Releasing the Three Year Action Agenda (2017-18 to 2019-20) prepared by the Niti Aayog, finance minister Arun Jaitley on Thursday said India is now becoming restless for a higher rate of growth and if the recommendations are implemented then it has the ‘potential to trigger much more economic activity’. “India and Indians are increasingly becoming restless…they expect higher rate of growth, more decisions to be taken and higher economic activity itself to take place,” Jaitley said, adding that even states have the pressure to take decisions which promote growth.
In the economic agenda document, the Niti Aayog said: “Indeed, there are good prospects that we will return to 8 per cent plus growth trajectory in another 2-3 years if not sooner. Therefore, the chances of massive cut in the poverty rate in the upcoming decade are excellent.” Niti Aayog vice chairman Arvind Panagariya said the agenda has been finalised after a series of consultations with various stakeholders.
The document has suggested various reforms for doubling farmers’ income, the need for higher capital support for public banks, lowering of stamp duties to boost the real estate sector, among others.
The document proposes linking central expenditure to future priorities, shifting additional allocations to high-priority sectors which are more likely to promote development. “The proposals imply substantial expansion in expenditures by 2019-20 on education, health, agriculture, rural development, defence, railways, roads and other categories of capital expenditure,” the agenda said.
It suggested ways to facilitate urbanisation and deal with key challenges like affordable housing, infrastructure, public transport and promotion of Swachh Bharat. “This document really has the potential for becoming, for those in the government, a good textbook (of future reforms),” Jaitley said. Among the recommendations, the Niti Aayog pitched for providing infrastructure sector status to the real estate development, which will help bring down interest costs in the sector. It suggested that the states may consider reducing the stamp duty rates including the property registration fee to 3-3.5 per cent, from as high as 8 per cent in some of the states. “A high rate (stamp duty) creates the incentives for the buyer of property to declare a lower value and pay a part of the payment in black,” it said.
The document also projected non-performing assets to rise for the public banks, necessitating higher capital support from the exchequer. “The government has already committed a sum of Rs 70,000 crore under the ‘Indradhanush’ scheme to recapitalise and help public banks meet the capital requirements under Basel III. But it is likely that as the NPAs are moved out of the bankbooks, we will need a larger sum,” it said.
The Aayog recommended giving a tax pass through status to partnership firms. “The income from operations of partnership firms is subjected to a tax twice: First, profits of the business entity are taxed (subject to certain deductions such as partner salary), and the individual owners’ incomes are taxed. The tax on the intermediary, i.e., the business entities, is distortionary since the income ultimately goes to the business owners and is taxed as part of their personal income. Therefore, we propose giving the non-corporate business entities a “pass-through” of tax liabilities so that their income is taxed only once, in the hands of the individual owners,” it said.
Its suggestions for reforming the judicial system revolve around streamlining human resource availability and performance, increasing and strengthening avenues for dispute resolution and extensive use of ICT to improve efficiency. On the social sector, it talked of changes in segments like education, skill development, health and issues facing specific groups, such as scheduled castes, scheduled tribes and women.