August 04, 2016
A quick summary of all the sessions that happened during Day One of the Swarajya — Indic Academy India Economic Seminar.
Between 30-31 July, Swarajya— in collaboration with the Indic Academy and Public Policy Forum of IIM-Bangalore— organised the India Economic Seminarwhich had sessions on specific themes of economics such as political reforms, taxation and public-private partnership.
The seminar took place at the IIM-Bangalore campus. Several participants attended the event with the attendees being from, and outside, IIM-Bangalore.
The seminar was anchored by the head of Indic Academy’s ‘Indian Economic Studies’, Dr V. Anantha Nageswaran who was also the first one to give a presentation on India’s growth prospects. Dr Nageswaran was followed by Mukul Asher, Seetha and Manish Sabharwal among others.
Dr V. Anantha Nageswaran
Session 1
Speaker 1: Dr V. Anantha Nageswaran— Can India Grow?
Dr Nageswaran spoke on India’s economic growth prospects and feasibility of sustaining the growth for a meaningful period of time.
Dr Nageswaran started out by highlighting that two major ingredients that contribute to growth are missing in India’s case: primary education and women’s share in the GDP.
He suggested that the country needs more factories with the capacity to employ large number of workers. The longer they remain in business, they ought to employ more. However, this does not happen in India which is a cause of worry.
Unfortunately, most of the economic policies in India are being crafted without taking cognisance of the facts. The policy makers must make use of more concrete data before outlining policies.
Dr Nageswaran made an interesting comment on China. He observed that, for a long period, China kept its head low and did hard work playing by the international rules. Now, since it thinks it has acquired enough muscle and can frame its own rules, it openly flouts these same laws.
Coming back to India, he noted that in the last five years, exports have been declining as well as the propensity for an export-led growth.
What is more disappointing in Dr Nageswaran’s view is the dearth of important components in policy execution of areas like primary school outcomes, higher education, healthcare facilities and banking.
Although he commended the political dispensation for setting economic targets to succeed, he also felt that those in the government end up focusing more on targets rather than on the processes of how to get there.
Dr Nageswaran lamented that we are the only country that believes that the rules of economics do not apply to us because we are different from the others.
He opined that for a country of India’s size, diversity and political complexity, any fundamental reform must emerge as a top-down effort— similar to the millions of marginal revolutions that characterised China’s growth over the past three decades.
The government should whole-heartedly clasp the principle of under-promise and over-delivery. More importantly, India should stop obsessing about China. The appropriate growth strategy, in his view, is to accept five to six percent growth as the trend growth, while pursuing higher rates of growth speculatively, and change the structural deficiencies.
Speaker 2: Mukul Asher on GST— Rationale, Design And Implementation Challenges
Professor Mukul Asher’s presentation concentrated on the basis of the Goods and Services Tax (GST) in the framework of the Indian economy, and focused on the key design issues and implications for the economy, businesses and tax administration.
From the last decade, GST has been in the news for several reasons ranging from the game-changing concept in economy to the question of whether the Indian political system has the will for implementation of GST.
However, with the law being tabled in the Rajya Sabha after all the parties reached a consensus, the bill is closer to fruition than ever.
Prof Asher started by saying that, on the evolution pyramid, the GST is the most complex and at the highest level. In his view, GST will better the accounting standards in India and will also be a huge competitive advantage for the country.
He tried to counter the narrative prevalent in the intellectual circles regarding the nature of the GST. It says that the GST will be regressive. Prof Asher doesn’t think so. He said that the GST will, in fact, reduce the regressiveness of the current Indian tax system which is a remnant of our socialist economy, and favours goods over services. Until 1994, our lawmakers didn’t even think of taxing services. Today, service taxes are growing faster than excise collections.
Prof Asher believes that India’s GDP will expand by 0.1 to 0.3 percent in the next three years on sustainable basis. This is his hunch and not based on any economic model.
But he also warned that the GST rate should not only be grounded on ramping up revenue but how competitive it makes our system in the world. The Organisation for Economic Co-operation and Development tax average is 18.7 percent. The GST rate beyond that would hurt India’s competitiveness.
Professor Asher expressed his dissatisfaction at the fact that, in the GST draft bill, the exemption for the North East state was lower instead of being higher. He also suggested that the draft bill needs to improve the transition phase as it has not been addressed extensively in the draft bill.
Prof Asher finished his presentation by saying that it is very important that the Indian tax officials change their attitude. Unless things change on the ground, merely passing a law won’t help improve our tax system.
No comments:
Post a Comment