Chief Economic Adviser Arvind Subramanian while speaking at the Economic Survey 2016-17 said that there has been a regime shift in terms of macroeconomic stability since demonetisation.
Economic Survey 2016-17: Chief Economic Adviser Arvind Subramanian while speaking at the Economic Survey 2016-17 said that there has been a regime shift in terms of macroeconomic stability since demonetisation.
He revealed that about 5.4 lakh new tax payers have been added since Prime Minister Narendra Modi declared Rs 500 and Rs 1000 notes invalid on November 8, 2016. “5.4 lakh new tax payers added in post-demonetisation period, a big number,” he was quoted as saying by ANI.
Talking more about the impact of demonetisation on the Indian economy, Subramanian said the long term effect is that there has been a 20% reduction in cash in the economy.
He added that so far the government has overachieved its targets on inflation and it will soon be within target. “Substantially overachieved on checking inflation; by the end of March, inflation will be well within the target. Long term effect of demonetisation has been a 20% reduction in cash in economy”, the CEA added.
Talking about the boom to mobile banking, Subramanian said both level and pace of digital payments have been different since demonetisation.
While speaking about the historic Goods and Service Tax which was implemented last month, Subramanian said it is an astonishing feat of administration, politics and technology.
He said farm loans are going to have a deflationary, not inflationary effect if states’ borrowing limit is not raised. The Chief Economic Adviser further added that the balance of risks to growth has shifted to the downside.
His comments came in the backdrop of protests being held by farmers across the country. He said a structural decline in inflation rates and outlook has created scope for lower interest rates and monetary policy.
Income tax collection showed a surge. The number of returns filed as on August 5, 2017, grew to 2.82 crore as compared to 2.26 crore last year, the government said.
The number of Income Tax Returns (ITRs) filed for 2016-17 year grew by 25 per cent to 2.82 crore, as increased number of individuals filed their tax returns post demonetisation, the tax department said today. The growth in ITRs filed by individuals is 25.3 per cent with over 2.79 crore returns having been received up to August 5 as against over 2.22 crore returns filed in the corresponding period last fiscal.
“As a result of demonetisation and Operation Clean Money, there is a substantial increase in the number of Income Tax Returns (ITRs) filed,” an official statement said. The total number of returns filed as on August 5 stands at over 2.82 crore as against over 2.26 crore filed during the corresponding period of 2016-17. This was an increase of 24.7 per cent compared to growth rate of 9.9 per cent in the previous year.
The last date for filing of income tax returns by individuals and HUFs, who need not get their accounts audited, was August 5.
The finance ministry said that the number of ITRs filed showed that substantial number of new tax payers have been brought into the tax net subsequent to demonetisation. The effect of demonetisation is also clearly visible in the growth in direct tax collections, it said.
Advance tax collections of personal income tax (other than Corporate Tax) as on August 5 showed a growth of about 41.79 per cent over the corresponding period in 2016-17. Personal Income Tax under Self Assessment Tax (SAT) grew at 34.25 per cent over the corresponding period in 2016-17.
“The above figures amply demonstrate the positive results of the government’s commitment to fight the menace of black money,” it added.
The Central Board of Direct Taxes (CBDT), which is the apex policy making body of the I-T department, is committed in its resolve to eradicate tax evasion in a non-intrusive manner and widening of tax base.
To fight the menace of black money, the government had on November 8, 2016, demonetised old 500 and 1000 rupee notes and asked holders of such notes to deposit in bank accounts. The I-T department had then launched operation clean money to clamp down on unaccounted money funnelled into bank accounts post demonetisation.
In a last minute decision, the government on Monday extended the deadline for filing Income Tax Returns (ITRs) and linking Aadhaar with the Permanent Account Number (PAN) of taxpayers.
While ITRs can now be filed by August 5, the Aadhaar-PAN linking can be done till 31 August.
The government had made mandatory the linking of the two databases for filing ITRs from 1 July, this year.
The Central Board of Direct Taxes (CBDT) issued a statement saying the dates have been extended on receipt of complaints from “some taxpayers” that they were unable to log on to the e-filing website of the Income Tax department.
There were also complaints that the assessees were unable to link Aadhaar with PAN because their names were mentioned differently in the database relating to the two documents, the CBDT, the policy making body of the IT department, said.
A senior tax department official said the decision was taken after a meeting of senior officers of the revenue department and CBDT was held in the finance ministry today to “ease out the panic situation”.
“For the purpose of e-filing return, it would be sufficient as of now to quote Aadhaar or acknowledgement number for having applied for Aadhaar in the e-filing website.
“The actual linking of PAN with Aadhaar can be done subsequently, but any time before August 31, 2017,” the CBDT said.
It, however, cautioned that the returns (ITRs) will not be processed “until the linkage of Aadhaar with PAN is done.”
“In order to facilitate the e-filing of return, it is also decided to give extension of five days for e-filing of return. The return can be filed upto August 5,” it said.
The department, till Sunday, had maintained that no extension would be given as already over 2 crore returns have been received and no major glitches on the e-filing portal-http://incometaxindiaefiling.gov.in/– had been detected.
“While technical snags have been removed already, the main reason for failure of people to log in (the efiling portal) is because of last minute rush and panic in which those who have already logged in want to continue for the entire period for fear of losing it,” it said.
The official twitter handle of the I-T department said the move to enhance the time limit for filing ITRs beyond today was made “in view of difficulties faced by taxpayers.”
The department, this time, has also asked taxpayers to declare cash deposits made in bank accounts aggregating Rs 2 lakh or more, post demonetisation between November 9-December 30 last year, in the ITRs.
The ITRs to be filed by 31 July pertain to 2016-17 fiscal or assessment year 2017-18.
Challenge before taxmen is to widen tax net and officials are working towards it
Income taxpayer base moved up substantially to 6.26 crore at the end of the last fiscal, from nearly 4 crore earlier, CBDT Chairman Sushil Chandra said on Monday.
Clearing the air on disclosure of bank account details of non-resident Indians (NRIs), expats, as well as foreigners with investments in private equity in India, Chandra also said that such accounts need to be disclosed only when a refund is due to the assessee.
The chairman of the Central Board of Direct Taxes (CBDT) said that post demonetisation the department has taken a host of measures to increase tax base and the statement of financial transaction (SFT) report filed by banks shows widening of taxpayer base.
“As on date, we have got 6.26 crore assessees. It is a myth that we have 3-4 crore… (These) assessees who have filed returns, paid advance tax or tax has been deducted at source. This is a large jump from earlier years,” he said speaking at the Income Tax Day celebrations here.
The challenge before the taxmen now remains how to widen the tax net and officials are working towards it, he said.
Chandra said that with the enactment of the amended Benami law, the tax officials have found out clusters and persons who have invested money in real estate without filing tax returns.
The department has also taken enforcement action and under the law, 233 properties has been attached.
With regard to reports on NRIs having to disclose overseas bank account details in tax returns, Chandra said “providing bank account detail is optional and only has to be provided for claiming refunds”.
The tax department, he said, will now start working on expanding the process of e-assessment, he said, adding so far limited scrutiny cases are done using technology in 7 cities.
“We are working on the strategy that within two months we will spread limited scrutiny to 100 cities. Limited scrutiny cases which are selected should be done through systems,” he said.
If a case is selected under ‘limited scrutiny’, it means a limit has been set on the enquiries which will only pertain to mismatch or inaccurate reporting. When a tax income- expenditure profile does not match, the department’s automated system throws up a case for limited scrutiny.
Chandra said the next step would be to undertake complete scrutiny on systems so that assessees don’t have to visit tax office. “That will be big challenge and we are working on that,” he said.
Revenue Secretary Hasmukh Adhia said that with the linking of PAN with Aadhaar the entire era of bogus bank account and holding multiple PAN will go away.
He said of the last 25 years, in 11 years the Income Tax department has achieved a growth rate of 20 per cent and even a growth rate of 30 per cent in the year after demonetisation is considered modest.
The government hopes to mop up Rs 9.8 lakh crore from direct taxes in the current fiscal.
The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities and an Indian unit of HSBC Holdings in analysis that contrasts to the distress that’s swept the farming sector
India’s vast rural hinterland, which makes up 70% of the country’s population, is showing signs of recovery from last year’s cash crunch, boosting optimism that increased spending will help the broader economy regain its vigour.
The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities Ltd and an Indian unit of HSBC Holdings Plc in analysis that contrasts to the distress that’s swept the farming sector.
“We believe repayments and improved collection trends have increased the confidence of companies to start disbursing loans at a healthy pace again,” Mumbai-based Alpesh Mehta and colleagues wrote in a report from Motilal Oswal.
India’s micro-finance industry, which provides small loans to entrepreneurs and business owners who have little collateral, was slammed when the government withdrew high-denomination bank notes from circulation late last year in a bid to stamp out corruption. And while farmers have taken to the streets across India to protest plunging food prices, labourers who get paid a wage to work the land have actually seen their incomes rise after last year’s good monsoon, the HSBC economists wrote.
Loan collection rates in Uttar Pradesh, India’s largest and most populous state, are largely back at about 98% levels, up from less than 50% after demonetisation, Mehta, Piran Engineer, and Subham Banka said in their 3 July note. Other major states such as Karnataka are displaying “much improved collection trends,” they said.
Micro-finance disbursements, which grew 13% last year compared with 80% the prior year, are expected to return to pre-ban levels in three to six months, according to Motilal Oswal.
Gold loan company Manappuram Finance Ltd has risen 68% from its low after demonetisation in November and Bharat Financial Inclusion Ltd, India’s largest listed micro-finance firm, has rebounded 64% over the same time frame.
However, the state of Maharashtra, home to India’s financial capital, Mumbai, is lagging other states and continues to face delinquency pressures, with about 20% of loans unpaid 90 days past due, according to Motilal Oswal.
Interactions with micro-finance companies reveal no expectation of disruption from the rise of farm loan waivers in Indian states but instead a focus on the effects of demonetisation, the report said. Microfinance Institutions Network—India’s largest group of microfinance firms—reported that “demonetization severely impacted the micro-finance business in multiple ways including slowing down of growth due to non-availability of cash for a few months.”
Motilal intends to observe delinquency trends for a few more quarters before reaching conclusions over the impact of waivers on micro-finance. Maharashtra, Punjab, Uttar Pradesh have all announced, waiver programs.
The rise in credit growth at the micro-finance level is complemented by a rise in rural incomes and purchasing power, according to HSBC Securities and Capital Markets (India) Pvt. Ltd.
“Macro indicators have improved” in rural India, HSBC economists Pranjul Bhandari, Aayushi Chaudhury, and Dhiraj Nim said in their 10 July note. The plunge in inflation has helped boost annual real income growth to just under 4% from contracting levels a year ago while rural unemployment has sunk from about 9% last September to around 4%, according to HSBC.
Normal rains so far in 2017 and a bumper crop in 2016 after a two-year drought have generated more jobs for rural Indians who work the land—some 70% of rural households who are “landless, according to HSBC.
That’s help pushed up two-wheeler sales and the production of consumer non-durables in this segment, according to the HSBC report. Shares of companies with substantial rural customer bases are experiencing steady growth.
While falling farm prices have hit many rural Indians hard, they have also boosted purchasing power and consumption among the population which could help a broader recovery in the Indian economy that’s suffering from a slowdown in growth, soured loans and weaker manufacturing sector.
The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said.
The resolution of the vexed issue of massive non-performing assets (NPAs) in the banking system is a work in progress and some “visible action” will be initiated over the next few days under the NPA ordinance promulgated recently, finance and defence minister Arun Jaitley said on Thursday.
“The RBI was taking measures under the existing mechanism. We have now taken other steps and there would be visible action taken under the new mechanism in the next few days,” Jaitley said, addressing media on achievements of the ministries under him over the past three years. The Centre won’t provide any special package to any state to waive farm loans but the states are free to spend from their own budgets should they take any such decision, the minister said.
Here are few excerpts from FM’s media briefing:
On NPAs and other things constraining private investments
Massive toxic assets impact the ability of banks to support growth, although record levels of foreign direct investments (gross FDI inflows touched $60 billion in 2016-17) and higher government spending have offset inadequate private investments to a certain extent. Linked to it (NPAs) is the challenge of wanting to increase private sector investment, even though our FDI and public investments have significantly increased. And of course there is a significant (adverse) impact of the global situation also (on private investments).
“Note ban not sole reason for Q4 GDP slowdown”
Demonetisation could be one of the several factors, and not the sole reason, that contributed to the slowdown of GDP growth to an 8 quarter-low of 6.1% in Q42016-17. What you think is very clear (that note ban dragged down Q4 growth) isn’t very clear. There are several factors which can contribute to GDP in a particular quarter. There was some slowdown visible, given the global and domestic situations, even prior to demonetisation in the last year. Financial services, which used to have 9-10% growth, has come down (to 2.2% in Q42016-17). Under the current global situation, 7-8% growth, which is at the moment the Indian normal, is fairly reasonable by our own standard and very good by global standards.
And I am sure as the impact of all these policies (taken by the government) holds out, growth will gather momentum. There won’t be any adverse impact of GST on GDP growth. The GST by itself should normally add to growth.
(Chief economic adviser Arvind Subramanian pointed out that under the GST, the incidence of tax is going to come down. While there could be some teething problem in implementation, at the most, initially, the tax cut would be positive to both reduce inflation and stimulate consumption).
On Pradhan Mantri Garib Kalyan Yojana
PMGKY wasn’t an isolated scheme in last financial year. First we introduced the Income Disclosure Scheme; after the IDS, there was a (post-demonetisation) phase of people depositing cash in the banking system. And the PMGKY was over and above these. To assess the total amount of (black money) disclosures made, you have to look at all the three collectively.
Revenue secretary Hasmukh Adhia said the response to PMGKY hasn’t been very good; only Rs 5,000 crore has been declared under the scheme. There are mainly two reasons for it. First, even before the scheme was announced, people had tried to deposit their cash in different accounts and tried to “adjust their money”. Secondly, many people found the (PMGKY) rate – 50% tax plus 25% as interest-free for four years – too high).
No central funds for farm loan waiver by states
The Centre won’t provide any special package to any state to waive farm loans but states are free to spend from their own budgets should they take any such decision. The Centre will continue to provide the states funds in accordance with the latest Finance Commission suggestions, and not more to waive farm loans (clarified that states are free to take decision on farm loan waivers from their own budgets but they have to stick to the 3% fiscal deficit target, as stipulated under the fiscal responsibility legislation).
On Air India
As far as AI is concerned, Niti Aayog has given its suggestion to the civil aviation ministry and the ministry will have to explore all the options for divestment or privatisation of the airline. The civil aviation minister will now devise the methodology ( for disinvestment / privatisation). As far the merger of oil PSUs are concerned, the petroleum ministry will have to take a call.
On “jobless growth”
Jobs aren’t created outside the economic structure. If the economy grows then it’s only natural that the formal sector would create jobs and in this country job creation is even faster in the informal sector. Since there is no firm statistics available on job growth in the informal sector, the term ‘jobless growth’ is being bandied about.
On the amount of demonetised currency
On the total currency given to the banks, the RBI used to give the figures frequently during the process of demonetisation, but now that the exercise is complete, as a responsible institution it can’t give an approximation. Today, every currency note is to be counted and if there are counterfeits these also need to be counted before arriving at the real count. The exercise is enormous and large but the RBI will give the accurate figure when it is complete.
Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.
Noting that India is recovering from the temporary adverse effects of demonetisation, the World Bank has projected a strong 7.2 per cent growth rate for India this year against 6.8 per cent growth in 2016.
Even as the World Bank has revised India’s growth figures by 0.4 percentage points as compared to its January forecast, India remains the fastest growing major economy in the world, the World Bank officials said.
The growth projections for China remains unchanged at 6.5 per cent for 2017 and then 6.3 per cent for the next two years 2018 and 2019. The World Bank in its latest Global Economic Prospects, projects India’s growth to 7.5 per cent in 2018 and 7.7 per cent in 2019.
In both the years, the forecast has been downgraded by 0.3 per cent and 0.1 percentage points as compared to the January 2017 forecast.
“A downgrade to India’s fast pace of expansion,” the World Bank said, is “mainly reflecting a softer-than-expected recovery in private investment.”
In 2016, in India, activity was underpinned by favourable monsoon rains that supported agriculture and rural consumption, an increase in infrastructure spending, and robust government consumption, the report said.
“In India, recent data indicate a rebound this year, with the easing of cash shortages and rising exports. An increase in government spending in India, including on capital formation, has partially offset soft private investment,” it said.
“While manufacturing Purchasing Managers’ Indexes have generally picked up, industrial production has been mixed,” the Bank said in its latest report.
Observing that India’s growth is forecast to increase to 7.2 per cent in Financial Year 2017 and accelerate to 7.7 per cent by 2019, is slightly below previous projections, the Bank said this outlook mainly reflects a more protracted recovery in private investment than previously envisaged.
“Nonetheless, domestic demand is expected to remain strong, supported by ongoing policy reforms, especially the introduction of the nationwide Goods and Services Tax (GST),” it said.
“Significant gains by the ruling party in state elections should support the government’s economic reform agenda, which aims at unlocking supply constraints, and creating a business environment that is more conducive to private investment,” the Bank said.
M Ayhan Kose, Director of the World Bank Group’s Development Prospects Group, in response to a question, underscored the need of reforms in the banking sector.
“The government has especially taken steps to address the banking sector weakness, but that remains on the to-do list,” Kose told PTI.
“Second (to do list) of course is the initiative by the government to remove some of the public investments, exactly the right thing to do to stimulate – to try to reinvigorate -private investment, which has been weak,” the Bank official said in response to a question.
