Is an average 8 per cent growth over the next five years possible in India?
In January, it will be four years since the constitution of the NITI Aayog.
The institution which was to serve as a government ‘think tank’ has often been criticised for its failure to create a clear roadmap for India's growth.
Now, in a new document The Strategy for New India, the NITI Aayog has pitched for an average 8 per cent growth over the next five years to make India a $4 trillion economy in its 75th year of Independence.
The document highlights 41 key areas that it has identified for growth under four categories: drivers, infrastructure, inclusion and governance.
The strategy document comes several months after the NITI Aayog released its three-year action plan, and is expected to be followed by a 15-year vision document before the general elections in 2019.
According to the paper, growth can be accelerated by a number of measures across different policy areas.
Some of these are:
1. Raising investment rates to 36 per cent by 2022-23, from about 29 per cent in 2017-18: There has been a steady fall in private investment, which is likely to continue as investors wait and watch for the elections.
2. Increasing India’s tax-GDP ratio: At around 17 per cent it is low when compared to that of Brazil (34 per cent), South Africa (27 per cent) and China (22 per cent). India should aim to increase its tax-GDP ratio to at least 22 per cent of GDP by 2022-23. Efforts are needed to rationalise direct taxes for both corporate tax and personal income tax, says the document. The government has claimed that GST has been able to bring 55 lakh more entrepreneurs under the tax net. The Goods and Services Tax Council slashed tax rates for 23 commonlyused items from 18 per cent to 12 and 5 per cent, respectively.
3. Increase government expenditure: In 2016-17, the share of government capital expenditure (central and state combined) in total budget expenditure was 16.2 per cent, and the government’s contribution to fixed capital formation was close to 4 per cent of GDP. This needs to be increased to at least 7 per cent of GDP by 2022-23.
4. Two areas in which higher public investment will be easily absorbed are housing and infrastructure. This is easier said than done. The real-estate segment has been going through a tough phase, marked by slowing demand in some pockets. Several developers are also unable to complete their projects in time, following a cash crunch.
5. Easing FDI norms across sectors by 2022-23: Domestic savings can be complemented by attracting foreign investment in bonds and government securities.
6. The government should continue to exit central public sector enterprises (CPSEs) that are not strategic in nature.
7. Inflation needs to be contained within the stated target range of 2 per cent to 6 per cent. The government has been really lucky to have international oil prices on a downslide which will keep fuel prices down and lower the current account deficit.
8. Public sector banks’ governance reforms: Performance assessment of executives and increased flexibility in human resources policy are needed in light of the scams related to Nirav Modi and Mehul Choksi.
9. Focus on exports and manufacturing: Sadly, India has been unable to boost manufacturing despite the flagship “Make in India” campaign.
10. Work with states to ease labour and land regulations: In particular, introduce flexibility in labour provisions across sectors. The policies are more likely to remain on paper, unless a clear action plan is chalked out for each of these areas.
(Courtesy of Mail Today)
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