According to the Central Board of Direct Taxes (CBDT), the number of taxpayers earning more than Rs 1 crore has increased 68 per cent in the Financial Year (FY) 2017-18 to 1,40,000, which was 89,000 in the FY 2013-14. The number of taxpayers has increased by 80 per cent in this period. In FY 2013-14, 3.79 cr persons filed income tax returns, which increased to 6.85 cr. in the FY 2017-18. According to CBDT Chairman Mr. Sushil Chandra, direct tax and GDP ratio during the FY 2017-18 has been 5.98 per cent, which is the best in the last 10 years.
The share of the Centre in Goods and Services Tax (GST) will help in achieving the fiscal deficit target in the current financial year. The 50 per cent of the amount can be transferred to the cumulative fund of the centre for any year during 5 years if the amount of GST collection is not utilised in the State. This law is a tool for meeting deficit amount of GST collection. There is a hope for an increase of more than Rs 300 billion in direct tax collection. By the third week of October, the direct tax collection has increased 15.7 per cent on year-on-year basis to Rs 4,890 billion, which is more than 42 per cent of the direct tax collection target of the year. The government is expected to get Rs 800 billion from disinvestment, as there is a hope for some mergers and strategic sales before March 2019 which includes Air India’s ground handling unit and PFC’s disinvestment.
In the second quarter of the current financial year, the country’s gross domestic product (GDP) growth rate was 7.1 per cent, which is the lowest level of three quarters. The GDP growth rate in the first quarter was at a high level of four years at 8.2 per cent. Nonetheless, despite the GDP growth rate being reduced in the second quarter, India remains the fastest growing economy. China’s growth rate is 6.5 per cent in this period. The GDP growth during the first half of the current financial year was 7.4 per cent, which is more than 5.8 per cent of the same period of last year.
The growth rate of the manufacturing sector was 7.8 per cent in the second quarter, which was 8.7 per cent in the first quarter. Mr. Devendra Pant, Economist, India Ratings and Research, says that during the September quarter, the construction activities remains slow, but after passing of the month of October, its pace increases. Due to low growth in GDP, the pace of growth in agriculture, manufacturing, the service sector is sluggish. The reason for sluggishness in the agricultural sector is mainly bad response of monsoon, farmers not getting the capital in the times of need etc. Banks are avoiding distributing agriculture loan having a problem of mounting Non-performing Asset (NPA). In recent months, the amount of NPA in the agriculture sector has increased significantly. At present, the bank is facing capital problem, credit risk, fraud, mounting NPA etc. Despite this, the result of the second quarter of the current financial year for its public sector banks was mixed. Some public sector banks have come in profit in the second quarter, whereas some are still in loss. State Bank of India earned a profit of Rs 945 cr in the second quarter, Canara Bank has been successful in earning a profit of Rs 300 cr in the second quarter. However, the bank recovered 1,700 cr during this period, but most of the money was used for the provision in connection of NPA.
The Central Government has made a number of improvements to encourage investment in the country and also make ways for “Ease of Doing Business”. Last year, in the ranking of “Ease of Doing Business”, India had recorded a record number of 30 points to get a 100th place. In 2019, India wanted to get the 50th place in the global ranking of “Ease of Doing Business”, but it could get the 77th position among 190 countries.
Due to economic reforms, the World Bank termed India as the economy to make significant improvements for the third consecutive year. Due to the corrective steps taken by the government, India could reach the 77th place from 142th place within four years. According to this report, India has been the fifth best-performing country in the world in terms of improvement in the business environment.
The World Bank has placed India at 10th place among the most reforming economies in this matter. In order to assess the improvement in the business environment, the ten criterias that the World Bank has put in, India has improved in six norms. These norms include an introduction of business, construction permit, obtaining electricity facility, getting loans in an easy way, paying taxes, cross-border trade, implementing contracts in reality on easier terms and dealing with the bankruptcy process. If India’s ranking improves, global rating agencies can give a better rating, which will boost investors’ confidence in India and the business environment in the country will also be in a better position.
The number of people making income-tax deposits in the country is increasing. At the same time, there has been a huge increase in the income tax deposit, but tax evasion is still being done on a large scale in the country, including those who are well-educated people. Reduction in unnecessary expenses, increase in direct taxes, disinvestment etc. can help the government succeed in keeping the fiscal deficit in line with the target. The reasons for which GDP growth rates have decreased in the second quarter may be called temporary. The weakening of the monsoon, rupee depreciation, the rise in the price of crude oil, the uncertain environment in the country etc. should be considered as a temporary reason.
The speed of recovery in the banking sector is on the rise. The merger of some banks will strengthen the position of weaker banks. The government is going to provide relief to the weaker banks. By the end of the FY 2019, there is a possibility of the increase in the number of profitable Public Sector Banks. In order to facilitate the business, the Modi Government is working with the World Bank to maximise the reforms. Next year, India has the potential to reach the top 50 countries category.
By looking at the ongoing reforms in the economic sector, the NITI Aayog has set a target in strategic documents of achieving 8 per cent growth rate in each year till 2022-23. The Aayog wants the Indian economy to be made 4 trillion US $. The government will also try to get 9 per cent growth rate instead of 8 per cent. On the basis of economic reforms made in the last 4 years, the estimation of the NITI Aayog cannot be said exaggerated. It is worth mentioning that the NITI Aayog has presented a strategic document to realise the dream of “New India”. Accordingly, the investment will be increased from the existing 29 per cent of GDP to 36 per cent by 2022-23.
To achieve this, the government will invest in infrastructure sectors like health, education, irrigation, electricity, road construction etc.
In this context, the government has also targeted to increase the export of goods and services from the current $478 billion to $800 billion. There is a proposal to emphasise on the agriculture sector, to make farming an entrepreneurship, to formulate a code of labour laws and promote the allied activities and Small & Medium Enterprises (SME) for inclusive development of the country.
(The author of the article is the Chief Manager in State Bank of India’s Economic Research Department.)