There have been a multitude of takeaways from the Economic Survey 2018. Some of the realities of the economy have been highlighted by the Survey, tabled by Union Finance Minister Arun Jaitley in Parliament today. The Economic Survey highlights that there has been a spike in the number of direct and indirect taxpayers, while the contribution of states and civic agencies stays low in comparison to other nations that have a federal structure such as India's. The Survey also reveals that raising investment is relatively more important than increasing the amount of savings.
1. Large increase in registered indirect and direct taxpayers: Goods and Services Tax (GST) has given a new perceptive of the Indian economy and new data has emerged. There has been a fifty percent increase in the number of indirect taxpayers. There has also been a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises wanting to avail themselves of input tax credits.
2. Formal non agricultural payroll much greater than believed: India's formal sector, especially formal non-farm payroll, is substantially greater than what it is currently believed to be. It became evident that when "formality" was defined in terms of social security provisions such as EPFO ((Employees' Provident Fund Organisation) and ESIC (Employees' State Insurance Corporation) the formal sector payroll was found to be about 31 per cent of the non-agricultural workforce. When the term was defined in terms of being part of the GST net, such formal sector payroll share was found to be 53 per cent.
3. States prosperity positively correlated with their international and inter-state trade: For the first time in the history of the country, data on the international exports of states have been dwelt in the Economic Survey. Such data indicates a strong correlation between export performance and states' standard of living. States that export internationally and trade with other states were found to be richer. Such correlation is stronger between prosperity and international trade.
4. India's firm export structure substantially more egalitarian than in large countries: India's exports are unusual and the largest firms account for a much smaller share of exports than in other comparable countries. Top one percent of Indian firms account only for 38 per cent of exports unlike in other countries where they account for a "substantially greater" share (72, 68, 67 and 55 per cent in Brazil, Germany, Mexico and USA respectively). Such tendencies were also found to be true for the top five or ten per cent of the Indian companies.
5. Clothing incentive package boosts exports of readymade garments: It was pointed out that the Rebate of State Levies (ROSL) has increased exports of readymade garments (man-made fibres) by about 16 per cent, but not of others.
6. Parents continue to have children until they get desired number of sons: The Economic Survey highlighted another seemingly known fact that Indian society exhibits a strong desire for a male child. It pointed out that most parents continued to have children until they get number of sons. The Survey gave details of various scenarios leading to skewed sex ratios and also gave a comparison on sex ratio by birth between India and Indonesia.
7. Substantial avoidable litigation in tax arena: The Survey pointed out that the tax departments have gone in for contesting against in several tax disputes but also with a low success rate which is below 30 per cent. About 66 per cent of pending cases accounted for only 1.8 per cent of value at stake. It further stated that 0.2 per cent of cases accounted for 56 per cent of the value at stake.
8. To reignite growth, raising investment more important than raising saving: Extrapolating the data, the Survey indicated that growth in savings did not bring economic growth but growth in investment did.
9. Direct tax collections by state/local governments is significantly lower compared with those of their counterparts in other federal countries, according to the Economic Survey.
10. Extreme weather adversely impacts agricultural yields: The Survey captures the footprints of climate change and its consequent adverse impact on agricultural yields. Extreme temperature increases and deficiency in rainfall have been captured on the Indian map and the graphical changes in agricultural yields are brought out from such data. The impact was found to be twice as large in un-irrigated areas as in irrigated ones, it noted.