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The US has averted a recession for now: Surya Gangadharan

IBNLive.com
Jan 03, 2013 at 06:15pm IST

Barack Obama on Tuesday signed into law a landmark bill that allows a rare tax increase that will hit the nation's wealthiest households in a bipartisan budget deal that stops the world's largest economy from falling into a deep fiscal crisis and recession. CNN-IBN's Surya Gangadharan joined IBNLive readers for an interaction over the deal.

Q. Don't you think that such an action is required in India where only the service class people pay the tax honestly and majority of professionals, industrialists, traders and even politicians evade paying tax? Asked by: Shyam Vadalker

A. You maybe right but do you seriously expect our hon'ble MPs and MLAs all of whom are crorepatis (how they came by so much money is anybody's guess)to support such a move. Our industrialists and traders know how to manipulate the system and there are obliging people in the income tax dept who will help.

The US has averted a recession for now: Surya Gangadharan

CNN-IBN's Surya Gangadharan joined IBNLive readers for an interaction on the US 'fiscal cliff' deal.

Q. Is there a short and sweet description from you on what the hullaballoo is all about this "Fiscal Cliff" in US and the impact it would have on the common man in India? Is it another sub prime crisis in the making? Asked by: Karthik

A. To put it simply, the US was on the edge of cliff because there was no agreement between the govt and congress on an important bill. If that bill had not passed the govt's finances would have gone over the edge and America would be in even worse economic crisis. The signing of the bill means govt and congress have reached a deal, they will tax the wealthiest Americans, ensure middle and lower class Americans continue to benefit from tax cuts, benefits to the unemployed will continue and doctors will get their reimbursements under the medicare system.

Q. What are your bets on the fortune of the US economy in the near as well as the distant future. Will china and India become the new economic powerhouse? Asked by: ajay

A. America's crisis is far from over, the economy is still not growing fast enough to make a serious dent in the ranks of the unemployed, now around 2 million people. China is in better shape than America but the communist party is warning people to get ready to tighten their belts as export driven growth continues to fall. India is bad shape too, there's a grim economic situation, growth prospects are down. India is no powerhouse, China could still be I don't think so.

Q. What direction will USD Dollar go over the next 12 months given thet budget cuts are not yet finalized and so is the US government debit limit. This direction will have impact on oil prices in India. Asked by: Krishnan

A. From what the currency watchers in my office are telling me, the dollar should remain stable in the short term but long term expect some erosion in its value. So if your dealing in dollar it maybe wise to limit yourself but then even the Euro isn't doing well. And I see no prospect for the Chinese Yuan. Maybe you should try gold (or opium!).

Q. Surya do we have any Cliff's to deal come 29th Feb2013? Asked by: sundar1950in

A. Nope don't think so. Our deficit of around 6% is manageable and the govt has been tightening things (althouh the cash transfer scheme could see lot of money go) but before election in 2014 expect the taps to be turned on full!

Q. Will this deal allow a difficulty to exporters from developing countries. Asked by: sundar1950in

A. The deal means that the US has been saved from recession and therefore exporters in India can breathe easy, for a while. The overall health of the US economy isn't good and long term the prospects don't look bright.

Q. Is it somewhere related that US was desperately looking for an alternate market for its investments and that's why, as the wall mart bribe allegations unfolded, it pressurized India for FDI? Asked by: pc

A. No the fiscal deal in Washington has nothing to do with Walmart, although since its a key player in the US economy, Washington would want Walmart to enter India. Pressure sure but the US is also aware of the other pressure groups here and would not want to be seen as too overbearing.

Q. Does this deal allow any concession to the Financial institutions there which acted wrongly and brought about the recession. Asked by: sundar1950in

A. The deal has preserved billions of dollars in giveaways to the corporate sector. Wall street firms are expected to benefit from scores of tax loopholes to the extent of hundreds of billions. It underscores how powerful corporate groups in that country are.

Q. Why did the govt introduced cash transfer scheme knowing the fiscal deficit and economic crisis in US, Europe and asia pacific? Asked by: pc

A. The Indian govt is operating to other sentiments, basically they see it as a game changer for the next elections. They hope people with money in their pockets will vote for the party which put the money in there.

Q. Now the deadline of debt ceiling of US is nearby. Comment on its short term & long term consequences. Asked by: Gaurav

A. In the short term the US has averted a recession. The long term consequences are less certain. The US economic indicators are still weak, Obama is under pressure to make a dent in the ranks of the unemployed, the dollar is expected to come under pressure in the long term.

Q. What is the real effect of the deal and how much will the federal gain on this. Asked by: sundar1950in

A. If you read some of the earlier posts in this chat, you will note that the answer is there. The US has averted a recession for now.

Q. Does the cliff deal have any provisions for reduction of subsidies in USA ? Asked by: sundar1950in

A. The deal doesn't seem to have closed all the tax loopholes that benefit corporate firms to the extent of billions of dollars. Middle class Americans have benefited but what the deal has done in one way it has taken away from another. So doctors will get reimbursements in medicare which helps the ordinary American but corporate groups have ensured they do not lose.

Q. The us has one of it's highest tax structures for the rich and yet not much of noise. Is that possible in India? Asked by: sundar1950in

A. The problem in India is one of tax compliance. The IT dept will get after salaried people but not touch the crorepatis sitting in Parilament or state assemblies. Industrialists are able to influence the law to the extent of crores. The loopholes in tax law are well documented.

Q. Why is the fiscal effects of local tax matters of USA striking bells at BSE? Asked by: sundar1950in

A. I think what's important here is that the US, for now, has escaped the prospect of recession. But the long term indicators aren't good which means Indian exporters selling to the US have to factor all that in. Even Europe is in bad shape, so the markets there may not hold much promise.

Q. Will US innovation like cloud computing, fracking etc be able to turnaround the economy? Asked by: Ramesh

A. I doubt it. These are small segments of the economy, what they need is manufacturing (which employs in large numbers) to go up, that will dent the ranks of the unemployed but that's not happening. The defence industry is also down with govt cuts in defence spending.

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