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India 2017 OECD Economic Survey Strong reforms are boosting inclusive growth
The 2017 OECD Economic Survey of India highlights significant reforms that are fostering strong economic growth, yet notes that growth could be more inclusive. Key recommendations include comprehensive tax reforms, addressing regional inequalities, and improving public infrastructure to support macroeconomic resilience. The document emphasizes the need to attract foreign direct investment and enhance revenue generation through better tax compliance and lower corporate tax rates.
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India 2017 OECD Economic Survey Strong reforms are boosting inclusive growth
- 1. 2017 OECD ECONOMIC SURVEYOF INDIA Strong reforms are boosting inclusive growth @OECD @OECDeconomy http://www.oecd.org/eco/surveys/economic-survey-india.htm http://oe.cd/1No Delhi, 28 February 2017
- 2. India is undertakingmajor reforms Prosperity is rising quickly, but growth could be more inclusive Comprehensive tax reform, building up on the landmark GST reform, would lift all boats Reducing regional inequality is key Main messages 2
- 3. 3 Growth has beenvery strong Source: CSO; and OECD Economic Outlook 100 database.
- 4. 4 Inflation is undercontrol Source: Reserve Bank of India.
- 5. The current accountdeficit has narrowed 5 Source: Reserve Bank of India.
- 6. 6 Exposure to externalrisks is relatively low Note: Foreign-currency external liabilities are approximated by the sum of a positive difference between debt securities issued by nationals and residents from the BIS debt securities database (a proxy for off-shore external bond liabilities) and external liabilities for financial derivatives and other investments (the latter includes bank loans) from the IMF international investment position database. Source: Reserve Bank of India; Bank for International Settlements; and OECD calculations.
- 7. Structural reforms areboosting growth Source: OECD compilation. Key reforms approved Key ongoing reforms Goods and Services Tax (GST) Financing system for the states FDI deregulation Bankruptcy laws Inflation targeting Budget making process Competitive and co-operative federalism Subsidies (oil, food and fertilisers) Financial inclusion Corporate income tax Tax evasion and compliance Ease of doing business Banks Labour regulations 7
- 8. 8 India has beena top reformer Note: The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. Source: OECD FDI Regulatory Restrictiveness Index database.
- 9. 1.1 billion uniqueidentification numbers (Aadhaar) created to better target support to the poor 276 million bank accounts opened for the poor since August 2014 34 million toilets built since October 2014 7 108 villages electrified in 2015-16 (out of the 18 452 unelectrified villages) Inclusiveness stands high on the agenda 9
- 10. It is crucialto revive investment 10 Note: Gross fixed capital formation. Source: Central Statistical Organisation.
- 11. 11 Non-performing loans arehigh Source: Reserve Bank of India and IMF.
- 12. 12 More progress onFDI is needed Note: The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. Source: OECD FDI Regulatory Restrictiveness Index database.
- 13. 13 More social infrastructureis needed in some regions Source: NSS Report No. 566: Status of Education and Vocational Training in India; and Census of India. Data are for 2011-12.
- 14. 14 Rural areas lackaccess to core infrastructure Source: Census of India 2011.
- 15. 15 Public debt ishigh Data for India are revised estimates by the Reserve Bank of India for the fiscal year 2015-16. Source: OECD Economic Outlook 100 database; Reserve Bank of India; Brazilian ministry of economy; and World Bank World Development Indicators database.
- 16. Strengthen publicbanks' balance sheets by recapitalisation, bank consolidation and lowering the 51% government share Increase public spending on physical and social infrastructure Gradually extend the subsidy reform to other products including fertilisers and food Raise more revenue, especially from property and personal income taxes, to ensure that government debt to GDP return to a declining path Key recommendations to strengthen macroeconomic resilience and growth 16
- 17. Tax reforms tomake growth more inclusive
- 18. 18 GST is alandmark reform but India needs to raise more revenue Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- 19. 19 The personal incometax raises little revenue Note: Social security contributions are not included. Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- 20. 20 Combined corporate taxrates are high Note: Foreign source income is assumed to be exempted in the residence countries. For India, the 45% rate comprises the 30% CIT rate on corporate profits, plus 12% surcharge on CIT and 3% earmarked tax (on CIT and surcharge amount), plus the 15% dividend distribution tax. Source: Thomas et al. (forthcoming).
- 21. 21 Reducing the corporatetax rate would attract FDI Note: FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: OECD FDI main aggregates database.
- 22. 22 More resources forthe tax administration would raise tax compliance Note: Data for India relates to the CBDT. Source: OECD (2015), Tax Administration 2013: Comparative Information on OECD and other advanced and emerging economies.
- 23. Remove thetax expenditures that benefit the rich most (e.g. those related to housing investment) and freeze the income thresholds from which rates apply. Enable municipalities to raise more real estate taxes. Implement the reduction in the corporate income tax rate from 30% to 25% while broadening the base. Increase the number and training of staff employed in the tax administration. Key recommendations to ensure taxes better support inclusive growth 23
- 24.
- 25. Regional disparities arelarge 25 Note: Regions in OECD member countries have been classified according to two territorial levels to facilitate international comparability. The territorial level 2 (TL2) consists of macro-regions, states in the case of India. Source: OECD Regional Statistics database.
- 26. 26 There is littleevidence that poor states are catching up Note: The population data are from Census 2001 and 2011. For the other years, population was estimated by linear interpolation and extrapolation. Source: Central Statistics Office; and NSSO.
- 27. 27 Rural poverty isvery high in some states Note: Poverty is calculated by using the Tendulkar methodology, which expresses the poverty line in terms of monthly per capita consumption expenditure based on a mixed reference period. Data refer to FY 2011-12. Source: Reserve Bank of India.
- 28. 28 Productivity differences acrossstates contribute to regional inequalities Note: Labour productivity is measured as the ratio of value added (GDP) per worker. Source: CSO; and OECD Economic Outlook 100 database.
- 29. 29 Agriculture still employsmany Notes: Employment data for China refer to the primary sector (including farming, forestry, animal husbandry and fishery). Source: NSSO; National Bureau Statistics of China; and World Bank.
- 30. 30 Agriculture productivity islow Notes: Employment data for China refer to the primary sector (including farming, forestry, animal husbandry and fishery). Source: NSSO; National Bureau Statistics of China; and World Bank.
- 31. 31 States’ ability totailor public policies is high Source: CSO; and OECD Economic Outlook 100 database.
- 32. 32 Urban population willincrease fast in India Note: Forecasted data are shown in red. Source: United Nations, Department of Economic and Social Affairs, Population Division (2014).
- 33. 33 Urbanisation gains arenot fully exploited Note: Productivity is calculated as a median value added per worker in the organised manufacturing sector. Source: NSSO, Employment and unemployment survey, round No. 68; and World Bank Enterprise survey 2014.
- 34. 34 Local air pollutionis high Note: Indian cities are marked in red. The other selected cities are marked in blue. PM2.5 refers to particulate matter less than 2.5 micrometers in diameter; these fine particles are particularly damaging to health as they can penetrate deep into the lungs when inhaled. Source: World Health Organisation, Ambient Air Pollution Database, May 2016.
- 35. Continue effortsto improve universal access to core public services Continue the benchmarking of states and strengthen the sharing of best practices, in particular on labour regulations and land laws Enable reforms in land ownership laws, improve the land registry and step up the digitisation of land records Give municipalities more and clearer spending and taxing powers Key recommendations for a strong and balanced regional development 35
- 36. 36 For more information….. Disclaimers: Thestatistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Visit the OECD Economics department website to download this presentation; an overview of the 2017 Economic Survey of India and more www.oecd.org/eco/surveys/economic-survey-india.htm http://oe.cd/1No OECD OECD Economics follow us on Twitter https://oecdecoscope.wordpress.com/ Keep up with the latest ideas with the OECD Economics department Blog
Editor's Notes
- #4 Source: CSO; and OECD Economic Outlook 100 database.
- #5 Source: Reserve Bank of India.
- #7 1. Foreign-currency external liabilities are approximated by the sum of a positive difference between debt securities issued by nationals and residents from the BIS debt securities database (a proxy for off-shore external bond liabilities) and external liabilities for financial derivatives and other investments (the latter includes bank loans) from the IMF international investment position database. Source: Reserve Bank of India; Bank for International Settlements; and OECD calculations.
- #9 The FDI Regulatory Restrictiveness Index measures statutory restrictions on foreign direct investment across 22 economic sectors. It gauges the restrictiveness of a country’s FDI rules by looking at the four main types of restrictions on FDI: 1) Foreign equity limitations; 2) Discriminatory screening or approval mechanisms; 3) Restrictions on the employment of foreigners as key personnel and 4) Other operational restrictions. Restrictions are evaluated on a 0 (open) to 1 (closed) scale. The overall restrictiveness index is the average of sectorial scores. The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. 4. FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: Reserve Bank of India; OECD FDI Regulatory Restrictiveness Index database; Brazilian Central Bank; and OECD FDI main aggregates database. Several measures have been implemented in India to deregulate FDI but are not reflected in the index.
- #11 Source: Central Statistical Organization.
- #12 Source: Reserve Bank of India and IMF.
- #13 Source: OECD FDI Regulatory Restrictiveness Index database.
- #14 Source: NSS Report No. 566: Status of Education and Vocational Training in India; and Census of India. Data are for 2011-12.
- #15 Source: Census of India 2011.
- #16 Data for India are revised estimates by the Reserve Bank of India for the fiscal year 2015-16. Source: OECD Economic Outlook 100 database; Reserve Bank of India; Brazilian ministry of economy; and World Bank World Development Indicators database.
- #19 Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- #20 Social security contributions are not included. Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- #21 Foreign source income is assumed to be exempted in the residence countries. For India, the 45% rate comprises the 30% CIT rate on corporate profits, plus 12% surcharge on CIT and 3% cess (on CIT and surcharge amount), plus the 15% dividend distribution tax Source: Reserve Bank of India; Technical Background paper; Brazilian Central Bank; and OECD FDI main aggregates database.
- #22 Note: FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: Reserve Bank of India; Technical Background paper; Brazilian Central Bank; and OECD FDI main aggregates database.
- #23 Source: OECD (2015), Tax Administration 2013: Comparative Information on OECD and other advanced and emerging economies.
- #26 Regions in OECD member countries have been classified according to two territorial levels (TL) to facilitate international comparability. The higher level (territorial level 2) consists of macro-regions, while the lower level (Territorial level 3) is composed of micro-regions. Source: OECD Regional Statistics database.
- #27 Note: The population data are from Census 2001 and 2011. For the other years, population was estimated by linear interpolation and extrapolation. Source: Central Statistics Office; and NSSO.
- #28 Poverty is calculated by using the Tendulkar methodology, which expresses the poverty line in terms of monthly per capita consumption expenditure based on a mixed reference period. Data refer to FY 2011-12. Source: Reserve Bank of India.
- #29 Data refer to FY 2011-12. Source: Central Statistics Office of India; and Census of India.
- #30 Source: NSSO; and World Bank. Share of agriculture in total employment
- #31 Source: World Bank.
- #32 Note: The autonomy indicators capture the assignment of fiscal power across government levels and the extent to which sub-federal governments can conduct policy in the area of taxation and spending. High levels of the indicators are associated with a high level of fiscal autonomy. Source: OECD Fiscal Network database.
- #33 Note: Forecasted data are shown in red. Source: United Nations, Department of Economic and Social Affairs, Population Division (2014).
- #34 Notes: Wages are calculated using total wage and salary earnings of all individuals who, during the reference period, worked as a regular wage or salaried employee. Productivity is calculated as a median value added per worker in the organised manufacturing sector. Source: NSSO, Employment and unemployment survey, round No. 68; and World Bank Enterprise survey 2014.
- #35 Note: Indian cities are marked in red. The other selected cities are marked in blue. PM2.5 refers to particulate matter less than 2.5 micrometers in diameter; these fine particles are particularly damaging to health as they can penetrate deep into the lungs when inhaled. Source: World Health Organisation, Ambient Air Pollution Database, May 2016.