Rahul Mehta Gandhinagar LsCandidate
The "90% myth" of scale of economy - reality that most large companies' owners excel because they get bank loans at lower interest, they often dont repay bank loans (!), get huge plots from govt at cheaper rates, get govt contracts and so on. So called scale of economy is more of a myth, and yes, it may be reality in some cases.
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bikau-economists (every economist is a bikau economist) often rationalize and legitimize collapse of small company owners and large company ownmers taking over their business or companies, by saying that large companies have lower cost of production due to so called scale of economy.
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It may be true in some cases. But in large number of cases, the owners of large companies excel and browbeat owners of small companies mainly because
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(cause-1) In India, small companies' owners have to pay 36% interest per year on their loans, while banks give loans to large comapnies at 18% of lesser rates. And even small company owner is lucky and has close relatives willing to finance him, 24% is lowest he will get. And some no lucky end up paying as much as 48% a year !! So lower rate of interest is an important reason. I am sure, bikau economists never wrote that in their textbooks'.
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(cause-2) The owners of companies are at liberty not to repay the loans and create NPA !! Vijaya Malya with NPA of Rs 9000 crore is not even top 20 in India !!! The toppers have taken loans of Rs 100,000 crore and calmly telling banks to get lost !! And bank directors and FinMin IAS are willing to give them more loans !! Suffices to say -- ability to not to repay loan is important reason why owners of large companies excel. How many bikau economists told you this? NONE.
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(cause-3) Large company owners get huge plots from Govt for dirt cheap rates --- they bribe PM/CMs/ Ministers and get away !! Say minister has prime plots of sat 1000 acres (one acre = 4000 meters). Now he can give plot of 0.25 acres = 1000 sqmt to 4000 small company owners and take bribes, but chances of expose are high. And Minister is better of taking bribe from 2-3 large company owners and give them all 1000 acres !! The second option is safer and will enable Minister to retain his image of non-corrupt and no-nonsense !! So large company owners manage to get land for cheap where as small company owners have to pay large sums for rent or price for the land. Getting land at cheaper rate is another reason why owners of large companies excel and the main reason here is corruption. How many bikau economists told you about this reason? NONE.
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(cause-4) Govt contracts - many govt contracts are worded so that only large company owners would qualify
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So these are the 4 main causes why large company owners are able to beat small company owners in the market. The merit or scale of economy is rarely the reason
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Now how does this gyaan apply wrt to GST?
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Many small manufacturers, despite higher interest rate and higher price of land, survived ONLY because excise on them was zero while excise on large manufacturers was some 15%. Now GST puts them in same tax rate and Missing Trader Problem makes their situation worse compared. So now given that tax rate on them is same as large, and the the large companies' owners get loans at lower rates, have previlege of generating NPAs, and get land for cheap --- many of small manufacturers will now loose their businesses to large ones. So unemployment in small units will increase by employment in large units will increase. But large units use more imported machines and give less jobs per unit production. So overall employment will decrease and overall efficiency of economy will also decrease. And those who loose jobs will be more in age group of 35 years plus, while those who get jobs will be more between 20 yuears and 30 years.
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SOLUTION to (cause-1) to (cause-4)?
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Solution to (4) is cumbersome and goes department by department.
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But (1) to (3) is easy. Solution to (3) is DDMRCAM aka MRCM. Here, rents from plots owned by Govt are directly deposited in citizens' account. So if Minister or officer-in-charge takes a method that reduces land rent, be giving away plots for cheap or deliberately making large plots so keep small players out, then citizens will immidiately see the loss. So using RTR over that Minister or officer-in-charge, the voters will expel him and bring in someone who is less corrupt and gives lesser plots for cheap. So the land price advantage to larger companies will go. MRCM-law-draft is given in chap-5 of https://www.facebook.com/groups/righttorecallparty/10152114637883103/ .
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The solution to NPA is Right to Recall RBI-Governor and RTR-SBI-Chairman. All PSU banks should be merged into one SBI. And Govt should insure deposits only in SBI , and not in any private banks. The Govt should give loans only for home, education and emeregency medical treatments, and nothing else. Details are given in chap-9 and chap-20 of above link.
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As always, SoMoKe and CoRaAp = congress / rss / aap workers have opposed RTR over RBI-Gov and SBI-Chairman. SoMoKe and CoRaAp-workers have also opposed MRCM and RTR over Ministers. So if you want MRCM and RTR in India, then pls dont waste time and hopes on SoMoKe and CoRaAp and pls work to publicize these RTR, MRCM etc law-drafts.
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And solution to GST is - remove GST and bring WT = Wealth Tax. Here too, SoMoKe and CoRaAp-workers ahev supported GST and oppose WT, and we at RRP support WT and have proposed removal of GST. So if you want removal of GST and bringing of WT, then pls dont waste time and hopes on SoMoKe and CoRaAp, and pls work to publicize WT-draft and problems in GST such MTP , DTSTP etc..