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Industry : Global Economy
Functional Area : Economic activity
Activity: Question posted: 06 13 2009 14:18:58 +0000, 5 answers, 80 views, last activity 07 06 2010 20:18:08 +0000
 
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If each of us spend 1 or 2 % extra than we do normally and the corporates also spend similarly 5 or 10 % extra, than normal, do you think we would create bigger stimulous than the givernment aided stimulus.

Governments in return should reduce 5 - 10 % taxation. or bring tax cuts. Does it work? What is your view?

 
 Top Answer :
Rating : +2 

The fear of recession is worst than recession. When fear of recession looms large, everybody including individuals as well as corporate houses are switch over to cost cutting mode. All development activites are kept in abeyance and minimum essential expenditure is allowed. These precautionary measures stimulate the recession and cause spiralling effect.

If we continue to keep our spending pattern on normal mode, without going for excessive cost cutting that will cause stimulus to come out of recession. Here I thing should be noted that, we should continue drive for waste cutting without mixing it with cost cutting



  Answered by     Devi Kaladeen, Audit Manager, Health Sector Development Unit  | 06 15 2009 14:15:49 +0000
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Rating : +1 

I have done 3 things: (1) contribute towards building a new home so a lot of cash was spent on building materials(including value added tax);(2) sold my previous house and had to pay some huge taxes on the profits gained; and (3) import a new vehicle and had to pay high custom duties. 

  Answer modified by     Radha V, Project Lead, Confidential  | 06 14 2009 17:44:43 +0000
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Obviously govt reducing taxes would certainly stimulate economy.Corporates are also going for cost cutting measures and we too should spend money in a very limited way and thereby prioritising our needs during these recession times would help in stimulating economy.

  Answered by     GOPALAN PARTHASARATHY, Head/VP/GM-Credit/Risk, BANKMUSCAT  | 06 13 2009 15:10:44 +0000
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Rating : +2 

I find from my experience, traveling is the best variable that promotes spending. Most other activities are constant and may not create additional personal spend. Dining and wining can result in additional spend, but these have limitations of health and time. Just imagine people who can afford to spend more travel more. Whether it is by air or train or by road, travel promotes a better utilisation of capacities in hospitality, results in more print read, gets SPAs active, gets more photography done, gets more taxis hired, gets more hotels occupied, gets more adventure sports organized and what have you. This kind of variable is unlikely when we carry on life going to the same office and carrying out same routine. Therefore, I would count people who travel frequently as those who have done some thing to stimulate. In a sense, Govt can encourage domestic tourism providing tax incentives. This will have a domino effect. Coming to generous tax cuts everywhere expecting that the money spared from tax will flow into spending, I would believe that a fragment would get channeled. But something like a special incentive for spending in tourism etc can be significantly more influential than tax cuts as such. Similarly, there can be incentives for buying educatinoal materials, undergoing professional training, buying fitness equipments and a variety of alternatives to choose from rather than merely buying a house on a home loan. There is a lot of innovation that has to promote spending. Everyone should spend in a variety of ways that will definitely stimulate economy. Govt spending out of printed currencies has serious limitation and has serious adverse fiscal implication including and not limited to hyper inflation in later years.

 
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