The k2p blog

The Indian budget will be presented today and the annual Indian Economic Survey (which forms the basis for the budget) is also out. The Economic Survey is the responsibility of the Chief Economic Adviser to the GoI (this year Arvind Subramanian).

india-economic-survey-2016-17

The budget itself is expected to be mildly expansionist (especially after the jolting brake applied to the economy by the demonetisation circus of the last few months). Certainly some black money was removed from the system but this may be a one-off affair. Certainly, from the anecdotes I hear, the generation of “new” black money has not been slow to start. Maybe demonetisation will have to become an annual affair – or a regular occurrence every so often. But, no doubt, India has made a step-change in the level of electronic transactions being used. It has also brought a huge number of people into the banking system. One of the main concerns for the government is that the cash economy has allowed so many to remain invisible and completely outside the tax base. Considering that only 7 of every hundred voters is even registered for tax, it was imperative for the government to reduce the huge number of the tax-invisible. This they probably have done.

The Economic Survey itself highlights “8 interesting facts”:

1. Indians on The Move – New estimates based on railway passenger traffic data reveal annual work-related migration of about 9 million people, almost double what the 2011 Census suggests.
2. Biases in Perception – China’s credit rating was upgraded from A+ to AA- in December 2010 while India’s has remained unchanged at BBB-. From 2009 to 2015, China’s credit-to-GDP soared from about 142 percent to 205 percent and its growth decelerated. The contrast with India’s indicators is striking.
3. New Evidence on Weak Targeting of Social Programs – Welfare spending in India suffers from misallocation: as the pair of charts show, the districts with the most poor (in red on the left) are the ones that suffer from the greatest shortfall of funds (in red on the right) in social programs. The districts accounting for the poorest 40% receive 29% of the total funding.
4. Political Democracy but Fiscal Democracy? – India has 7 taxpayers for every 100 voters ranking us 13th amongst 18 of our democratic G-20 peers.
5. India’s Distinctive Demographic Dividend – India’s share of working age to non-working age population will peak later and at a lower level than that for other countries but last longer. The peak of the growth boost due to the demographic dividend is fast approaching, with peninsular states peaking soon and the hinterland states peaking much later.
6. India Trades More Than China and a Lot Within Itself – As of 2011, India’s openness – measured as the ratio of trade in goods and services to GDP has far overtaken China’s, a country famed for using trade as an engine of growth. India’s internal trade to GDP is also comparable to that of other large countries and very different from the caricature of a barrier-riddled economy.
7. Divergence within India, Big Time – Spatial dispersion in income is still rising in India in the last decade (2004-14), unlike the rest of the world and even China. That is, despite more porous borders within India than between countries internationally, the forces of “convergence” have been elusive.
8. Property Tax Potential Unexploited – Evidence from satellite data indicates that Bengaluru and Jaipur collect only between 5% to 20% of their potential property taxes.

Trade IES 2016-17

Tags: Budget, India Economic Survey

This entry was posted on February 1, 2017 at 8:04 am and is filed under Economics, Economy, India. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.