India has seen major structural reforms in 2017-18 such as GST, Insolvency Code and bank recapitalisation according to the Economic Survey tabled in Parliament today, will boost the economy in the coming years.
"The economy will start reaping benefits of these reforms in the next fiscal year and we look forward to continuity in the reforms process displayed by the government," said Mr. Rashesh Shah, President FICCI.
This optimism is also reflected in the improved ratings of India by the Moody's and the country's rating in the World Banks' ease of doing business index.
As per the Economic Survey, there has been a fifty percent increase in the number of indirect taxpayers post GST and an addition of about 18 lakh in individual income tax filers since Nov 2016. Large increase in voluntary registrations under GST, especially of small enterprises has led to greater formalisation of the economy. "The Government has been pro-actively working towards further improvement in GST structure. We look forward to convergence to fewer tax slabs and inclusion of all sectors within GST", said Mr. Shah.
The survey also highlights the scope of reducing substantial tax litigation through government action. It clearly points out how tax departments have extremely low success rate when they have contested for tax disputes. Additionally, 66% of the pending cases account for only 1.8% of value at stake. FICCI has repeatedly emphasized the need for reducing litigations through simplification and issuance of clarifications/ guidelines on various areas of tax disputes. We look forward to strong action on this front in the coming fiscal. Furthermore, greater coordination between government and judiciary will further improve our rank on ease of doing business as this is the next frontier for imp our competitiveness.
The survey clearly points out raising investment is more important than raising saving to reignite growth. Various surveys of FICCI show that private investment is yet to pick up pace and we look forward to positive measures from the Government in the upcoming budget. Most important would be the cut in corporate tax rate, which would not only help industry retain its competitiveness in the current global environment but also encourage fresh investments. FICCI has also suggested creation of regulation free zones, especially along ports to boost new investments in innovative and new-age sectors.
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The survey has also highlighted how top one percent of Indian firms account for only 38% of India's exports unlike other comparable economies. Global economy is showing an improvement and to fully capitalise on same, Indian exports need to be made more competitive. Just as the clothing sector has seen higher exports on the back of incentive package, we hope that the government extends similar incentives to other sectors as well. As the survey has highlighted, FICCI also believes that measures to drive investments and exports will not only revive growth but also create large scale employment opportunities.
Further, in context of the banking sector, the survey indicates that the gross NPAs have increased from 9.6% to 10.2% between March and September 2017. While the implementation of Insolvency and Bankruptcy Code and Bank recapitalization have been steps in right direction, there is a need for greater banking reforms alongside the bank recapitalisation. We also look forward to the roadmap on consolidation of banks that can improve the efficiency of the banking sector and aid economic expansion.
In the context of inflation, the Economic Survey states that Inflation during 2017-18 averaged the lowest in the last six years. Government's pro-active measures to control inflation have been noteworthy. However, there has been only one repo rate cut by the RBI of 25 basis points during last fiscal year. Clearly, there has been a missed opportunity of lowering interest rates significantly, which could have provided a major boost to private investments. "Going forward, we hope that the RBI will give an equal consideration to the growth concerns, especially given the fact that inflationary pressures in India are largely due to supply side factors on the agriculture front", said Mr. Shah.
FICCI also looks forward to higher allocation on education and healthcare sectors not only through public spend but also with focus on quality aspects as these sectors are in dire need of reforms and structural transformation. This is critical in wake of the long term growth and development of the economy. FICCI's skill gap study also points out that there is a need for higher skills to create jobs in the future. A robust education system integrated with skill education is the way forward in this regard.