Property Taxation in Indian Cities – Application of Unit Area Assessment

Property tax is one of the major fiscal instruments of local governments in urban areas for raising their own revenues. Two popularly used tax bases of property taxes in India are annual rental value of the property and the capital value of the land. Most of the urban local governments use the notional property rental values as the base for assessing property taxes. In the notional property rental method, the tax base becomes stagnant, and an upward adjustment of tax rates is the only way to increase revenues from the property tax (Bagchi 1997, Rao and Ravindra 2002).

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Local governments at the cities are responsible for designing instruments to finance their activities with the 74^th Constitutional Amendment Act (1992). Many urban local governments have initiated reforms to improve the property tax system. The reforms in property tax focus primarily on improving the tax base and the administrative mechanism on of the tax. The municipal governments in a number of Indian cities have adopted the capital value of property method since 2004. In this method, values per unit of land are estimated, and the tax base is the product of this unit value and land area, plus the value of the property determined by some multiplicative factors.  It is highly unlikely that the potential gains of the new method have been fully realised partly because of the absence of a well-functioning real estate market for accurate information on property values and high transaction costs that adversely affect land prices.

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The Kolkata Municipal Corporation (KMC) and Newtown Kolkata Development Authority (NKDA) have adopted recently the Unit Area Method of Property Tax. The urban local bodies of Delhi, Bangalore and Pune also have introduced the capital value system in their property tax assessment. This system is simple and transparent, and property owners can assess their tax and submit the returns. In this system, tax for a particular property is based on the annual value of the property obtained by multiplying unit area value assigned to the localities by the covered area of the property and the multiplicative factors for occupancy, age, structure and use. Multiplicative factors account for the wide heterogeneity among properties within a conceptual block. This system is expected to reduce disparity in assessment of similar properties within the same locality and thereby ensures equity to the taxpayers, efficiency in tax collection, neutrality in resource allocation, and accountability of tax officials. Equity in property taxation is horizontal or vertical. Vertical equity refers that a tax should be progressive in income or wealth. Horizontal equity, on the other hand, refers that taxpayers with equal ability to pay ought to have similar tax burdens.

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References

Bagchi, A. (1997). “Reforming the Property Tax Base: Need for a New Direction.” Economic and Political Weekly, 32(47): 3005-3010

Rao, U.A.V and A. Ravindra, (2002). Reforming the Property Tax, New Delhi: UNDP

Mr. Panchanan Das
Professor, Department of Economics
University of Calcutta

Low Degree of Macro-Economic Volatility - BRICS Nations

In a study we observe that the positive growth effect on the real sector is reaped out from the financial integration in terms of integration of the financial markets (stock markets) among the BRICS nations. The fundamentals of the economies in the sample are attracting the foreign investment from among the nations in sample. Financial integration allows the capital to be invested in the market which is to give the highest return by reducing the barriers, hence the investors have the incentive to invest and consequently the entrepreneurs also gets the incentive in investing technological innovation. The ever expanding cross country capital flow in equity market is improving the production structure of the economies and influencing the growth of the real sector positively. Factors that fosters the investing in BRICS nations is the low degree of macro-economic volatility relative to the rest of the world. The growth rate of Brazil, China, South Africa and India is quiet high relative to the global market growth rate, especially aftermath of the crisis of 2008.

www.glarius.com – has 25 years of market data with analysis, prognosis.

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The global financial market has become very synthetic in terms of volatility. The member nations of BRICS nation have much more transparency of information and less asymmetry of information about the economy fundamentals and with regard to projects they are investing, since the financial intermediaries have easy access to all kind of information regarding the projects and economy fundamentals. So to reduce the uncertainties of investment the investors of BRICS nation are opting for cross-country investment within and between the BRICS nation. The positive impact of economic growth is found from the analysis, implies that the fundamental endowment of the BRICS nations are almost equal therefore, consequently the growth is taking place in terms of equalization of factor prices.

Daily changes, 10-year and 25-year averages of the main stock market indices like JSE/FTSE, IBOVESPA, BSE Sensex, RTSi can be followed on www.glarius.com

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Mr. Panchanan Das
Professor of Economics, University of Kolkata
Kolkata, West Bengal, India

Financial Integration and Real Sector Growth in BRICS Nations

by Panchanan Das
 
India - The 1980s and 1990s were characterized by substantial institutional change in financial markets that significantly increased global financial integration. These changes resulted in the emergence of new issues that were not present so far. As a result, we have seen a noticeable increase in the size and variety of studies dealing with these issues. This article is restricted to look into some interrelated issues on financial integration among the BRICS nations. BRICS is an association of five major emerging economies: Brazil, Russia, India, China and South Africa. These five countries together contributed roughly 1/5 of the GDP to the world economy with nearly 40% of the world population in 2015. Initially it was BRIC but later South Africa joined the family to be newly termed as BRICS. The immediate aftermath of the 2008 financial crisis didn’t had much effect on their economies as the emerging powers continued to grow.
Related: What is the state of the BRICS economies?

Image: REUTERS/BRICS Photohost/RIA Novosti

The BRICS countries have little in common in political terms and the degree of openness with regards to the level of globalization and liberalization. The unique and unifying factor is the scale of their economies in terms of gross domestic product (GDP) and their sustained growth rates in the past two decades. The shift from intensive technique to extensive technique way of extracting materials lead to a paradigm shift in development. Although there exists a huge number of studies that concentrate on measuring the level of financial integration and focusing on the issues related to it, there are relatively small number of studies that concentrated on these nations. However, the changing power structure of global economy calls for more attention to the emerging giants. The BRICS is a renewed global partnership for development. The BRICS member countries have converged to work on some common goal and priorities. Being the fastest growing and the largest emerging giants, the BRICS nations account more than half of the global population and contribute majorly in the world GDP growth. Daily changes, 10-year and 25-year averages of the main stock market indices like IBOVESPA, BSE Sensex, RTSi can be followed on www.glarius.com
Related: BRICS Face Their Own Challenges While Meeting As A Bloc

Mr. Panchanan Das is an Economics Professor at University of Kolkata Kolkata, West Bengal, India

Does the movements in the BSE Sensex Index Reflect the State of the Indian Economy?

BSE Sensex building     Source: financialexpress.com

The movement in BSE Sensex (Mumbai, India) largely depends on major macroeconomic parameters like GDP growth, inflation, fiscal deficit, foreign exchange stability, industrial output etc. affecting the expectations of future performances of the companies. Let’s say RBI (Royal Bank of India) increases interest rates because of rising inflation. This increases the borrowing cost of companies which is expected to add to their cost of production and bring down their profits. This will bring down share prices of most of the companies in the market.

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Mumbai business district  Source: mumbaithemegacity.weebly.com

The Sensex is also affected by the macroeconomic indicators of the global economy. The debt crisis in the Eurozone, for example affected the Sensex after the integration of the domestic financial market to the global market. Recently, the sensitive index decreased 604 points to 26398 on June 24^th because of the Brexit effect. Stock prices and the BSE Sensex index can be regarded as a good mirror of the Indian economy. However, it must not be forgotten that Stock Markets in general are subject to a deal of emotions, opportunism and hustlers looking for an overnight profit. For serious, long-term investments it is important to look at the results and opportunities over a long period of time.

Daily BSE Sensex movements but also long-term results, average return on investments can be followed live on Glarius Investments Intelligence Platform. Glarius has developed models, graphs and tools to monitor performances of stock market indices worldwide. Also, we have developed an econometric model to predict future movements in indices such as BSE Sensex. www.glarius.com

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Mr. Panchanan Das
Associate Professor at the Department of Economics, University of Calcutta
Kolkata, West Bengal, India