Ex­ist­ing mid­dle class sub­si­dies and food, petroleum and fer­tiliser sub­si­dies as % of GDP

The Economic Times - - Companies: Pursuit Of Profit -

The cost of

In­dia will ap­proach, within four years, the peak of its de­mo­graphic div­i­dend as its work­ing age pop­u­la­tion plateaus. This means the pos­i­tive im­pact of de­mo­graphic div­i­dend on the over­all eco­nomic growth will slow down. How­ever, In­dia may not see the sharp growth de­cel­er­a­tions ex­pe­ri­enced by the East Asian coun­tries. As the fis­cal chal­lenges mount for the states be­cause of the Pay Com­mis­sion rec­om­men­da­tions and mount­ing pay­ments from the UDAY bonds, there is a need to re­view how fis­cal per­for­mance can be kept on track. Greater reliance will need to be placed on in­cen­tivis­ing good fis­cal per­for­mance, not least be­cause states are grad­u­ally re­pay­ing their obli­ga­tions to the Cen­tre, re­mov­ing its abil­ity to im­pose a hard bud­get con­straint on them. In­dia’s de­ci­sion to sharply raise taxes on petrol and diesel when oil prices were tum­bling has placed the coun­try among the world’s top league in im­pos­ing a car­bon tax to com­bat cli­mate change, the Eco­nomic Sur­vey said. It said In­dia in­creased petrol taxes 150% when crude oil price crashed. “In con­trast, the gov­ern­ments of most ad-vanced coun­tries have sim­ply passed on the ben­e­fits to con­sumers, set­ting back the cause of curb­ing cli­mate change. As a re­sult, In­dia now out­per­forms all the coun­tries ex­cept those in Europe in terms of tax on petroleum and diesel,” it said. The change in tax ex­ceeds what is rec­om­mended in Stern Re­view, a re­port on global warm­ing by economist Ni­cholas Stern.


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