Myths & fallacies that hide more bad news in Economic Survey 2017-18
There is more bad news in the Economic Survey than what has been explicitly stated. In fact, there is so much of it that Chief Economic Advisor (CEA) Arvind Subramaniam's team appears to have resorted to fallacies and misinterpretations to hide it.
The obvious sore points have already been pointed out, which include disappointing growth, higher fiscal deficit, poor state of agriculture, investment slowdown, poor performance of road sector and the burden of .
Hidden in the form of grandstanding and exaggerated interpretation is more data and perspective that leaves one with a gloomy impression of the economy and the government's performance. Take a look at some of the assertions made in the Economic Survey:
1. Note ban, GST led to substantial increase in taxpayers: The survey has asserted that the taxpayers under the new Goods and Services Tax (GST) regime have gone up by 50% or 34 lakhs. In terms of income tax, it has also claimed that there has been an addition of about 18 lakh individual income tax filers since November 2016, the month in which demonetisation was announced.
It further says that in the 13 months after that, up to November 2017, about 1 crore new tax filers were added, as compared to about 62 lakh on an average in every 13-month window of preceding six years.
Even if we accept these figures and do not see the scope for any jugglery, what do these numbers mean?
Economist Amir Ullah Khan told Catch this figure of 40 lakh new filers is just 5% of the nearly 28 crore households. This is just a 2% rise from our previous tax base of 3%. Is this small a rise worth all the trouble that demonestisation caused, he asked.
Prof Arun Kumar, Malcolm S Adiseshiah Chair Professor at the Institute of Social Sciences, pointed out that these numbers are not even talking about any extra revenue earned by the government. These are merely filers who could just have filed income tax returns, he said.
The survey itself has admitted that the average income of new filers was close to the income tax threshold of Rs 2.5 lakh, “limiting the early revenue impact”. Kumar explained that not much additional revenue appears to have flowed in the government's coffers and black money has definitely not been revealed. Had this been because of crackdown on black money, people with higher incomes would have filed taxes, he asserted.
2. Drive against illicit wealth pushed investors towards stock markets: Even a layman with a basic understanding of the economy will flag this as a red herring. As Kumar explained, people have gone to stocks because the rate of returns on fixed deposits in banks and small savings schemes have been slashed. Also, real estate is down and gold is stagnant, leaving the equities market as the option with the highest return.
Khan added that if the purported crackdown against illicit wealth has indeed pushed investors towards stock markets, then Securities and Exchange Board of India should immediately launch a probe. He said what the government is saying is that shares worth $8-10 billion were bought in cash and all of it is illicit wealth. This defies logic, he asserted.
3. There has been crackdown on black economy: The survey claims that the rise in number of taxpayers and the investment shift towards stocks both are because of the government’s crackdown on corruption and the black economy. However, Kumar, a well-known expert on black money, contested that fact.
He said any such crackdown would have led the government to a lot of accumulated wealth, but has any such gain been advertised? Further, he noted that illegal money networks like hawala houses would have also been busted, which has also not been heard of.
4. Formal sector stands at 53%: Among the most astounding claims in the survey is that the formal employment sector in the country is bigger than what was thought. According to the survey, in terms of social security provisions like EPFO/ESIC, the formal sector payroll is at about 31% of the non-agricultural workforce, while in terms of the GST net, it stands at 53%.
Khan said the government could change definitions and make any claim but it would have to apply parameters universally.
“The Union labour ministry puts the formal sector at 7%, so how can social security and GST net be suddenly made the parameters and that number expanded?” he said. Khan asserted that with the new parameters, the government will have to come up with a new category, but it can't call it formal.
Kumar also said that EPFO and GST (net) were not the right parameters to define formal employment.
Edited by Joyjeet Das