Diese Präsentation wurde erfolgreich gemeldet.
Wir verwenden Ihre LinkedIn Profilangaben und Informationen zu Ihren Aktivitäten, um Anzeigen zu personalisieren und Ihnen relevantere Inhalte anzuzeigen. Sie können Ihre Anzeigeneinstellungen jederzeit ändern.
Nächste SlideShare
What to Upload to SlideShare
What to Upload to SlideShare
Wird geladen in …3
1 von 25

Budget 2018-19 and its Impact on the India Economy: An Industrial Slant



Herunterladen, um offline zu lesen

This presentation was delivered by Rajat Kathuria, Director, ICRIER at the "Five-Institute Union Budget Seminar 2018-19: Reforms and Development Perspectives", Leela Palace, Chanakyapuri, New Delhi, February 10, 2018.

The seminar was organised by the National Institute of Public Finance and Policy in partnership with CPR, ICRIER, NCAER and IDF.

Ähnliche Bücher

Kostenlos mit einer 30-tägigen Testversion von Scribd

Alle anzeigen

Budget 2018-19 and its Impact on the India Economy: An Industrial Slant

  1. 1. Indian Council for Research on International Economic Relations
  2. 2. GDP growth rate (in percent) GDP growth estimates for 2017-18 GDP growth forecasts for 2018-19 Earlier estimate (%) Revision (%) IMF 7.2 6.7 7.4 World Bank 7.2 6.7 7.4 Economic Survey 6.75-7.5 6.75 7-7.5 GDP growth has averaged 7.3 per cent for the period from 2014-15 to 2017-18, which is the highest among the major economies of the world. Growth Forecasts for India is 7-7.5% for 2018-19. India remains the most competitive country in South Asia, appearing at No. 40 in the global competitiveness ranking of 137 countries by the World Economic Forum (WEF). India is likely to grow at consistently higher rates (>7%) and retain its position as one of the fastest growing economies till 2020 (Source: International Monetary Fund)
  3. 3. Areas of policy focus over medium-term  Employment: finding good jobs for the young and burgeoning workforce, especially for women  Education: creating an educated and healthy labor force  Agriculture: raising farm productivity while strengthening agricultural resilience. Agenda for the FY19  Stabilize GST implementation to remove uncertainty for exporters, facilitate easier compliance, and expand the tax base Completing the Twin Balance Sheet actions by focusing on 4R’s Privatizing Air India Staving off threats to macro-economic stability which may arise from persistently high oil prices and sharp corrections to elevated stock prices.  According to Economic survey 2017-18, increased exports led by global recovery and major economic reforms like implementation of GST , initiation of Insolvency and bankruptcy code and recapitalization package accelerated the growth of Indian economy in the second half of the FY18.  Fiscal deficits, the current account, and inflation were all higher than expected, partly due to the high international crude oil prices.
  4. 4. 149 180 200 211 217 275 364 365 438 1085 0 200 400 600 800 1000 1200 Poland France Italy Germany UK Japan Russia Argentina India US Net protectionist measures implemented (number of ‘restrictive' measures, minus number of ‘liberalising' measures)
  5. 5. 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2003 2005 2007 2009 2011 2013 2015 India’s share in world exports and imports India's share in World exports India's share in world imports India’s share in world exports and imports are 1.79% and 2.31% respectively in 2016 Source: UNCTAD
  6. 6.  The main items of export from India to China include petroleum oil products, cotton yarn, iron ore and concentrates and copper cathodes.  The main items of import from China include cellular phones, computers, components of cellular phones and computers, fertilizers. The top 12 products (HS 6 digit level) account for 34% of India’s total import (more than 3500 items at HS 6 digit level) from China  Cellular phones and its components have been the most valued item imported from China in the last few years.  In the Union budget for fiscal year 2018-19, the customs duty on cellular phones has been raised to 20% to incentivize its manufacturing in India. The move is likely to impact industry giants Google and Apple which import most of their phones from China India’s trade with China
  7. 7. Sr.No PRODUCT DESCRIPTION 2015-16 2016-17 1 Iron ores and concentrates non-agglomerated other than roasted iron pyrites 133.1 825.9 2 Cathodes and sections of cathodes of refined copper 1,128.5 665.2 3 Iron ore and concentrates agglomerated 22.2 623.7 4 Light oils and preparations: 537.1 581.7 5 Granite crude or roughly trimmed 324.7 323.8 6 Ferro-chromium containing carbon >4% by weight 121.9 310.4 7 Single yarn of uncombed fibres measuring <714.29 but >= 232.56 decitex (> 14 but <=43 metric number) 324.4 286.9 8 Single yarn of uncombed fibres measuring <192.31 but >=125 decitex (>52 but <=80 metric number) 423.7 268.6 9 Cotton, not carded or combed 188.8 264.7 10 Castor oil and its fractions 276.6 263.8 11 Single yarn of uncombed fibres measuring <192.31 but >=125 decitex (>50 but <=80 metric number) 389.6 210.2 12 Other petroleum oils and oils obtained from bituminous minerals etc. 78.0 173.0 Total of top 12 items 3,948.3 4,797.8 India’s total export to china 9,010.4 10,171.2 India’s Export to China: Top 12 Items (Million USD)
  8. 8. Sr. No PRODUCT DESCRIPTION 2015-16 2016-17 1 Parts: 2,746.6 5,786.7 2 Telephones for cellular networks or for other wireless networks 5,443.9 3,651.2 3 Photosensitive semiconductor divisional photovoltaic cells w/n assembled in modules/ made up into panels; light emitting diodes 2,164.6 3,031.2 4 Portable digital automatic data processing machines, weighing <10kg consisting a central processing unit, a keyboard and a display 2,307.7 2,156.3 5 Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switch 1,035.1 977.7 6 Other parts of heading 8525 to 8528 764.2 924.8 7 Diammonium Hydrogenortho Phosphate (Diammonium Phosphate) 1,720.3 889.9 8 Project goods 994.1 763.0 9 Others 582.1 694.5 10 Other vessels, fire floats etc 737.4 669.8 11 Parts and accessories of machines of heading no.8471 602.1 548.1 12 Static converters 408.4 478.0 Total of top 12 items 19,506.5 20,571.2 India’s Total Import from China 61,706.8 61,281.6 India’s Import from China: Top 12 Items (Million USD)
  9. 9.  The problem of duty inversion has been partially addressed in the Budget 2018 by a duty reduction for inputs and raw materials in food processing, electronics and medical devices. To protect domestic industries, customs duties have been increased for these sectors.
  10. 10.  India’s CAD increased from US$ 3.8 billion (0.4 per cent of GDP) in H1 of 2016 -17 to US$ 22.2 billion (1.8 per cent of GDP) in H1 of 2017-18 .  The widening of the CAD was primarily on account of a higher trade deficit (US$ 74.5 billion) brought about by a larger increase in merchandise imports relative to exports.  Reasons for Surge in Imports  Sharp rise in gold imports as uncertainty over GST implementation resulted in front loading of purchases by jewellers in Q1 of 2017-18  Rise in crude oil prices (Indian basket) resulting in increase in oil import bill,. -6.0 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 0.0 10.0 20.0 30.0 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 2014-15 2016-17 CADas%GDP Exports - Imports (goods) and CAD as percent of GDP Exports/ GDP Imports/ GDP CAD/Source : Reserve Bank of India
  11. 11. 0.0 50.0 100.0 Petroleum crude & products Gems and Jewellery Engineering goods Marine products Ores and minerals Top 5 contributors to export growth in 2016-17  According to economic Survey 2017-18 growth of exports rebounded into positive one during 2016- 17 and expected to grow faster in 2017-18 to 12.1%  Survey indicates a strong correlation between export performance and states' standard of living  Factors leading to positive export growth in 2017-18 (April –December) ◦ Clothing incentive package boosted exports of readymade garments . The rebate of state levies (ROSL) has increased exports of readymade garments (man-made fibers) by about 16 percent. Source: Economic Survey 2017-18 0.0 10.0 20.0 30.0 40.0 Ores and minerals Agriculture and allied… Petroleum crude & products Engineering goods Marine products Top 5 contributors to export growth in 2017-18 (Apr-Nov) (P)
  12. 12.  India’s top 1% firms account only for 38% of exports, which is much lower compared to global standards.  As per the survey even though Make in India Initiative has helped to slightly improve share of the manufacturing in GDP, overall international competitiveness of manufacturing has not improved as it is evident from the declining manufacturing export –GDP ratio and manufacturing trade balance.  The apparel sector has immense potential to drive economic growth, increase employment, and empower women in India. This is especially true as China’s share of global apparel exports has come down in recent years. However, India has not, or not yet, capitalized on this opening Way Ahead  As per the survey with a 10% decrease in indirect logistics cost exports can increase by 5- 8 percent.  To incentivise the domestic value addition and Make in India , finance minister in budget 2018-19 has proposed to increase custom duty in sectors such as food processing, electronics, auto components, footwear and furniture . This measure will help to generate employment opportunities and will increase competitiveness of domestic products.  Changes has been proposed in custom act in order to improve ease of doing business. As per the World bank LPI statistics (2016) India’s ranking in “ Logistics Performance Index” (LPI) has improved from 54 in 2014 to 35 in 2016.
  13. 13.  GST has increased the number of unique indirect taxpayers by more than 50 percent.  3.4 million new indirect tax registrants  Direct tax collections of the centre grew at the rate of 13.7 percent keeping pace with previous year while indirect taxes grew by 18.3 per cent during April- November 2017  Buoyancy in personal income tax for financial year 2016-17 and 2017-18 (RE) are 1.95 and 2.11 respectively  Budget 2018-19 has proposed to roll out E-assessment across the country to almost eliminate person to person contact which will therefore lead to greater efficiency and transparency in direct tax collection.  Proposed to extend reduced rate of 25 percent currently available for companies with turnover of less than 50 crore (in Financial Year 2015-16), to companies reporting turnover up to Rs. 250 crore in Financial Year 2016-17, to benefit micro, small and medium enterprises
  14. 14. TAX TO GDP RATIOS Gross tax -GDP Direct tax -GDP Indirect tax-GDP 2012-13 10.4 5.6 4.8 2013-14 10.1 5.7 4.4 2014-15 10 5.6 4.4 2015-16 10.6 5.4 5.2 2016-17(RE) 11.3 5.6 5.7 2017-18(BE) 11.3 5.8 5.5 0.00 5.00 10.00 15.00 20.00 25.00 30.00 2008 2009 2010 2011 2012 2013 2014 2015 Tax-GDP ratio of some selected countries European Union United Kingdom India Korea, Rep. United States Source: World Bank database
  15. 15. Source: Economic Survey 2017-18  A predictable tax regime will help lower Compliance Cost for tax payers  About 66 percent of disputed cases (each less than Rs. 10 lakhs) accounted for only 1.8 % of the value – underscores the evidence of regressive compliance costs for direct taxes in India  The Tax Department’s obsession with anti-avoidance measures to increase tax collection may amplify the existing uncertainty on application of new provisions  Training and familiarization is necessary for smooth implementation of digital processes in tax compliance. Moreover, impact assessments are necessary to confirm their effectiveness in lowering compliance burden ( commonly adopted by HMRC and ATO) Petition Rate and Success Rate of Tax Department, March 2017 Court Direct tax cases Indirect tax cases Success rate Petition rate Success rate Petition rate Supreme court 27% 87% 11% 63% High Courts 13% 83% 46% 39% ITAT/CESTAT 27% 88% 12% 20%
  16. 16.  Tax collection by states, local governments significantly lower than those in other federal countries  14th FC recommends a grant of Rs. 87,000 crore during 2015-20 (i.e. Rs.500 per capita per year).The rest of the funds are expected to be raised locally by the ULBs Major Challenges for ULBs ◦ Poor governance ◦ Infrastructure Deficits ◦ Inadequate finances (core issue) Sources of Revenue for ULBs ◦ Professional taxes, user fees etc. ◦ Property Tax : most imp. and underutilised source of revenue ◦ Economic survey notes that : low coverage, low tax rates, low collection efficiency, lack of timely indexation of property values – as the prime problems which are holding back the property tax collection of ULBs ◦ A study by the MoF of Bengaluru and Jaipur Municipal Corp. Report that only 15.8% and 5.1% of the total potential property tax was being collected. ◦ Budget 2018-19 has talked about investment grading for these cities which will enable them to access capital market better. Already 65 ULBs had investment grade rating in 2012.
  17. 17. 0.00 20.00 40.00 60.00 80.00 100.00 2007 2009 2011 2013 2015 2017 ShareofWireless Subscribers(%) Share of Rural Wireless Subscribers Share of Urban Wireless Subscribers 0 50 100 150 200 250 300 2015 2016 2017 Subscribers(inmillions) Year Urban Internet Susbcribers Rural Internet Susbcribers Source – Data obtained from TRAI Performance Indicator Reports Source – International Telecommunication Union • Growth in urban internet subscribers is higher than that in rural, though 2017 saw a significant rise in rural Internet subscription • India was ranked 121 among 157 countries in terms of progress in new ICT in a report by the ITU • Internet penetration in urban India is 59%, while in rural India, it is only 17%, as reported by IMRB i-Cube All India Estimates for October 2016 • Ownership of computers and Internet access is limited in rural areas and only a few families have shared access to computers or Internet connections
  18. 18. Sr. No. Description of Work Status 1 OFC Pipe Laid 2,61,450 Kms (1,15,519 GPs) 2 Optical Fibre Laid 2,59,856 Kms (1,11,084 GPs) 3 Tenders Finalized 3334 Blocks / 1,24,757 GPs 4 Work Started* 3276 Blocks / 1,21,969 GPs 5 Current Weekly Performance of Optical Fibre Laying 1221 kms 6 Current Weekly Performance of OFC Fibre Laying 755 kms 7 Optical Fibre Cable Delivered on Site 3,22,416 kms 8 Service Ready GPs 1,02,326 GPs Source – Status of Bharat Net as on 28.01.2018  The poor state of access in rural areas and the low speeds highlights the need for Bharat Net.  The government estimates that the second phase of Bharat Net will double the existing optical fibre footprint and generate employment of 10 crore man-days during the rollout of the project.  Under Bharat Net - Phase 1, the government has set up 15,000 WiFi hotspots of which around 11,000 are in rural areas and the rest in semi-rural. As per Budget 2018, 5 lakh WiFi hotspots will provide broadband internet access to 5 crore rural citizens at the cost of Rs. 10,000 crore.  However, even with its wifi hotspot targets for the second phase, India will still fall below countries like France (13 million), US (9.8 million) and UK (5.6 million)  Alternate technologies like Satellite Communication can also be considered to provide connectivity in remote areas where it is costly to lay fibres, especially in hilly terrain.
  19. 19. Category 2016 2021 Internet Users (% of Population) 28% 59% Devices and Connections Per Capita 1.1 1.5 Average Traffic Per Capita Per Month 1.3 GB 4.7 GB Source – CISCO VNI According to data from CISCO VNI, there will be 1380 million mobile connected devices in India by 2021 and 60% of those would be ‘smart’. This growth will be fuelled by enormous consumer adoption of smartphones, IoT, smart devices and use of machine-to-machine connections  It was announced in the Budget 2018 that DoT, in partnership with IIT – Madras, will set up a development centre to work on 5G technologies that will enable new applications like the Internet-of-Things.  There are concerns about inadequate infrastructure for the functioning of 5G and IoT, especially with respect to the lack of a robust cybersecurity infrastructure. In wake of recent Aadhaar data breaches and the government’s announcements for adoption of block-chain technology in the digital economy, a robust data security framework is the need of the hour.
  20. 20.  Reduction of payroll costs to companies  The government will bear 12% contribution to the retirement corpus of salaried individuals in the Employees’ Provident Fund for the first 3 years of their employment for all the sectors under the Pradhan Mantri Rozgar Protsahan Yojna to boost formal job creation. Welcome step! Since its inception in 2016, over 21,79,024 employees across 29,055 establishments have been registered under the Pradhan Mantri Rozgar Protsahan Yojana (PMRPY).  Amendments have been proposed to the Employees Provident Fund and Miscellaneous Provisions Act, 1952 to reduce women employees' contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers' contribution. But is this enough to increase female employment? Unlikely! o Incentivizing companies to hire women also important o Embedding the incentive in the organized sector inadequate o Wage disparity also needs to be addressed (In NSS 63rd round (2011-12), the daily wage for female salaried employees stood at 307.72 as against 417.08 for male salaried employees. )
  21. 21.  Boosting MSMEs “Major Engines for Growth & Employment”  Allocation of Rs3,794 crore to the MSME sector as credit support, capital, and interest subsidy and “promotion of innovations”.  Reduction of corporate tax rate to 25% for MSMEs. o While, this will leave firms with higher investible surplus, will it create more jobs? o No empirical evidence to suggest that preferential tax system boosts job creation  Differential treatment to the SMEs under the Insolvency and Bankruptcy Code is necessary to deal with NPAs  Fixed Term Employment extended to all sectors of the economy  Will provide employers flexibility and improve the ease of doing business  But, will it encourage “hire and fire system” ?  Will create jobs in short run, but question mark on job sustainability!  Mudra Yojana: Facilitating availability of credit  Launched in April, 2015 has facilitated sanction of 4.6 lakh crore in credit since its inception.  Target of 3 lakh crore for lending under MUDRA for 2018-19 (120% rise from the last year) Disproportionately large number of loans accounts are under the Shishu category. Could these be engines of job creation ?
  22. 22.  Boost to infrastructure to spur job growth In the year 2018-19, for creation of livelihood and infrastructure in rural areas, total amount to be spent by the Ministries will be 14.34 lakh crore, including extra-budgetary and non budgetary resources of 11.98 lakh crore. Apart from employment due to farming activities and self employment, this expenditure will create employment of 321 crore person days, 3.17 lakh kilometers of rural roads,51 lakh new rural houses, 1.88 crore toilets, and provide 1.75 crore new household electric connections besides boosting agricultural growth. Ministry Schemes Physical Targets (2018-19) Ministry of Drinking Water & Sanitation Swachh Bharat Mission 16.92 crore person days National Rural Drinking Water Programme Employment-84000 Ministry of Rural Development Pradhan Mantri Awaas Yojna 46.55 crore mandays Pradhan Mantri Gram Sadak Yojna 28.35 crore mandays MNREGA 230 crore Person-days Ministry of Micro, Small & Medium Enterprises Prime Minister's Employment Generation Programme Employment-294000
  23. 23. 44000 46000 48000 50000 52000 54000 56000 Budget 2017-18 Revised 2017-18 Budget 2018-19 Rs.Crore MNREGA 0 500 1000 1500 2000 Budget 2017-18 Revised 2017-18 Budget 2018-19 Rs.Crore Prime Minister's Employment Generation Programme 0 400 800 1200 1600 2000 Budget 2017-18 Revised 2017-18 Budget 2018-19 Rs.Crore Pradhan Mantri Rozgar Protsahan Yojna 20000 21000 22000 23000 24000 Budget 2017-18 Revised 2017-18 Budget 2018-19 Rs.Crore Pradhan Mantri Awaas Yojna (Rural) 15000 16000 17000 18000 19000 20000 Budget 2017-18 Revised 2017-18 Budget 2018-19 Rs.Crore Pradhan Mantri Gram Sadak Yojna Budget Outlays for various employment generating schemes
  24. 24.  Household Surveys NSS- Quinquennial Employment & Unemployment survey (most recent 2011-12); Labour Bureau- Annual Employment & Unemployment survey (started in 2009-10, most recent 2015-16)  Census and Survey of Establishment Economic Census (most recent, 2015-16); Annual Survey of Industries (annual, most recent 2014-15); NSS Unincorporated Non-Agricultural Enterprise Survey (quinquennial, most recent 2015-16); Labour Bureau- Quarterly Employment Survey (QES) Reports on select 8 sectors (most recent quarter Oct, 2016 – Jan, 2017);All India Census of MSME (most recent 2006-07)  Administrative Data Sources ESIC, EPF & NPS A recent study, “Towards a Payroll Reporting in India” made use of the EPF, ESIC and NPS data to estimate employment generation in the country and found that 70 lakh jobs were created in the FY 2017-18.  Government Schemes Micro Units Development & Refinance Agency (MUDRA) Yojana, Pradhan Mantri Employment Generation Programme (PMEGP), Pradhan Mantri Awas Yojana (PMAY), Pradhan Mantri Gram Sadak Yojana (PMGSY), Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) and Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)  National Accounts Statistics An ICRIER study (2017) made use of Gross Value Added data from the national account statistics to estimate employment generated in the private corporate manufacturing sector . Computing elasticity estimates from the ASI data for thirty broad industry groups, the study uses GVA estimates from NAS to estimate employment changes. Between 2015-16 and 2016-17, a little over 300,000 jobs were added. Roughly 410,000 jobs were added between 2014-15 and 2015-16 and FY16. Sources of Employment Data in India