30 January 2018
News
Economic survey highlights
- Effects of note ban and GST have receded.
- Sounds a note of caution on rising oil prices, stock markets
- Calls for medium term focus on education, agriculture.
Economic growth
Survey suggests that GDP growth in current financial year is expected to be around 6.75% and it is projected for the next financial year at 7-7.5%.
Oil price rise
$10 price rise per barrel results in slow down in GDP growth by .2-.4% and a rise in inflation by o.3% to 0.4%. Policy vigilance is necessary.
Twin balance sheet problem -
Insolvency and Bankruptcy code, recapitalisation plan for public sector banks can address the problem.
Tax payer count rises post GST
Voluntary enrolment by small firms lifts number of indirect tax payers by 50%.
The distribution of GST base among the states is closely linked to the size of their economies.
There is a strong correlation between export performance and standard of living in a state.
Formal sector in India is larger than earlier thought.
Time to change to monetary stance :
As inflation expectation is close to 6%, monetary policy need to be shifted towards higher interest rates.
SME’s hold key to revive investments
Investment slowdown is a concern. Easing further cost of doing business, creating a stable tax and regulatory environment are essential.
Eliminate embedded taxes to boost exports
Survey suggested following measures
- GST council shall conduct a comprehensive review of embedded taxes arising from products left out of GST like Oil and Electricity.
- National logistical policy need to be prepared to bring in greater transparency and efficiency in logistics operations.
- There is no export concentration by firms in India. It mean that there are no export superstars in india.
- Maharashtra, Gujarat, Karnataka, Tamilnadu and Telangana are the top five states in exports.
India needs $4.5tn for infrastructure
- Investment Gap would be about $526bn by 2040.
- There is a massive underinvestment in infrastructure due to collapse of PPP, stressed balance sheets of private companies, issues related to land clearances.
- India shall fill the infrastructure investment Gap.
- India can focus on ship building industry.
- Railways share in freight movement is decreasing over a period of time primarily due to non competitive tariff structure.
- Telecom sector is going through stress period with growing losses, rising debt, price war, irrational spectrum costs.
Tax litigation taking toll on economy
Income tax department is the biggest litigant and losses 85% of cases. It is taking a severe toll on the economy in terms of stalled projects , legal costs and reduced investments.
Dedicated subject matter courts : Supreme Court has created a separate bench for tax related issues. It can be followed in High courts.
Climate change may hit farm income :
Technologies like drip irrigation hold key to future of agriculture.
Climate change can lead to income losses to farmers between 20-25%.
Address rent control, vacancy
Indian Government needs to address issues such as rent control and unclear property rights rather than building more homes. It is because India today has a highly fluid population. Rental housing is important for both horizontal and vertical mobility.
Household cash savings dip 250%.
After note ban, people are shifting to financial assets like mutual funds. It is decreeing cash savings.
India is spending on science below economic capacity
China and USA have spent 1% and 2.5% of GDP when their per capita GDP was similar to that of India. India is spending only .5% of GDP
Farm sector sees feminisation
As migration of male population from rural to urban ares is increasing, agriculture is getting feminised. so, survey stresses for inclusive, transformative agricultural policies aimed at gender specific interventions. Land ownership is highly unfavourable to women. It needs to change.
Need to visit sops for renewables
Renewable prices decreased and reached grid parity. so, low tariffs can affect thermal plants. Survey suggest setting up a payment guarantee fund or foreign exchange fund for renewables.
Incidence of open defecation falls sharply.
It is estimated that it felt from 55 crore to 25 crore. It has impact on child nutrition, mortality. According to World bank estimates, lack of sanitation facilities costs India over 6% of GDP.
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