Our economy is demand-driven. To achieve 8% of Gross Domestic Product (GDP) growth, India needs to spur demand. This can only happen by increasing the earnings of the 800 million Indians who presently survive on Rs 10,000 per month.
Before November 8, 2016, the economy was moving in the right direction. The decision to demonetise paralysed it. Growth fell every quarter. That downward spiral continues, and may continue for some time. The folly of demonetisation was compounded by the imposition of an ill-structured multi-rate Goods and Services Tax (GST). Businesses required time to adjust to this paradigm shift. Small and medium-size entrepreneurs were unable to adjust to the complexity of the GST framework. It disturbed the nation’s economic equilibrium. Added to these were the economic consequences of ill-conceived majoritarian decisions disrupting lives of people. The lynching of Dalits, politics underlying the cow, the architecture of the National Register of Citizens coupled with the decision to amend Article 370, have destroyed livelihoods across different relevant geographies.
The result: Revenue earnings have gone down. The collections under GST have not matched expectations. Resources have dried up, negatively impacting the implementation of socially beneficial measures.
Former finance minister Arun Jaitley had committed to reduce corporate tax rates to 25%, but not as a one-time measure. That commitment remained unfulfilled because of revenue constraints. The rationale was that reducing rates will make industry globally competitive. In that regard, this year’s budget was found wanting. Given that in the last quarter, the GDP growth rate came down to 5%, the government needed to urgently address industry’s concerns.
Prime Minister Narendra Modi’s visit to the United States (US) provided the opportunity for some good news for industry to celebrate Howdy Modi. The diplomatic task ahead is persuading US President Donald Trump to revise his decision to exclude India from the Generalized System of Preferences list.
The president, in turn, will seek tariff concessions on US products exported to India, especially medical devices and agricultural products. He will also be looking at India easing restrictions on e-commerce platforms provided by companies like Amazon; removing impediments in relation to content on Facebook, Google, WhatsApp and others; and the possible consequential liabilities arising therefrom. The broad contours of a bilateral trade agreement may well be in the offing. With interest rates reaching zero levels in the US, its industry will welcome increased investment opportunities in India.
Kapil Sibal is former Union Cabinet minister
The views expresses are personal
This article is originally published on HindustanTimes