As a boy my father shared an idea which I didn’t quite understand at that time. I thought about it over the years, as it left an indelible impression on me. He suggested, “… never stop spending, as someone’s expense is someone else’s income. The wheel of the economy runs only when there is spending and there is corresponding income.”
At a macro level, the business community borrows money from banks and runs its businesses. Likewise, banks are in the business of lending money on interest. The business community, trading/manufacturing/services, etc, as well as banks incur expenses and part of their income is paid to the government as taxes. The rest is profit and good for the overall economy.
The implied partnership is clear. The business community generates income, incurs expenses, including payment of interest to banks and then pays taxes. Likewise, banks earn net interest income on the money they lend. And the government receives taxes to run the country’s fiscal and (in a way) monetary policy managed by the RBI.
(Rajesh Narain Gupta, managing partner, and Sanjay Khanna, advisor, SNG & Partners)
Read More News on
Download The Economic Times News App to get Daily Market Updates & Live Business News.
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
Read More News on
Download The Economic Times News App to get Daily Market Updates & Live Business News.
Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price