View: India needs to choose the economy it wants - Toyota or pakora?
By Andy Mukherjee
Narendra Modi says, “Make in India.” Toyota Motor Corp. says, stop treating cars as though they were drugs or alcohol. The Japanese carmaker has a point about the tax structure being unviable for the industry, and Shekar Viswanathan, vice chairman of the India unit, made it forcefully in an interview to Anurag Kotoky of Bloomberg News. However, instead of trying to address the specific concern about the high sin levies on cars, the go nment turned it into a public relations issue. The minister for heavy industries, who also looks after information and broadcasting, took to Twitter to announce that “the news that Toyota... will stop investing in India is incorrect.”
The additional luxury-tax burden — 1% to 22% depending on the size of the vehicle and engine capacity — is what jacks up the overall levy in the world’s fourth-biggest car market to as much as 50% on some sports utility vehicles.
Six years of headline management should have been enough for PM Modi’s go nment. From justifying its bizarre overnight ban on most banknotes in 2016 to defending suspiciously cheerful gross domestic product data and suppressing a not-so-rosy household consumption survey, Team Modi has left no stone unturned when it comes to spinning a narrative in which it’s doing everything right. The longer this pretense continues, the higher the risk of India getting stuck in a post-pandemic sub-5% growth rut.
It’s time to start an honest dialogue with unhappy stakeholders — labor, capital, and subnational go nments. Lockdowns are easing even though the coronavirus continues to spread. Workers desperately want jobs to return because there isn’t much of a safety net beyond the family or village. Businesses weren’t investing even before Covid. It’s impossible to cut consumption taxes to stoke demand. India’s fund-starved 29 state go nments badly need the sin levies that are earmarked for their exclusive use. Businesses were hoping that these, which are in addition to the regular goods and services tax, would expire as planned in 2022. However, because of the hit to collections this year, they may continue well into the future.
That isn’t the whole story. Import duties on steel and electronic components may go up, ostensibly to promote Modi’s Make in India campaign, pushing prices for cars still higher. The market will then be even smaller. So what can be done?
Auto analyst Govind Chellappa has practical suggestions. Even if taxes remain high for now, end the constant tinkering with the rates, regulation and the fuel policy — diesel, petrol or hybrid — and commit to stability for 15 years. “It takes 24 to 36 months to develop a new product and another 12 months to set up the physical infrastructure. If taxes and regulation change every 24 months, how does one decide what to invest in?” Chellappa asks. Similarly, the badly designed goods and services levy needs a one-time overhaul, followed by long-term certainty.
India must break out of this vicious cycle in which taxes are high, consumer demand is low, investment and job creation are constrained, and wage incomes are insufficient to boost purchasing power at the bottom of the pyramid. Taxes are hence exorbitant and have to be collected from a small consuming class that can afford a $23,000 Toyota sedan — and fill it up with highly taxed gasoline that costs three-quarters more than what Americans pay.
Narendra Modi said in an early 2018 television interview that those earning $3 a day by selling “pakoras” — Indian fritters — should also be counted as employed. That would leave the go nment off the hook for the absence of new jobs in the formal economy. This false pakora/Toyota equivalence must end. India should enable large companies to grow and create good jobs with social security. When they’re more productive and paid a little better, low-wage workers will be able to afford Made in India shirts and trousers, which, as economist Rathin Roy has noted, are more expensive than imported clothing from Bangladesh and Vietnam.
Ultimately, the Modi go nment needs to focus on one simple statistic highlighted by Ambit Capital Pvt. and Singapore-based investor Akash Prakash. As much as 40% of the country’s listed nonfinancial firms have revenue of less than $15 million. They’re tiny even by emerging-market standards, and the ratio hasn’t increased at all over the past decade.
最终，莫迪政府需要关注一个由Ambit Capital pvt和新加坡投资者Akash Prakash强调的简单统计数据：在印度上市的非金融企业中，有40%的企业收入不足1500万美元。即使以新兴市场的标准来衡量，这一比例也很小，而且在过去10年里，这一比例根本没有增加。
译文来源：三泰虎 http://www.santaihu.com/p/50868.html 译者：Jessica.Wu
It is sad that no one talks about a large population in rural areas of India. Given that freebies are dumped in rural communities it is imperative that there is hardly any money left for middle class who contribute as money multiplier in the economy.With less employment opportunities and falling bank interest rates the impetus to spending is severely curtailed causing the economy to further nosedive. At this juncture a large population instead of giving adividend pulls the economy downwards
I think India needs an economy which is in between Toyota & Pakora , i.e. the economy serving middle income groups .I agree that Govt should listen to all types of suggestion and do what it thinks is right .
Taxes are high because poor who eat on the taxes paid by 2.5% of the population is the reason. Reduce the population. 90% of the population cannot buy Toyota but certainly they can buy pakoras. So we need pakora economy and not BMW and Toyota cars unless they are manufactured for export.
The real patriotism is not supporting a political party blindly, but asking questions to the go nment like why the high tax incidence on petrol, why not tax the billionaires and reduce taxes for middle-class, etc.?
Sheo Nandan Pandey
Could any body deny that the foolhardiness of the govt. in handling issues that the nation confronted now and then In M-I and M-II epoch on all dimensions including playing conch to deal with COVID-19. God save the nation..
Truth is bitter!
Blaming PM alone is highly unjustified. A country where less than 4% are tax payers and you have to compete with china like developed nations than you need money. We are not technology oriented country, we are agricultural based country which solely depends on mercy of mother nature. Education and food is still a dream for 100% . Toyota knows our potential and that is why they are here . They are gaining and to gain more they are pressurizing go nment.
Our go nment has to feed so many Poor's and rohingya etc. so what ever we earn is taken back in in the form of taxes and no many left for the costly Toyota SUV
In India due to legacy of the past, land and property make people rich. In most cases, skills and talent are undervalued . High quality education and talent can get us a upper middle class existence at best.
The article is seems bias and with some vested agenda. Industrial environment is dynamic in nature and Toyota has to come up with there strategy. Don't make unnecessary issue. Those who consume pakoda on street never go for Toyota.
Indian Governments have not grown up but only grown fat since 1947 and an intolerable burden on India welfare, prosperity and security..
Buyers are also less because there is no enough money in the hands of people.How can one buy Toyota car ?
pakora, I am my own boss and also give employment to some. Toyata is also needed but not required to sell in large nos and pollute our atmosphere.
What a misleading article. Writer should put full information for readers or he has some vested agenda.Toyota already announced that they will invest more in India.