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Agri sector reforms need of the hour to boost economic growth of India
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Monday, 21 January, 2019, 12 : 00 PM [IST]
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Our Bureau, New Delhi
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Continuous reforms in the agriculture sector to improve farm productivity and income levels and increased disposable incomes of the middle class vis-a-vis rationalisation of the direct taxes would give a further boost to the overall economic growth of the country.
This was stated by Rajeev Talwar, president, PHD Chamber of Commerce and Industry, while releasing a press statement on expectations from the interim Budget, which will be presented by finance minister Arun Jaitley on February 1, 2019.
“The last five Budgets of the present government have focussed on each and every segment of the economy, and the intent of the government has been to ensure the welfare of every citizen of India. Going ahead, we look forward to the continuation of the dynamic reforms in the forthcoming Budget also,” he added.
The consistent indirect tax revenue growth, along with the reduction in the GST (Goods and Service Tax) rates by the government, indicated that the tax base was widening and economic activity was rapidly expanding in India.
At this juncture, the economy needs bolder measures to boost the investment environment and to trigger demand growth to the next level.
“The time has come to rationalise the direct taxes, starting from reduction in corporate tax to a level of 25 per cent for all corporate tax payers, without any turnover criteria. This will provide a boost to economic growth and would result in the widening of the direct tax net, the enhancement of collections and the promotion of compliance further,” said Talwar.
“Income up to Rs 3.5 lakh should be considered for tax exemption, instead of the present Rs 2.5 lakh. The maximum personal income tax rate should be towards 25 per cent to increase the personal disposable income, which will boost demand in the economy. The maximum marginal slab should also be raised to Rs 15 lakh instead of Rs 10 lakh,” he added.
The low-hanging fruit will be to examine the tax measures taken by the NDA-I government and index them for inflation between 2004 and 2015. These will, by themselves, cause a spurt in demand in all sectors of the economy.
“It is a settled principle that a reduction in the tax rate widens the tax net and promotes compliance,” Talwar said.
“As international experience shows, start-ups have been major employment creators in most of the economies. In India too, start-ups have made good strides to foster a new business environment. Going ahead, the government should provide an exemption from angel tax to the start-ups to attract more and more innovative minds in entrepreneurship,” he added.
“We appreciate the government for maintaining macro-economic stability in a highly uncertain global economic environment. We are proud that India is the fastest-moving economy in the world economic system. The credit certainly goes to the prime minister and finance minister,” said Talwar.
“The macro-economic environment has improved significantly during the last four years. Inflation has been contained remarkably, fiscal consolidation is on the right path and foreign investment flows are growing year after year,” he added.
“In the last few years, the government has undertaken a plethora of reforms for each and every segment of the population, starting with Make in India. The implementation of GST is the foremost, and perhaps the biggest, tax reform since independence,” said Talwar.
At the global charts, the Indian economy is looking remarkably attractive due to its performance in the last five years. The improvement in the Ease of Doing Business from 142nd in 2014 to 77th in 2019 is the significant outcome of the diligent efforts of the government towards improving the business environment in the economy. What needs to be accelerated is a much greater interaction with Indian businesses at the highest level in the Government of India.
In the last four years, the government has been making continuous efforts to uplift industrial growth, which has increased significantly from 3.8 per cent in financial year (FY) 2014 to 5.5 per cent in FY 2018 and is expected to be 7.8 per cent in FY 2019.
“To bolster the industrial sector further, double-digit manufacturing growth, with increased participation of manufacturing sector MSMEs (micro-, small and medium enterprises), would create maximum opportunities for employment for the growing young workforce in India,” said Talwar.
Land reforms, such as the increase in the lease period and the creation of land banks for the use of industry, should be strengthened. Further reforms in labour laws and an emphasis on productivity are required to facilitate the manufacturing firms to enhance their competitiveness, although tenure employment is a great step forward.
“Continuous reforms in the housing and construction sectors would definitely create employment opportunities for millions of unskilled, semi-skilled and skilled workers. It should be noted that urbanisation has the potential to shift the disguised unemployment in the agriculture sector to construction activities,” said Talwar.
“The agriculture export policy of the government is very encouraging and has the potential to double the agricultural exports from the present $30 billion-plus to $60 billion-plus by 2022. Further reforms in rural infrastructure logistics and a cold chain would help in increasing the level of food processing and rural entrepreneurship. These would lead to increased participation in the global agriculture and food exports,” said Talwar.
The increase in public investments in agricultural infrastructure would attract private investments in cold storage, warehousing and supply chain of agricultural produce in order to reduce food wastage and get them to urban citizens at moderate rates. It shall also raise the returns to agriculturists,” he added.
“The current level of food wastage of over 25 per cent should come down to below 10 per cent,” Talwar said.
Credit availability to small and marginal farmers would enable them to adopt farm techniques, diversification in the crop pattern and increase in farm productivity.
“The infrastructure sector has a huge untapped potential and could be the main driving force for achieving double-digit economic growth. To facilitate further infrastructural development, the strengthening of integrated public transport projects, such as roadways, railways and waterways, would reduce the logistics and time costs to businesses and enhance employment creation. The privatisation of railway and road transport on the lines on the aviation industry is the answer for the future,” said Talwar.
Tourism is the low-hanging fruit for both the Centre and the state governments. Over 25 million Indians travelled abroad in 2018 and domestic tourist trips numbered 180 crore trips in 2018. This is the largest investment market in India, which has a larger number of stakeholders than even the stock exchanges in India. It is time to give this a further boost in private sector investment by not considering it a luxury.
Focus on twin merit goods of education with skill development and basic health with safety should continue with a longer-term vision.
“Education expenditure as a percentage of the GDP needs to be increased to the level of six per cent of the GDP. There should be a school in the radius of 1km and a college in the radius of 10km in the next five years,” said Talwar.
“But that should also mean easier private sector investment rules for teacher training facilities. Today, we are increasing the number of schools, but there are fewer teachers of a modest calibre,” he added.
“Health expenditure as a percentage of the GDP should be increased to 2.5 per cent of the GDP. For the inclusive health facilities, there should be a health centre in the radius of 1km and a good state-of-the-art hospital in the radius of 5km,” said Talwar.
For all the above sectors to come of age, India needs to be a more tax compliant nation. For this reason, it is time to invest in Big Data analytics to ensure that all potential taxpayers pay all the taxes that they should be paying. And it should not be done through raid Raj or tax terrorism, but with the help of data mining and making an example of major offenders and doing away with exemptions.
“We look forward to a dynamic, inclusive and pragmatic budget on February 1, 2019,” concluded Talwar.
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