New Reforms Agenda For India’s Next Phase Of Growth

For its next phase of growth, India does need a new reform agenda. It was on 8 February when Government of India came out with a white paper on the Indian economy. The document talked big of what the Modi Government had inherited and what efforts were made by the present government at the centre to rebuild the nation and help it join the top five global economies during the period. From being as part of the ‘Fragile Five’ economies of the world, a narrative given by Morgan Stanley in 2013, to nowadays when the nation aspires to enter the top five global economies over next few years, India has come a long way now. No wonder if India was able to realise the dream of crossing USD 7 trillion mark by 2030

The Modi Government launched a host of beneficiary schemes so as to expedite the process of development in 2014. Some of those programmes include Jan Dhan Yojana, Mudra Yojana and Swachh Bharat Abhiyan. PM Modi ensured that almost half the population of India, which hitherto had no access to formal banking, sanitation or capital, now had it all, says a report by The Economist.

Look at the outcome. Roughly, 50 crore bank accounts were opened, 12 crore toilets were built, and 43 crore loans worth `22.5 lakh crore were disbursed since the launch of those people-oriented schemes.

Along with several other similar schemes that ensured all remaining villages would now have access to electricity, the Modi Government was empowering a significant portion of the Indian population, so far impoverished, to become productive contributor to the Indian economy. There is JAM Trinity (combination of Jan Dhan Account, Aadhar and Mobile) in place now, facilitating direct benefit transfer (DBT) negating the role of go-betweens.

Meanwhile, the Modi government also went on a major military modernisation spree. As a result, India has started exporting Defence equipment. The private sector companies have played a key role in achieving the goal.

Again, monthly GST collections have reached historic highs, what with the collection of `2.11 lakh crore under the segment, in the April 2024 month alone. Demonetisation was announced by the Prime Minister on 8 November, 2016. It was supposed to destroy the black economy at one stroke, end the menace of counterfeit currency and financing of terrorism. However, the ultimate goal was yet to be achieved.

The Atmanirbhar Bharat Abhiyan coupled with Production Linked Incentive (PLI) scheme, across various sectors, helped make India a critical part of global supply chain of manufacturing.

Let’s discuss about what should be the priorities for the new government, to make the country’s economy further strong in the future.

The foremost step should be to act against the black economy in the country, without which the economy can’t grow.

"There was an urgent need to make CBDC (Central Bank Digital Currency) more accessible to the common man. Right now it was mostly being used for B2B transactions"

Double Taxation Avoidance Agreement (DTAA) has been signed with 87 nations as of 2012. The same with Switzerland was supposed to help in unearthing black money held abroad. But it has not been of much help as of now, because it is to do with the declared incomes and not black incomes that are not disclosed in either of the two jurisdictions.

Tax Information Exchange (TIE) agreements with 37 nations have also not helped unearth black incomes since these are also about the declared incomes.

A number of other steps has also been taken by the Modi government so far to curb the menace of black economy. The first action taken by the present government towards the direction, in May 2014 was to set up the Court monitored special investigation team, on black money, as mandated by the Supreme Court. Various other steps were announced from time to time to show seriousness about tackling the black economy. Like, passing of the Black Money bill against illegal funds held abroad and the Income Declaration Scheme (IDS).

“Unfortunately, none of these steps bore any fruits and the government decided to go for a big bang in the shape of demonetisation of high denomination currency notes,” rues Arun Kumar, Retired Professor of Economics at JNU.

To get at illegal funds held abroad and to bring them back to the country, it is necessary to know where these funds are and how much is held abroad by Indians. Illegal funds are taken out of the country through the process of layering and shell companies are created in six different tax havens, and funds are moved from one to the other and the shell companies closed. This way the trail of the funds is sought to be obliterated. It becomes hard for official agencies to trace these funds, even if they want to track these funds. Since there are 90 tax havens in the world where the funds end up, it is not easy to discover for the agencies.

Yet another moot question arises, if the new government will be able to go for equal redistribution of wealth. As per income tax data, 6.6 per cent of the population filed a tax return in 2020-21. But only 0.68 per cent of the population were effective taxpayers who paid a significant amount of income tax. The rich, who declare an income of above `1 crore, were 0.016 per cent of the population, and they declared 38.6 per cent of the total taxable income.

Again, data on the eShram portal, which has 300 million unorganised sector workers registered, suggests that 90 per cent of them earn less than Rs 10,000 per month.

So, those against any redistribution are protecting the 0.016 per cent or 0.68 per cent of the people and are against the bottom 90 per cent in the country.

The disparity is much worse than depicted above because the top 1 per cent in the country has substantial black incomes and undeclared wealth in India and abroad (illegally spirited out).

Going by the manifestos of the two major political parties — BJP and Congress in the fray, one finds that big promises have been made by them to the people of the nation. Above all, there was an urgent need to make CBDC (Central Bank Digital Currency) more accessible to the common man. Right now it was mostly being used for B2B transactions.

The Bharatiya Janata Party’s (BJP’s) manifesto titled “Modi ki Guarantee 2024” promises much. It implies a guarantee that soon all will be well because of Narendra Modi. It reflects the state of affairs in the BJP and its reading of people’s mood.

The contrast with the Congress manifesto, titled, ‘Nyay Patra’, promising justice to all, is stark. The BJP manifesto too promises justice. But, one depends on faith in an individual’s guarantee while the other seeks to deliver through strengthening society’s institutional setting. The instrumentality proposed by the two political parties is diametrically opposite.