A step for the high growth strategy

Watch for the reward-to-risk ratio faced by private persons

The most important problem in Indian macroeconomics is the decline in private investment. The decisions of private persons are shaped by the reward and risk from investing. When a business got Rs 100 of profit before tax, the cash that went to the shareholder, under certain assumptions, was Rs 43. With the reduced rate of corporate income tax, this goes up to about Rs 48. This move is in the right direction. More needs to be done, to change the risk/reward analysis of private persons, to get back to high-growth arrangement. The greatest fiscal risk comes from low economic growth.