Economic Survey
- The Department of Economic Affairs, Finance Ministry of India presents the Economic Survey.
- The Chief Economic Adviser, Finance Ministry guides in its preparation.
- It is presented in the parliament every year, just before the Union Budget.
- The survey is the finance ministry’s view on the annual economic development of the country over the previous 12 months.
- It highlights the prospects of the economy in the short to medium term.
- It also summarizes the performance on major development programs, and highlights the policy initiatives of the government.
10 New Economic Facts on Indian Economy
- The Economic Survey highlights 10 new economic facts on the Indian economy based on the new data. They are as follows:
- Goods and Services Tax - GST has led to a 50% increase in the number of indirect taxpayers.
- There has been an increase in individual income tax filers as well.
- There has also been a large increase in voluntary registrations.
- This is especially in regards with small enterprises that buy from large enterprises.
- Availing the benefit of input tax credits was a major reason.
- The fear of undermined tax collections for states due to GST transition is allayed.
- Accordingly, the distribution of the GST base among the states got closely linked to the size of their economies.
- Formal Sector payroll - India’s formal sector, especially formal non-farm payroll, is substantially greater than believed.
- "Formality" was earlier defined in terms of social security provisions like EPFO/ESIC.
- It is now being defined in terms of being part of the GST net.
- This has increased the formal sector payroll share to 53% from the earlier 31% of the non-agricultural work force.
- Exports of states - Economic Survey, for the first time, deals with data on the international exports of states.
- The data indicates a strong correlation between export performance and states’ standard of living.
- States that export internationally and trade with other states were found to be richer.
- 5 States of Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana account for 70% of India’s exports.
- India’s internal trade is about 60% of the GDP.
- This is comparatively greater than last year’s survey as well as other large countries.
- India’s exports - The largest firms in India account for a much smaller share of exports than in other comparable countries.
- Evidently, top 1% of Indian firms accounts only for 38% of exports.
- This is unlike the 50-70% as in countries like Brazil, Germany, Mexico and USA.
- The relatively smaller share by larger firms in India makes the firm export structure of India more egalitarian.
- This is indicative of a better contribution from the smaller firms than in other countries.
- Ready-made garments - The Rebate of State Levies (ROSL) was announced in 2016.
- Under the RoSL, the Centre gives garment exporters refunds against all the levies they shell out at the state level.
- The relief was offered under the duty drawback scheme as part of the package for the garments industry in the GST regime.
- The incentive package boosted exports of ready-made garments by about 16%.
- Male child preference - The survey highlighted that Indian society still exhibited a strong desire for a male child.
- It pointed out that most parents continued to have children until they get number of sons.
- The survey brings out that this was resulting in skewed sex ratios.
- Tax Litigation - There is substantial avoidable litigation in the tax arena which government action could reduce.
- The tax department's petition rate is high, but its success rate in litigation is low and declining (well below 30%).
- A smaller share of total pending cases accounted for a larger share of the money value at stake (due to the tax dispute). E.g.
- 0.2% of pending cases - 56% of the value at stake
- 66% of cases (each less than Rs 10 lakh) - 1.8% of the value at stake
- Growth and Investment - It was highlighted that growth in savings did not bring economic growth.
- But the growth in investment did bring a substantial growth to the economy.
- The survey thus emphasizes that raising investment was more important than raising savings.
- Direct tax collection - Direct tax collections by States are significantly lower than those of their counterparts in other federal countries.
- Indian states and other local governments empowered for tax collection realise lesser collection than their actual potential.
- Climate change - Extreme temperature increases and deficiency in rainfall have been recorded as footprints of climate change.
- These have adversely impacted agricultural yields of the country.
- The impact was found to be twice as large in un-irrigated areas as in irrigated ones.
Source: PIB
Note: The following parts would be made subsequently.
