The government has set for itself the twin challenges of economic growth and job creation for the younger underemployed generation.
The survey recommends sweeping reforms in taxes, expenditure management, fiscal responsibility, and regulatory controls to achieve these objectives.
It also sets an ambitious agenda for freeing supplies of agricultural produce from the clutches of middlemen to the benefit of big retail and food processing majors, in order help ease inflation and enhance farm incomes. However, it concedes the enormity of the task at hand in the face of deficient rainfall this season.
Despite the ambitious roadmap, the market did not seem to buy much of the survey’s pious intentions, falling a further 137 points at the close of Wednesday’s trading after plummeting 517 points a day earlier.
Finance secretary Arvind Mayaram summed up the survey’s objectives in a foreword thus: “The survey conveys a sense of urgency about the course the economy should take not just to recapture the growth momentum fast, but also to end the longstanding structural problems that undermine the economy’s long term potential.”
Targeting 5.4 per cent to 5.9 per cent GDP growth for current fiscal, going up to 7 per cent to 8 per cent in two years, Jaitley’s agenda seems to centre on rebuilding investor confidence both at home and abroad by bolstering the exchequer and initiating reforms in over a dozen areas.
On taxation, the survey hints at ushering in a predictable regime, a euphemism for ending retrospective taxes dreaded by foreign investors and domestic industry alike.
Similarly, the survey makes a case for rolling out the goods and services tax (GST) with a single rate to begin with, while merging the central board of direct taxes (CBDT) and central board of excise and customs (CBEC) under a single authority, as suggested by the Parthasarathi Shome committee on tax reforms.
It also stresses on lowering corporate tax rates and dividend distribution tax, bringing them on par with other emerging economies.
The survey pointed out, “High taxation of firms hinders the process of capital formation and ultimately results in reduced wages.”
The 370-page document recommends overhauling of public finance administration, with predefined accountability and appropriate penalties for deviations to restore government finances to good health.
As part of these reforms, the survey also proposes to do away with the difference between plan and non-plan expenditu-re by bringing central finances under the exclusive jurisdiction of the finance ministry, and curtailing the role of planning commission. Instead, it proposes the setting up of a productivity commission to analyse the outcomes of government spending.
It also advocates direct transfer of subsidies to intended beneficiaries on the back of biometric cards, revamped aadhar cards or in accordance with the national population register.
It proposes a grandiose plan for a unified market for food items to tackle double-digit inflation, remove supply-side bottlenecks, and free farmers from the clutches of touts and middlemen at mandis by allowing them the freedom to sell their produce anywhere and at any price they find profitable.
The move should also facilitate big retail like Reliance and Walmart, besides major food processing companies in farm-to-fork deliveries while reducing the stress on state-owned Food Corporation of India from carrying excess stocks of foodgrains at huge costs.
The survey also hints at rolling out a price stabilisation fund for farm produce given that seasonal edible oils, pulses and fruits and vegetables have contributed most to retail inflation.It makes a case for sweeping legislative, regulatory and administrative changes to “suit a market economy like India”, by enumerating areas restricted to private investment and making governance predictable for the foreign and domestic investors.
The survey advocates repeal of archaic laws and enhance the government’s capacity to address market failures.Proposing single window clearance for all FDI and domestic proposals, it also floated the idea of easing movement of capital across borders by bringing about changes in FRBM Act. This would ease outbound FDI in critical and lucrative a1reas for Indian companies.
The survey emphasises the need to link RBI’s monetary policy with inflation management, indicating the government’s acceptance of the Urjit Patel committee’s recommendations on monetary policy reforms for targeted inflation management.
While the survey projects GDP growth at 5.4–5.9 per cent, real growth is expected to be on the lower side.