One of the problems addressing
the issue of black money is that India’s tax system could be perceived
as being arbitrary, the chief economic adviser said. “For example, our
tax system is seen as somewhat arbitrary. The whole going after black
money could play into that and I think we need to be very careful about
that,’’ he said.
“Much more
important thing about black money is to understand why do we create
black money in the first place and address those things. To me, black
money is more important in terms of what it signals we are doing —
arbitrariness, tax rules, discretion, corruption, all these things. We
need to be very serious about addressing them,’’ Subramanian said.
In
his talk, he described macroeconomic conditions as positive and said
that India will record growth in the current fiscal irrespective of
whether growth was being measured by the old GDP series or the new GDP
series. He, however, expressed concern over stagnation of export growth
especially in sectors like IT services.
“The
ratio of exports of services to GDP, after growing in dollar terms at a
rate of almost 30 per cent for about eight to nine years, has now
flattened out and may be even declining. That is really worrying,’’
Subramanian said. “For one percentage point growth of demand globally
our exports have plumeted sharply,’’ he said.
Merely going after black money
could create wrong perceptions about India and it is more important to
understand why black money is created and address those issues, Chief
Economic Adviser to the NDA government Arvind Subramanian said on June 22.
“I don’t understand
black money. Politicians spend a lot of time and money on it. What I
would say is that the way to think about black money is as a stock
problem and a flow problem,’’ Subramanian said on the sidelines of a
series of talks on ‘Economic Survey: Taking stock of the Indian Economy’
that he has been delivering around the country..“There is something going on on
our exports side including services exports, IT exports which I think we
need to understand much more. There is something fundamentally wrong in
terms of our competitiveness. This is a challenge we need to be alert
going forward,’’ he said.
On
the scale and pace of reforms, Subramanian said: “India is not in crisis
and the expectation of big-bang reforms is quite unrealistic. India, as
you also know, is a vibrant democracy, frustratingly vibrant
democracy,’’ he said.
“One of
the things that I have learnt over the last few years is that for all
the talk of centralization of power under the new government, the irony
is how difficult it is to centralize power in New Delhi. Power is just
completely dispersed not just vertically between the Centre and the
state but also horizontally across institutions, across the bureaucracy
and across regulatory institutions as well. So, actually, it is very
difficult to think about big-bang reforms in India,’’ Subramanian said.
Any
government must be judged on the basis of changes they are able to
affect using levers they have complete control over and incremental
changes in other areas, he said. One of the challenges before the
government is in extending direct benefit transfers on the lines of LPG
subsidies to other goods.
The
first-mile challenge is to invest in IT infrastructure projects like
Aadhaar to identify the beneficiaries and the last-mile challenge is to
build on schemes like Jan Dhan and Mobile money, he said.
The
chief economic adviser said that progress and development have to be
assessed in many different ways including on health and education
parameters and added that GDP growth has a huge impact on lives and
livelihood as well.
The
whole agenda of going after black money — an election promise of the
BJP later described as a jumla by its president Amit Shah — “could
actually compound some of the perceptions about India,’’ Subramanian
said after his talk at the Indian Institute for Human Settlements.
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