The Economic Survey highlighted the need for further reforms in the economy and while counting goods & service tax (GST) and direct benefit transfer (DBT) as potential game-changers also put forth some suggestions to see through pending reforms in agriculture besides some in banking and other areas.
While recognising the fiscal discipline the Survey suggested that the government should not just look at the numbers but also towards the quality of spending by moving away from consumption based spending to investment.
JAM trinity, national agri market
It pointed out that the focus of the government should not be on whether to provide subsidies but how best to provide support to the poor and vulnerable. The Survey also focused on the system of subsidies and how they can sometimes be regressive and suffer from leakages.
The Survey coined the term JAM referring to Jan Dhan Yojana, Aadhaar and Mobile as enablers for the State to transfer financial resources to the poor in a progressive manner without leakages and with minimal distorting effects. The survey suggested two alternate delivery mechanisms to ensure that the JAM trinity works better one being mobile money and the other post offices.
It also talked on the need for creation of National Common Market in Agricultural Commodities and the ineffectiveness of the Model APMC act and stresses on the Karnataka Model to transform agriculture sector.
The Survey said that the perception that the Constitution will have to be amended if the centre has to play a decisive role in creating a national market remains open. It pointed that there are provisions in the Constitution which can be used by the central government to enact legislation for setting up a national common market for specified agricultural commodities.
It argued that once a law is passed by the parliament to regulate trading in the specified agricultural commodities, it will override the state APMC laws, paving the way for creating a national common market. However, it cautioned that this approach could be seen as heavy-handed on the part of the centre and contrary to the new spirit of cooperative federalism.
Carbon subsidy to carbon taxation
The Economic Survey also acknowledged the default ‘green’ actions taken by India during the current fiscal pointing out that the reduction of fuel subsidies and increased taxes on fossil fuels has turned a ‘carbon subsidy regime’ to ‘carbon taxation’.
It highlighted that calculating CO2 emission reductions from measures taken for petrol and diesel suggests that there will be a net reduction of 11 million tons of CO2 emissions in less than a year.
The Survey suggested a few measures of additional carbon tax by using cess on coal usage. It said that the government needs to follow a taxation regime to bring India at par with the reforms in developed economies.
It suggested a three-fold increase in the current cess something to the effect that brings the price of the domestic coal at par with imported price, saying the endeavour should be increase cess too the point at which the coal-based power producers could still break-even.
4Ds to boost banking
The Survey proposed 4Ds of policy making- deregulation, differentiation, diversification and disinter- to deepen the core of banking sector and capital markets.
It suggests deregulation by gradually reducing statutory liquidity ratio (SLR) and then provide incentives for a deeper bond market. The government can follow two options one is indirect reform, bringing more sectors into the ambit of the priority sector lending (PSL), and the other is to redefine the norms to slowly make priority sector more targeted, smaller and need-driven.
It also recommended differentiation within public sector banks to move away from one size fits all policy and move towards prioritised policy reforms.
The Survey also called for a diversification within the banking space to create more banks and more types of banks that can cater to different needs.
It said the last measure to enhance banking is to disinter, to create better bankruptcy procedures and formation of debt recovery tribunals to support the banking system.
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