Ten Things I Learnt From The Economic Survey
The Economic Survey of 2017-18 was presented recently by Chief Economic Adviser Arvind Subramanian, who said that he learnt 10 new things while preparing this survey. I learnt 10 new things too in reading the survey.
1. Government Expenditure + Private Consumption = 95 Percent Of GDP Growth
India’s economy grew 6.5 percent in 2017-18. But, almost all of this growth came from just two sectors – private consumption and government expenditure.
65 percent of this growth came from people consuming and spending, and 30 percent from government’s own expenditure.
2. Biggest And Longest Investment Boom And Bust In The World
Investment as a percentage of GDP grew from 26 percent in 2003 to 36 percent in 2007 and fell to 26 percent again in 2017. This boom and bust of investment in India is among the largest of all economies in the world, including the 2008 global financial crisis.
3. Rs 7.5 Lakh Crore Stuck In Tax Litigation – That’s 5 Percent Of GDP!
We’ve all heard of tax terrorism. The Economic Survey teaches us about tax litigation and its costs. Tax litigation of indirect and direct taxes across all levels of the judiciary, including the Supreme Court, amounts to nearly Rs 7.5 lakh crore – that is 5 percent of India’s GDP.
4. New Taxpayers, But No New Income Tax From Them
What is the demonetisation impact on new taxpayers? There were 1.8 million new taxpayers – presumably due to demonetisation. But, there was little new additional revenue from these taxpayers because almost all of the new filers reported incomes that were less than the income tax threshold of Rs 2.5 lakh.
5. One-Fifth Of All Registered Enterprises Under GST Needn’t Have Registered!
Nearly 10 million businesses have registered under the Goods and Servivces Tax. But guess what? Nearly one-fifth of them need not have registered under GST because they were below the GST revenue threshold. So why did they then register? They did so for input tax credits, which was precisely the design and objective of the GST.
6. Five States Account For 50 Percent Of GST Revenues
Just five of the twenty-nine states of India accounted for nearly half of all GST revenues. These five states also account for half of all economic activity in the country.
This puts to rest the fear that the big producing states will end up as losers in GST.
7. Local Governments Collect <10 Percent Of Potential Land Taxes
While states are guaranteed their revenues through GST, local bodies and municipal corporations within these states are not collecting enough tax revenues. In fact, they collect only one-tenth of the potential tax revenues from property taxes.
8. Formalisation Good, But Income Levels Still Very Low
GST has ensured formalisaiton, which means employees get registered for provident funds such as EPFO. But this does not necessarily mean that income levels are very good.
9. Farm Incomes Could Fall 15-25 Percent In A Hotter, Drier India
What is the impact of climate change on India? India is getting hotter and drier. This means farm incomes can be down as much as 15 to 25 percent for irrigated and unirrigated farm lands.
10. Two Million Women Missing Every Year
And finally, there are nearly 2 million women going missing every year in India – due to female infanticide, or sex-selective abortions. Can the Prime Minister’s Beti Bachao, Beti Padhao mission stop this?
Praveen Chakravarty is Contributing Editor at BloombergQuint. He is a Senior Fellow at IDFC Institute and Founding Trustee, IndiaSpend.
The views expressed here are those of the author’s and do not necessarily represent the views of BloombergQuint or its editorial team.