Abolishing Personal Income tax - What do you say?

y2s said:
The value of the capital markets is an input to gdp calculation. This number will control the countries ability to borrow and will also impact interest rates at which the country is able to borrow. This will further have a cascading effect through the entire economy.
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WRONG!!!! Market Capitalization is not taken as an input for GDP calculation. GDP is the sum of value of all good produced and services rendered. So, if I buy a share at Rs 10 and sell at 1,000 then the GDP will not increase by Rs 990. The GDP will only increase by the extent of the Service Tax that was paid for the buying and selling. Here is what Wikipedia defines GPS as:

Wikipedia: Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period


y2s said:
That is why , a shares increase or decrease in price directly contributes to the national economy in pretty much every way. The increase in a companies worth is essentially the creation of VALUE. The higher this value the better. I would even go so far as to say, public equity markets are perhaps the best and largest value creators for pretty much any economy today.
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Again Wrong. Already provided reason why, above. The value is created in the hands of the shareholder and not the nation. Au contraire, state of the economy reflects the Share value of companies. History is replete with such examples.
 
skoka123 said:
WRONG!!!! Market Capitalization is not taken as an input for GDP calculation. GDP is the sum of value of all good produced and services rendered. So, if I buy a share at Rs 10 and sell at 1,000 then the GDP will not increase by Rs 990. The GDP will only increase by the extent of the Service Tax that was paid for the buying and selling. Here is what Wikipedia defines GPS as:

Wikipedia: Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period



Again Wrong. Already provided reason why, above. The value is created in the hands of the shareholder and not the nation. Au contraire, state of the economy reflects the Share value of companies. History is replete with such examples.
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I must admit you are correct! Market cap indeed has no direct input to GDP. I was looking at it more from the perspective - higher share price creates value which in turn creates more cash in the economy(the value is stored in a financial institute that lends it out) - this increases spending and in turn increases GDP. Wouldn’t the value thus created in the hands of the shareholder reflect on the nations GDP?
 
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y2s said:
Wouldn’t the value thus created in the hands of the shareholder reflect on the nations GDP?
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That would be true for dividends and not the share value as everyone knows that the share values are not true representation of company's actual value. It is just what the market feels and gambles upon daily in the stock market. Clear example of that would be the current state, where the GDP has shrunk enormously and at the same time, the market has touched it's highest point. So the shareholders have become rich but the GDP and the economy is still in the doldrums.
 
rdst_1 said:
That would be true for dividends and not the share value as everyone knows that the share values are not true representation of company's actual value. It is just what the market feels and gambles upon daily in the stock market. Clear example of that would be the current state, where the GDP has shrunk enormously and at the same time, the market has touched it's highest point. So the shareholders have become rich but the GDP and the economy is still in the doldrums.
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I am no expert. But from the little I understand - GDP broadly goes up either if a countries workforce increases or if it gets more productive. People making money on the stock market definitely increases the productivity per capita of the entire country and therefore should play a major role in GDP even if it’s not directly linked.

Not disputing what you are saying - just thinking out aloud .
 
y2s said:
I am no expert. But from the little I understand - GDP broadly goes up either if a countries workforce increases or if it gets more productive. People making money on the stock market definitely increases the productivity per capita of the entire country and therefore should play a major role in GDP even if it’s not directly linked.

Not disputing what you are saying - just thinking out aloud .
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Sorry, but it doesn't happen that way. Don't know if you have ever played the stock market or not. Also do check out the Sony series Scam 1992 to see how dissociated the stock market is from the actual productivity of the companies/economy. Stock market works just on sentiments unless a company is going bankrupt. So your statement that people making money on stock market increases the productivity is completely wrong because the money made on the stock market is complete gambling and in most cases, one makes money when the other one loses. That's why there are 'Bulls' and 'Bears' in the stock market and one makes money when the other loses.

The crux of the story is, a few people making money gambling has no affect on the GDP because the criteria for calculating the GDP are different. The people making money on stock market don't contribute to the productivity of the companies they are betting on and hence no affect on the GDP of the country. Another thing is that the stock market only deals with publicly traded companies whereas most of India's economy is in the unorganized sector.

Another point is, that even GDP is just a formula, which govt try and manipulate to suit their narrative and hence even GDP is not a true measure of a country's state of economy.
 
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