ECONOMIC SURVEY PRIMER

The Survey touched several economic policy issues. A few of them are excerpted below:

BENEFITS OF GST

Nearly all domestic indirect tax decisions to be taken jointly by the Centre and the states

Tax credit will deter non-compliance and foster compliance

Will eliminate most physical restrictions and all taxes on inter-state trade

CHALLENGES AHEAD FOR GST

Rate structures on alcohol, petroleum and energy products, electricity, and some land and real estate transactions have scope for improvement

Bringing electricity into the GST framework will improve competitiveness of industry, as taxes on power get embedded in manufacturers’ costs

Inclusion of land and real estate and alcohol in GST will improve transparency and reduce corruption

ON DEMONETISATION

As of July, cash holding is about ~3.5 lakh crore, 20 per cent less than what might have been the case had pre-demonetisation trends prevailed

Immediate post-demonetisation surge (in digital transactions) has moderated in some cases; the level and pace of digitisation are still substantially greater than before the note ban

Average income of new taxpayers (~2.7 lakh) not far above the tax threshold of ~2.5 lakh, so the immediate impact on tax collections was muted

IMPACT ON AGRICULTURE

Distress in agriculture sector can be addressed by reducing production risks through assured irrigation, better seeds (including GM seeds), allowing greater role of market forces and ending stock limits

No role of demonetisation on the farm markets and lowering of value of crops despite cash shortages in rural areas

Lower than remunerative price for farmers due to absence of robust marketing infrastructure across the entire value chain and excessive profiteering by middlemen

INFLATION

Decline in inflation is impacting economy, which is yet to fully recover

RBI has overestimated inflation by more than 100 basis points in six quarters of the total 14 quarters they had projected for

Even when food inflation rises, overall inflation is unlikely to go back to pre-2014 levels