India's GDP may rise, but little has been done to free it of illegal and unethical operations. Can digitisation stop the official extorters in various enforcement agenciesIJ The country can move faster if these barriers are removed
India’s gross domestic product (GDP) is growing. The rate has been differing with different rating agencies. It remains at around seven per cent — plus minus 0.25 per cent to 0.5 per cent. The latest Central Statistical Office (CSO) figure of a seven per cent GDP is within the range.
It will, hence, be better to not link it with demonetisation. The figures show an inherent strength of the Indian economy. On the other hand, it raises certain questions about the concept of GDP itself.
Possibly, GDP is not a complete indicator, though broadly, it provides a path. But it does not exactly tell all about the bumpy road conditions.
Data generation in India is largely considered credible. But the query can be whether GDP figure could have been better if demonetisation was not thereIJ Even the Economic Survey report 2016 (ES) was not sure about the impact of demonetisation. But it did not rule it out either.
But the ‘eight interesting facts’ mentioned in the ES speak volumes. 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. labour Bureau statistics too indicate fewer job creations than targeted.
The credit rating of China to AA in 2010, despite fall in its growth shows international bias, 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 the hinterland States peaking later.
The weak are weak targeting of social programmes. Welfare spending suffers from misallocation, districts with largest number of poor people suffer from the greatest shortfall of funds. Districts accounting for the poorest 40 per cent receive 29 per cent of the total funding.
India, ES says, has “weak tax base”. There are only seven taxpayers for every 100 voters ranking the country 13 among 18 democratic G 20 peers. It says property tax potential is also unexploited.
This perception of the ES is incorrect. It only speaks of income-tax. It should be noted that average income of Indians as per various reports, including the Arjun Sengpta panel, is extremely low. Inflationary situation from 2009 to 2014 further eroded 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 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 seven 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 two 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 a large chunk of the road or kisan vikas cess remains unutilised, one is made to pay the toll. In fact, it begins with capitation fee at nursery school admissions and continues till highest medical education.
The GDP increases with every levy but that does not mean the country is progressing. World over, it has been observed that GDP growth neither means 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 one smoothly crosses nations.
Apart there are police barriers almost everywhere adding to further delays and inconveniences. Of course, these also “add” to GDP as it is
common knowledge 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 progressIJ The Modi Government took initiatives to free the country of corruption. It has achieved a bit of it through measures like 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, came as a windfall for many officials. 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, 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 agenciesIJ Yes, the country has the potential to move faster if these illicit barriers are removed. Stringent rules will not solve the problem. It adds to more illicit ways and higher gratification.
The nation needs to discuss these issues threadbare and ensure real progress. It needs to do away with all barriers to create a new gross progress indicator and junk the GDP.
(The writer is a senior journalist)