Dhaka, Bangladesh
'India expects to grow at 7.3% this year'

'India expects to grow at 7.3% this year'

By Yuthika Bhargava

(From yesterday's issue) Therefore, it is time to go to the drawing board for a careful diagnosis and then a sustained handling rather than rushing to some other measure in the hope that that will address the issue. Is there a need to rethink the privatisation strategy? It is a process and we can't rush through it. The fact is that the government's commitment to it is very clear. NITI Aayog has been given a clear mandate to push for it. We have put out five lists for disinvestment, including a list for closures. Of the dozen units we recommended to be closed, I believe two have been done. People don't focus on this but it is also part of rationalising the public sector enterprise structure. Disinvestment has to be done in consonance with existing market conditions. We don't want to do a fire sale. All these are government assets, and we want to get maximum value out of these assets. I think, therefore, that the pressure to keep counting how many [have been] done in a week or month is not fair. Last year, we had exceeded the disinvestment target. I am sure we'll do that again this year. You have spoken in favour of a cut in duties on petrol. Do you think that is feasible, given that the government is also talking about rationalising GST rates? The Prime Minister has made it clear that he is committed to the fiscal targets. So, whatever is done must be done in that context. You need to find additional fiscal space if you are going to rationalise GST rates or cut excise duty on fuels. I'm not saying there is a trade-off here. If you can, do both. But if you can't find the necessary fiscal space and may have a fiscal slippage, the Prime Minister is clear he doesn't want that to happen. I have always said that excise on petrol should be cut as, in my view, there is additional fiscal space available. But I don't [think] there is additional fiscal space available at this time to do both. Do you think petroleum should be brought under the GST? It is a very attractive proposition but you should look at the current incidence of tax on petroleum. It is about 85% to 90%, so at what band will you bring them into GST? I think it should be brought under GST but it will have to be fairly sequenced. In that sense, maybe over a medium-term period. With that you will have to grow additional sources of revenue to achieve that. And we are on the right track. The direct tax net has increased from ?3.7 crore to ?6.4 crore. There is scope perhaps to grow more. Similarly, with indirect tax, GST collections are at a lakh crore rupees/month level. This is despite the fact that only about 90 lakh businesses have registered, of which 67 lakh now pay or file a return under GST. But if you compare that with the total number of business units in the country with a turnover of ?20 lakh, we are still at a fairly small percentage of the potential indirect taxpayers. All of this is to say that there is potential revenue space going forward. As we grow, we can start reducing dependence on oil taxes. But at the same time, I am very careful to point out that expansion of the tax base is not in any sense dependent on, or related to, any form of high-handedness of the tax administration. It is just the opposite. If the tax administration becomes more friendly, tax compliance improves. But we have not let that happen in our country. The government has said that one of the reasons for lower growth is that the global economy is still performing below par and that countries are increasingly looking inward. I don't think the government has done that this year. The government is acutely aware that you have had synchronised recovery of the global economy after a very long time. The growth of global trade is higher than that of the world economy in many years. Despite all the talk of protectionism, all this noise that you hear coming out of [Washington] DC particularly, the multilateral trading order has held and global trade is growing. An important issue is to take the entire exports sector and efforts well and truly into our hands to make sure that our share of exports, especially manufactured exports, in world trade improves and is not stuck at 1.6% as it has been for a while. Even our services exports, which I think have a share of 3.2%. They have been facing some headwinds because of issues relating to H1B, automation, Internet of Things and AI. These are big-time structural issues and it's time now to look again at this whole external sector, especially exports of manufactured good and services. The Department of Commerce is seized of the problem and is devoting time and effort. I am hopeful that we will come out with a set of measures to improve this. Will we look at newer markets for exports? There is this constant temptation to go for newer markets and newer commodities, and I use the word temptation for a very valid reason. Because it is just that. What we need, in my view, is to identify after careful analysis where our current competitive advantage is and then push for it. Then try and grab a much larger share in the world trade and use them as drivers of export growth rather than spread yourself very thinly. In India, if you see export figures, you will see that the 'other' category is a very large chunk - maybe more than 30-35%. That needs to change. For example, gems and jewellery is our competitive advantage. Why can't we make sure that 30% of the world's gems and jewellery come out of this place? There are other sectors like that which can also be related to domestic demand… use the emerging demand in the domestic market to create globally competitive and global scale capacities in your country and get on in those sectors rather than constantly look to diversify your export efforts because that I don't think is a good idea. This happened in auto [the automobiles sector]. As domestic demand and localisation has grown, India has emerged as a major component exporter which no one thought of 10 years ago. So why not do the same in other areas? For example, demand for metro coaches is going up. We should build capacity here which is export competitive and use India as a hub for exporting them. We already have two-three plants for production. Try and scale them up to global levels.

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