Economic Survey II highlights several policy issues

A few of them are excerpted below:

Benefits of GST 

• Nearly all domestic indirect tax decisions to be taken jointly by the Centre and the states
• Tax credit will deter non-compliance and foster compliance
• Will eliminate most physical restrictions and all taxes on inter-state trade

Challenges ahead for GST

• Rate structures on alcohol, petroleum and energy products, electricity, and some land and real estate transactions have scope for improvement
• Bringing electricity into the GST framework will improve competitiveness of industry, as taxes on power get embedded in manufacturers’ costs 
• Inclusion of land and real estate and alcohol in GST will improve transparency and reduce corruption

On Demonetisation
 

• As of July, cash holding is about Rs 3.5 lakh crore, 20 per cent less than what might have been the case had pre-demonetisation trends prevailed 
• Immediate post-demonetisation surge (in digital transactions) has moderated in some cases; the level and pace of digitisation are still substantially greater than before the note ban
• Average income of new taxpayers (Rs 2.7 lakh) not far above the tax threshold of Rs 2.5 lakh, so the immediate impact on tax collections was muted

Impact on Agriculture

• Distress in agriculture sector can be addressed by reducing production risks through assured irrigation, better seeds (including GM seeds), allowing greater role of market forces and ending stock limits
• No role of demonetisation on the farm markets and lowering of value of crops despite cash shortages in rural areas
• Lower than remunerative price for farmers due to absence of robust marketing infrastructure across the entire value chain and excessive profiteering by middlemen

Inflation

• Decline in inflation is impacting economy, which is yet to fully recover 
• RBI has overestimated inflation by more than 100 basis points in six quarters of the total 14 quarters they had projected for 
• Even when food inflation rises, overall inflation is unlikely to go back to pre-2014 levels