Hit the target.

 "India's direct tax collections have witnessed a remarkable upswing, underscoring its strong economic growth, improved compliance and better tax administration." "Personal income tax receipts have surged at a compounded annual rate of 22.8% to Rs 12.57 trillion in 2024-25 from Rs 8.33 trillion in 2022-23," wrote TV Mohnadas Pai & Nisha Holla. Are the people really growing wealthy as tax collections indicate? "According to the International Monetary Fund, in 2024, India ranked 142nd out of approximately 190 countries, with a nominal per GDP of around $2,700." And yet, "With 200 billionaires in 2024, according to Forbes magazine, India ranks third globally in the billionaire count," wrote Arjun Jayadev & Advait Moharir. It is not just direct taxes that are being squeezed out of us, but indirect taxes are an even bigger burden on the people. "India's goods and services tax (GST) collections surged 9.9% YoY to Rs 1.96 trillion during March 2025." ET. The GST policy started on 1 July 2017. In the first full financial year (FY) 2018-19, total GST collection was Rs 11.77 trillion, which has soared to Rs 20.18 trillion in 2023-24. In FY25, total GST collection from April-December 2024 has been Rs 14.07 trillion. cleartax.in. If we add Rs 1.96 trillion in January, Rs 1.84 trillion in February (BS) and Rs 1.96 trillion in March, we get a total of Rs 19.03 trillion for FY 25. The price of anything we buy includes the cost of transportation. Out of Rs 83.22 for one liter of diesel in Delhi, taxes account for Rs 43.99 (over 50%). bankbazaar.com. "India's toll collection touched an all-time high in FY25 at Rs 729.31 billion, an increase of 12.5%, with the number of use of toll use climbing about a tenth. ET. Since most goods are transported by trucks, taxes on diesel and high tolls increase prices on which the government collects GST. New regulations on income tax, drafted by 150 officers over 60,000 hours, have been revealed. But, "It does nothing to ease Indians' basic concern: That the taxman will send them a demand for an arbitrary sum when they least expect it." "Distrust and confrontation is at the heart of how the Indian taxation system works, and it is both nerve-racking and inefficient," wrote Mihir Sharma. Seven Indian academic institutions received tax demands on research grants ranging from Rs 50 million to Rs 1.20 billion, labeled "tax terrorism" by Mr TV Mohandas Pai. ET. Disputes are common. "Out of the arrears of over Rs 43 trillion, around Rs 29 trillion (67%) is impossible to recover," states Revenue Secretary report to the Parliamentary Committee. FPJ. Mr Pai is pleased with the rising personal income tax collections but is incensed by the tax on research grants. Tax authorities are the same and resort to terrorism to fulfill targets set by the Finance Minister in the budget. This year's budget has set a target of net taxes at Rs 28.37 trillion. pib.gov.in. Officials will do anything to achieve it. Terrorism and extortion.    

AI could be a bigger problem.

Following President Donald Trump's 26% tariff on Indian goods, "Analysts say while the headline number of 26% might appear massive, it comes as a relief because of no incremental impact on large exporting sectors like IT services, pharma and autos." Still, "Most analysts see IT services to be the biggest casualty of Trump's tariffs war, This impact will not come directly from tariffs imposed on India but rather from a slowdown in the form of US discretionary spending as a result of these measures." Mint. Can India take advantage of higher tariffs on other countries? "High tariffs on Chinese and Bangladeshi exports open space for Indian textile manufacturers," and "While Taiwan leads in semiconductors, India can tap into packaging, testing and lower-end chip manufacturing." "India's share of global exports is a mere 1.5%." BBC. Global Capability Centers (GCCs) set up by multinationals "have progressed from cheap outsourcing to the most complex design and R&D." GCCs could be generating revenues of $121 billion and exporting $102 billion, wrote Swaminathan SA Aiyar. "For now, Indian workers provide value-for-money services, such as debugging code, writing algorithms, checking legal documents, or providing basic financial advice." But soon AI will be able to do this work much faster and more accurately. "For India to remain a global leader in high-skill services, its quality of human capital must be upgraded," wrote Rohit Lamba & Raghuram Rajan. Which means concentrating on education and training in technology. "India will face much more hostility from the rest of the world, as it tries to grow, than China did during the last few decades," wrote Prof Aswath Damodaran. China was a clear winner from globalization and "now accounts for nearly 38% of global GDP growth (2010-2023). Already, "India's services declined for the second month in row in February to USD 31.62 billion," from "USD 34.72 billion in January against USD 36.96 billion in December 2024." ET. The latest National Trade Estimate Report on Foreign Trade Barriers in the US says, "India has conducted a number of localized shutdowns of internet in recent years. These shutdowns restrict access to information and services, disrupting commercial operations, and thereby undermining a free and open internet and impeding trade in digital economy." TOI. India has the proud record of the highest number of internet shutdowns for six years running. In 2024, India had 84 shutdowns, just second to the 85 by the military junta in Myanmar. "Goldman Sachs has reduced price targets on information technology (IT) stocks by 3% to 32% citing lower revenue growth forecasts driven by macroeconomic uncertainty in the US." The US accounts for 60% of India's IT revenues. ET. Tariffs are a problem. But AI could be a bigger one. Unless we wake up.

Now we know.

"US President Donald Trump slapped India with some of the highest tariff rates imposed on any major US trading partner," as "The Trump administration imposed a 26% tariff on imports from India, which is slightly higher than the 20% levy for the European Union, the 24% for Japan and 25% for South Korea." ET. The State Bank of India projected a reduction of 3-3.5% for India's exports to the US. "US total goods trade with India were an estimated $129.2 billion in 2024." India imported goods worth $41.8 billion while exporting goods worth $87.4 billion to the US. "The US goods trade deficit with India was $45.7 billion in 2024, a 5.4% increase ($2.3 billion) over 2023." ustr.gov. "The latest Emkay report estimates that India could lose around $6 billion (0.16% of its GDP) in exports to the US if tariffs are set at 10%. If the US increases the tariff to 25%, the impact could rise significantly to $31 billion." ET. "Trump...announced China will be hit with a 34% tariff, on top of the 20% he previously imposed earlier this year, bringing the total new levies to 54%." "Trump also signed an executive order closing a trade loophole known as 'de minimis' that has allowed low value packages from China and Hong Kong to enter the US duty free." China sells more than $400 billion worth of goods to the US annually. Reuters. In April 2024-January 2025, India's total merchandise exports were worth $358.91 billion, while imports were $601.90 billion. Services exports were $323.68 billion while imports were $168.17 billion, giving a total trade deficit of $87.47 billion. pib.gov.in. Should the tariff of 54% on China be a cause for celebration? Sadly no. Finance Minister Nirmala Sitharaman "highlighted the necessity for India to navigate the escalating global tariff conflicts 'smartly' to protect against potential dumping of goods from nations facing increased US tariffs." ET. As China looks for alternate markets for its goods, India's manufacturers, used to being protected by high tariffs, could be swamped.  In November 2024, services exports were "provisionally estimated at $35.7 billion, compared with $32.1 billion of merchandise or goods exports." This was the first time services exports were higher than goods exports. TOI. A poor country moves from agriculture to industrialization and then to services but India has skipped the industrial phase and gone straight to services. "In a globalized set up, there is nothing wrong in having a more developed services sector, but the worry is that our dependence on imports will tend to increase if we do not create the domestic capabilities needed for a manufacturing upsurge," wrote Madan Sabnavis. Trump wants India to import food grains from the US but India should resist that because the US heavily subsidises food production (BBC) and it will be disastrous for our farmers. Trump has shown his hand. Can we trump him?   

Gold, not Goldilocks.

"The Indian central bank will collaborate with the government to improve the inflation targeting framework and to obtain the 'Goldilocks conditions' for inflation and growth through appropriate monetary and fiscal policies, said Governor Sanjay Malhotra." Goldilocks is a golden-haired girl in a fairy tale for pre-school children, emphasizing perfection. wikipedia. Hopefully, the governor is not spinning a fairy tale for us. "Reserve Bank of India (RBI) is the custodian of our financial system. It completed 90 years of its journey yesterday. The theme for our 90th year was 'Stability, Trust and Growth'," wrote Governor Malhotra. Stability of prices "is important as inflation erodes the value of money" and "hurts the poor even more." However, "Experts believe that a moderate level of inflation is healthy for economic growth." What is moderate? Define it, please. In 2021, the RBI was asked by the government "to maintain retail inflation at 4% with a margin of 2% on either side for another five-year period ending in March 2026." ET. The RBI has been consistently overshooting the 4% target by more than 1% since 2014. RI. The reason inflation fell below 4% from 2017 to 2019 was because the GDP growth rate fell dramatically from 8.26% in 2016 to 3.87% in 2019 (pre-Covid) (Macrotrends) because of the "failure of epic proportions" in the demonetization of Rs 500 and Rs 1000 banknotes on 8 November 2016 (wrote Vivek Kaul). One indication of soaring prices is the rise of 9.9% year-on-year (YoY) in goods and services tax (GST) collections at Rs 1.96 trillion in March. "Net GST collections for FY25 is Rs 19.56 trillion, up 8.6%. ET. "Stability also refers to financial stability" and "includes stable foreign exchange rates". The exchange of the Rupee was 59.44 to one US dollar on 15 May 2014 (Thomas Cook), the day Mr Modi won his first general election (wikipedia). One USD buys Rs 85.63 this morning (xe.com) a drop of 44%. If a ship sinks by 44% in water, nobody in his right mind would call it stable, would they? "Currency will serve its purpose only if the public trusts it to be safe to use." But, Indians do not trust the currency or the government's inflation rates. The RBI's survey of households in January 2025 showed that median inflation perception was 8.3% (rbi.org.in), nearly double the Consumer Price Index (CPI) inflation rate of 4.31% (Provisional) (mospi.gov.in). Inflation expectation at three months was 9.3% and at one year was 10.2%. Despite the RBI's forecast of an inflation rate of 4.2% for FY 2025-26 ET. People do not believe the inflation rate or the RBI. As for the rupee, "India's gold imports fell to 712.1 tonnes in 2024, down from 744 tonnes in 2023, according to the World Gold Council. CNBC. In 2023, Indian households held 24,000 to 25,000 tons, or over 25 million kilograms of gold. TOI. Because, "Traditionally, gold's acted as an inflation hedge," wrote Somnath Mukherjee. "Desire for gold is not the gold. It is for the means of freedom and benefit," said Ralph Waldo Emerson. Governor Malhotra has good intentions but should not resort to fairy tales. Listen to the people. They don't believe.