Economic Survey unveils 10 new facts about Indian economy, highlighting the major achievements of the current fiscal — the impact of GST, India’s egalitarian export structure, the preference of the Indian society for a male child and lower tax collections….reports Asian Lite News
Highlighting the major achievements of the current fiscal — the impact of GST, India’s egalitarian export structure, the preference of the Indian society for a male child and lower tax collections — the Economic Survey 2017-18 has highlighted 10 new facts about the Indian economy.
(1) There has been a large increase in registered indirect and direct taxpayers: A 50 per cent increase in unique indirect taxpayers under the GST compared with the pre-GST system. Similarly, there has been an addition (over and above trend growth) of about 1.8 million in individual income tax filers since November 2016.
(2) The formal non-agricultural payroll is much greater than believed: More than 30 per cent when formality is defined in terms of social security (EPFO/ESIC) provisions; more than 50 per cent when defined in terms of being in the GST net.
(3) The prosperity of the states is correlated with their international and inter-state trade: states that export more internationally, and trade more with other states, tend to be richer. But the correlation is stronger between prosperity and international trade.
(4) India’s firm export structure is substantially more egalitarian than in other large countries: The top one per cent of Indian firms account for 38 per cent of exports; in all other countries, they account for a substantially greater share (72, 68, 67, and 55 per cent of exports in Brazil, Germany, Mexico, and US, respectively). And this is true for the top five per cent, 10 per cent, and so on.
(5) The clothing incentive package boosted exports of ready-made garments: The relief from embedded state taxes (ROSL) announced in 2016 boosted exports of ready-made garments (but not others) by about 16 per cent.
(6) Indian society exhibits strong son “Meta” preference: Parents continue to have children until they get the desired number of sons. This kind of fertility-stopping rule leads to skewed sex ratios but in different directions.
(7) There is substantial avoidable litigation in the tax arena which government action could reduce: The tax department’s petition rate is high, even though its success rate in litigation is low and declining (well below 30 per cent). Only 0.2 per cent of cases accounted for 56 per cent of the value at stake; whereas about 66 per cent of pending cases (each less than Rs 10 lakh) accounted for only 1.8 per cent of the value at stake.
(8) To re-ignite growth, raising investment is more important than raising saving: cross-country experience shows that growth slowdowns are preceded by investment slowdowns but not necessarily by savings slowdowns.
(9) Own direct tax collections by Indian states and local governments are significantly lower than those of their counterparts in other federal countries: This share is low relative to the direct taxation powers they actually have.
(10) The footprint of climate change is evident and extreme weather adversely impacts agricultural yields: The impact of weather is felt only with extreme temperature increases and rainfall deficiencies. This impact is twice as large in unirrigated areas as in irrigated ones.
According to the survey tabled in Parliament on Monday by Finance Minister Arun Jaitley, asset valuations (price-equity ratios) have a greater risk of sharp corrections, the faster and higher they climb in the economic cycle.
“Simultaneously high valuations of both bonds and equities tend to be briefly lived because they suffer from an acute tension: if future earnings and economic growth are so bright, justifying high equity prices, interest rates cannot be forever so low,” the Survey highlighted.
“If interest rates rise — or if markets even sense that central banks will need to shift their stance — both bond and equity prices could correct sharply,” it added.
The Survey explained that even if asset prices correct, the impact on growth would be far smaller than it was in 2007-09, because advanced countries are far less vulnerable now than they were a decade ago.
However, according to the Survey, there would be some consequences like forcing advanced country consumers to cut back on their spending due to a large decline in wealth, which in turn would lead firms to curtail their investments.
“And if this happens, monetary and fiscal policies would have much less room for expansionary manoeuvre since interest rates are already low while government debts are high,” the Survey said.
It added that there could also be significant political implications of the decline in asset prices.