Economic Highlights
New Delhi, 6 March, 2017
GDP ‘Growing’
JUNK IT, ADOPT NEW INDICATOR
By Shivaji Sarkar
The GDP is said to be growing. The rate has been varying with
different agencies. All, however, remains, around 7 per cent – plus minus 0.25
to 0.5 per cent. The latest Central Statistical Office (CSO) figure of 7 per cent
is within the range.
It is better not to link it up with demonetisation. The
figures, on the one hand show an inherent strength of the Indian economy and on
the other raise certain questions about the concept of GDP itself. Possibly the
GDP is not the complete indicator, though broadly it provides a path but does
not exactly tell all about the bumpy road conditions.
In India,
data generation is largely considered credible. But the query can be whether
GDP figure could have been better if demonetisation was not there. Even the
Economic Survey 2016 (ES) is not sure about the impact of ‘note bandi’ but doesn’t
rule it out either. However, the “eight interesting facts” mentioned in it tell
a lot. It says annual work-related migration has doubled since 2011 to about 90
lakh people. This shows that despite MGNREGA, people have to move out to look
for jobs. The Labour Bureau statistics also indicate fewer job creations than
targeted.
The credit rating of China to AA in 2010, despite fall
in its growth shows international bias, the ES says. India, despite improvement in its
indicators has remained unchanged at the lowest BBB. The peak of the growth
boost due to the demographic dividend is fast approaching with southern States
peaking soon and those in the hinterland peaking later.
The weaknesses are weak targeting of social programmes.
Welfare spending suffers from misallocation the districts with largest number
of poor people suffer from the greatest shortfall of funds. In fact, the districts,
which account for the poorest 40 per cent receive 29 per cent of the total
funding. India,
says the ES, has “weak tax base”. There are only seven taxpayers for every 100
voters ranking the country 13 among 18 democratic G- 20 peers. It states
property tax potential is also unexploited.
This perception of the ES is incorrect. It only speaks of
income-tax. It should be noted that the average income of Indians as per
various reports, including the Arjun Sengpta panel, is extremely low. The
inflationary situation from 2009 to 2014 had further eroded the income value.
While calculating tax base the indirect tax payment is not included. Indirect
taxes –excise, customs, cess, profession tax, local levies, tolls etc - are
approximately over 40 per cent of one’s income. It is repeatedly said that even
a beggar in this country pays at least 40 per cent as taxes. It has thus a tax
base of over 47 per cent and not 7 per cent, as the ES stresses.
The tax one pays on property registration is often over 20
per cent of the base price. The ES arguments need correction. In many cases
there are multiple taxes. Take the example of automobiles. Apart from various
taxes, road tax, bulk parking charge levied at the time of sale a cess of 2 per
cent per litre is realised on the sale of petroleum fuel ostensibly for highway
construction. But as one moves onto the highways again hefty toll, said to be
the highest in the world, is charged.
Nobody has studied the impact of multiplicity of taxes on
prices and inflation and growth. Besides, one also does not understand why when
large chunk of the road or kisan vikas cess
remains unutilised, why one is made to pay the toll. In fact, it begins with
capitation fee at nursery school admissions and continues till highest medical
education.
GDP increases with every levy but that does not mean the
country is progressing. In fact, the world over it has been observed that GDP
growth does neither mean a comfortable situation nor progress of a nation and
its people. This country also has possibly the world’s biggest illegal income
system. It is just not by businesses. Many business houses are forced to do
some of it by those people who the government employs to check it. Various
trade associations unofficially state that small and medium business units’
profit is limited to the unpaid taxes. In hushed tones, they also say they have
to shell out “doles” to various kinds of enforcers.
India can be more robust if the travel
can be seamless. It is not just hampered by each toll gate, where waiting time
is 10 to 50 minutes, causing delays and wastage of fuel. Every State boundary
calls for levying of an additional road tax and road barriers giving the
impression one is entering from one enemy territory to another. In Europe (EU)
one smoothly crosses nations.
Further, there are police barriers almost everywhere, adding
to further delays and inconveniences. Of course, these also “add” up to the GDP
as it is common knowledge that money exchange hands. There are official beggars
who would not stop without extorting. This also leads to higher prices and is
virtually a direct tax on the consumer. Does it add to the progress?
The Narendra Modi government has initiated many processes to
free the country of corruption. It has achieved a bit of it through measures such
as direct benefit transfer. But it has not changed the functioning of State
police and other agencies, including property registration or tax authorities. Demonetisation,
many would vouch for, had been windfall for numerous officials and some were
caught too.
Every district border is a potential point of extortion by
the policemen for all commercial vehicles, including taxis, which are extorted
even in NCR be it Gurgaon, Jhajjar in Haryana or places in Uttar Pradesh, Madhya
Pradesh or Rajasthan. No truck can pass a State border without paying the
gratification fee, for which “receipts” are also issued.
Again for all this, GDP may increase and so may be income
disparity but as a nation little could be done to free it of the blatant
illegal and unethical operations. Can any digitisation stop the official
extorters in various enforcement agencies?
Yes, the country has the potential to move faster if these
illicit barriers across the nation are removed. Stringent rules will not solve
the problem. It only adds to more illicit ways and higher gratification. The
nation needs to discuss these issues threadbare at all fora and ensure real
progress. It needs to do away with all barriers to create a new gross progress
indicator (GPI) and junk the GDP. ---INFA
(Copyright,
India News and Feature Alliance)
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