Economic Survey primer: Here are short notes on key economic policy issues

The Survey had a series of short notes on economic policy issues. A few of them are excerpted below:

On GST

• The goods and services tax (GST) GST Council offers a model “technology” of cooperative federalism to apply to many other policy reforms.
• There has been a 50 per cent increase in the number of indirect taxpayers; and a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of input tax credits.
• The distribution of the GST base among the states is closely linked to the size of their economies, allaying fears of major producing states that the shift to the new system would undermine their tax collections.

Fiscal federalism

• Long-run institutional development co-evolves with fiscal accountability involving, perhaps requiring, a low and declining dependence on devolved resources and a high and rising share of direct taxes in total taxes. India’s second and third tiers of government tend to underperform relative to these standards.
• Perhaps there is a broader challenge — afflicting all tiers of the government — in the limited ability to collect direct taxes.
• To any suggestion of the Centre incentivising second and third tiers toward better direct tax performance, the natural rejoinder of these tiers could be: Quis custodiet ipsos custodes (“who will guard the guardians themselves”)?

Ease of doing business

• The next frontier on the ease of doing business is addressing pendency, delays and backlogs in the appellate and judicial arenas. 
• These are hampering dispute resolution and contract enforcement, discouraging investment, stalling projects, hampering tax collections, but also stressing taxpayers, and escalating legal costs.
• Coordinated action between government and the judiciary — a kind of horizontal cooperative separation of powers to complement vertical cooperative federalism between the central and state governments — would address the “law’s delay” and boost economic activity.
• Downsizing or removing original and commercial jurisdiction of high courts, and enabling the lower judiciary to deal with such cases.

On gender

• The challenge of gender is longstanding, probably going back millennia, so all stakeholders are collectively responsible for its resolution. 
• India must confront the societal preference, even meta-preference for a son, which appears inoculated to development.
• Many of the gender outcomes are manifestations of a deeper societal preference, even meta-preference for boys, leading to many “missing” women and “unwanted” girls. 

Policy agenda 

The agenda for the next year consequently remains full: Stabilising the GST, completing the TBS actions, privatising Air India, and staving off threats to macroeconomic stability. 

Over the medium-term, three areas of policy focus stand out: 

• a. Employment: Finding good jobs for the young and burgeoning workforce, especially for women
• b. Education: Creating an educated and healthy labour force
• c. Agriculture: Raising farm productivity, while strengthening agricultural resilience

 

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