Stimulating the stimuli

What have the various stimulus packages announced by the government actually accomplished? February was worse than January and we all fear that things will still go downhill for a while.

Cutting excise duty by 2% or service tax by 1.8% will not stimulate anybody in buying more cars or making more calls. If I can afford to run up a Rs.1000 phone bill, the prospect of saving Rs. 18 per month won't excite me into making more calls. Neither will a price reduction of Rs. 5000 spur me on to buy a new car.

Instead of losing revenue by Rs. 30000 crore, the government could have very well have left tax rates unchanged and used that same amount to kick start the economy. State Transport Corporations can order 1000s of buses. Dozens of power plants couls have been sanctioned. Roads, bridges, airports could have been built.

What would this have achieved? Certainly not a saving of Rs. 18 per month for someone spending Rs. 1000 on his phone bill or Rs. 5000 for someone paying Rs.7,00,000 for a new cars. What it would do however is help bus manufacturers resume production. Help BHEL, NTPC, Coal India, NHAI, AAI grow in these tough times. This would have a domino effect of other sectors. Capital goods, transport, manufacturing would have all gotten back on track. Fewer job losses... More money in the hands of the consumer... More buying... More selling.

Is this too simplistic a view of the economy? I think not. But then why couldn't our honourable ministers think of this? Are all these stimulus packages simply poll gimmicks? What will happen once the elections are over?

More questions. Few answers. And unfortunately no light at the end of the tunnel.