 2008. But most worryingly, household sector savings have dropped by 4 percentage points," wrote A Ranade. "And almost all the slippage is in financial savings. Investments in gold, real estate and other non-financial savings have gone up." Mortgage becomes cheaper when interest rate falls. Those who invested in debt mutual funds, thinking they are safe, have suffered heavy losses recently. Debt of listed companies have been downgraded. Dividend on shares are taxed at up to 60%, wrote V Kedia, and long term capital gains on shares were reintroduced in 2018. People have no trust in financial savings so they buy gold and because it is taxed so heavily, an estimated Rs 90 billion worth of gold is smuggled in from Myanmar. People do not trust the government and increasing taxes to increase handouts are not going to work. If they leave things alone instead of changing them every year people may begin to trust them. But then, what will the finance ministry fellows do?