Economic
Highlights
New Delhi, 16 October 2017
EAC Vision
BLURRED, DAMPENS DIWALI
By Shivaji Sarkar
Notwithstanding Prime Minister’s Economic
Advisory Council (EAC) making moves to revive the economy, there are other
departments that possibly are working at cross purposes.
The focus of the new policy has to be the
rural self-reliant economy. It would create jobs, reduce dependence on
government, doles, reactivate the economy, and generate demand. It also needs
to emphasise that ban on selling of fire crackers at the nick of time, Diwali,
hurts the economy of millions. This imprudent decision should be reversed. It
leads to back-door sales and makes the policemen and inspectorate happy. Such
utopian ideas can never be implemented to dampen the festive spirit.
Not much should be read into the higher tax
collections. It is largely the impact of the implementation of the Seventh Pay Commission
recommendations and some stray pay hikes in the corporate. Overall direct tax
gains now at Rs 3.86 lakh crore, said to be 16 per cent higher, is not that a
large amount. It was Rs 4.06 lakh crore last year but also had Rs 79, 600 crore
refunds between April and September 2016.
The annual refunds are over Rs 1 lakh crore. The EAC has not included direct tax abolition
in its ten-point action plan. It includes economic growth, employment and job
creations, informal sector and integration, fiscal policy, public expenditure,
institutions of economic governance, agriculture and animal husbandry, patterns
of consumption and social sector.
During his monthly pragati meeting in September 2016, Prime Minister Narendra Modi
told the CBDT that taxpayer complaints (tax terror) had gone up. Income tax hardly
raises kitty for the government. It increases tax administration cost and rent
seeking. To reduce corruption, its abolition should be a priority. The biggest
bane of income tax is sharp reduction in purchasing capacity. It suppresses
demand all over.
Somehow despite rise in prices, there is a
tendency to ignore it as statistics show otherwise and the EAC must take
serious note of it. Some of the inflation is fueled by decisions of different
government departments. These include rail fares, fuel charges, metro fares, highway
and other tolls, parking charges, surreptitious raise in phone tariffs,
continuous rise in bank and compliance charges. These all are inflationary.
The aadhar link has an additional cost on
compliance costs at all levels, including expanding the aadhar backbone and
access costs. Linking aadhar to office attendance serves little purpose but
adding to the government expenditure and burdening the aadhar network. The EAC
has to advise the government to trust people and futility of surveillance of
every individual. It is against the concept of security.
It has missed an important aspect. It has
decided to look at government expenditure but it has not taken any view on
public transport policy and needs to keep its fares low. In Delhi, number of
buses, as per government report, is coming down every two months though riders
are increasing. Sharp metro fare hikes have reduced one lakh metro riders, soon
after the June hike and more after the October 10 hike. They are shifting to
rickety DTC bus services and those who can afford are commuting by private cars
choking vehicles. The solution is not in sharp parking charge hikes. That helps
the mafia and adds to inflation.
It was expected that the EAC would try to
remap the economy and change its focus. Agriculture and animal husbandry
remains its third last priority. It has to change. Further, EAC chief Bibek
Debroy was candid on many issues including whether jobs can rise or not during
his press briefing. This only hints at the critical situation. Job creations
take time and linked to gradual improvements. The EAC has not yet considered
how to make the farm sector the base of the economy. Jobs cannot be created by
reducing most of the 75 crore farm jobs. Of course, changing tack needs time.
Unless the focus changes to farm and rural
sector, the policy planners always would be in dilemma. It needs a detailed
discussion and new framework. Rural industries, khadi and the farm sector have
to re-integrate to create self-sufficient villages.
The EAC has to chalk out how MNREGA and
direct benefit transfer funds could be utilised to have self-sufficient
villages that would not be dependent on the government or the corporate sector.
Pricing of farm products is another key issue. The revival of the rural economy
is a must. Not so long ago, urban workers were looking to the village homes for
their financial support. It has changed of late. The trend has to be reversed.
The villages must not be begging.
It looks that the EAC is in a tearing hurry.
The reorientation from the British induced industry and corporate fixation is
not easy. Various lobbies that have enormously grown at the exploitation and
ignorance of the rural sector would not like this. These lobbies are demanding
stimulus once again, even as the post-2008 stimulus has ruined the banking
sector. Now that is being sought to be compensated with farm-loan waivers. None
of these is practical. On the one hand, industry stimulus robs the banks and on
the other farm-loan waivers rob the exchequer. There are benefits for political
parties but real farmers get little.
The EAC has been wise enough in rejecting
stimulus. It, however, has yet to come out with a detailed roadmap. One problem
is that it wants to do too much to keep too many happy. Attending to ten
different aspects would never be possible. It should seriously consider not keeping
its hands full. In fact, it need not ignore industry as also the informal
sector – closely linked to the rural and semi-urban economy – but all the same
has to find out the moorings of Indian economy in villages.
Debroy distrusts job figures and is right to
an extent. It is found that from July 2014 to December 2016, in the eight major
sectors – manufacturing, trade, construction, education, health,
information technology, transport, and accommodation and restaurant – only 6.41
lakh jobs were created against 12.8 lakh jobs from July to December 2013. The Prime
Minister’s Employment Generation programme (PMEGP) created 24.4 per cent less
jobs in new micro enterprises and small projects, from 428,000 in 2012-13 to
323,362 in 2015-16.
The Economic Survey (2016-17) indicates that
casualisation of jobs has adversely affected wages, employment stability and
social security of the workers. The new schemes have not added to
entrepreneurship much. The task is onerous. The EAC has to focus on a new
economic vision and set fresh standards. ---INFA
(Copyright, India
News & Feature Alliance)
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