New Delhi, June 14: It is widely believed that the last half a decade has been challenging for India. However, at the same time, it is also interesting to note that the phase has seen much more structured and meaningful reform taking place than in the past.
Economic disarray, stagnation, sluggish investment and bureaucratic red-tapism have all been addressed adequately over the last few years. Though a great challenge in a country as diverse as India, the necessary structurally forms were implemented 2017 onwards so as to create an environment conducive for investment.
The first of many reforms was targeted at the tax collection system in the country. There were multiple issues plaguing the collection network and compliance methodologies. In addition, there was no uniformity in the taxation rates when it came to different states leading to an anomaly that would impact the economics behind different products. To resolve the same, VAT and other indirect taxes were replaced with the Goods & Services Tax (GST).
In an attempt to ensure one tax for one nation, the rates and procedural aspects of taxation are now consistent across the country ensuring that revenue losses are plugged effectively. Though factors like the pandemic has added another difficult dimension to tax collection, it is worth observing that the implementation of one tax has resulted in the savings of upto 4 per cent in monthly household expenses, which is a significant number when taking into account the 138 crores population of India. In fact, the last collections of GST are the highest ever at Rs 1,42,095 crore in March 2022 denoting the massive success that it has been in terms of compliance as well as collection.
Additionally, to provide relief to small businesses that were already reeling due to a global slowdown, the Companies Act was amended so as to decriminalize technical lapses and treat them as civil errors instead. Along with the fact that the insolvency proceedings under the Insolvency & Bankruptcy Code have proven to be an able mechanism to ease doing of business and improvement of Non-Performing Assets (NPA) rates, these reforms have helped provide fillip to the Indian industry.
Previously, India had the highest effective corporate tax rate in the world which led to a clear foreign portfolio investment (FPI) outflow from the country. By reducing tax burden on companies, it has helped make India an attractive destination for foreign investment in various sectors. Apart from that, a faceless assessment system has been introduced to empower honest taxpayers. A significant result of this has been that there has been an increase in the personal tax collection by 48% and corporate tax collection by 41 per cent in the financial year 2021-22. Despite these significant steps, the Indian MSME sector has lagged behind due to the historic disadvantages that it has faced. Therefore, the government has made special provisions to adequately support the sector that employs more than 11 crore Indians.
When it comes to incentivizing entrepreneurship and manufacturing, the newly launched One District, One Product scheme has been able to pull all the stops. So far, 106 product, 103 districts have been identified and selected. Once selected, the government provides adequate assistance to promote the product on a global level. This has ensured that the Indian exports sector has been able to grow at a significant pace, especially in light of the emerging competition from Vietnam and Bangladesh from our region. For the third consecutive month, India has remained at the top of the emerging market league table going to strong manufacturing activity as well as exports.
Therefore, contrary to the expectations that the difficult times of the pandemic would throw the Indian growth story into a ditch, India has emerged as a strong player with significant growth that is higher than any other developing country in the world. Defying all expectations, new estimates have shown that India may well be on the path to surpassing Japan in becoming Asia’s second largest economy. Though there are multiple factors that have led to the same, exports reaching a new high of $418 billion in a single year is a noteworthy reason apart from the growth in manufacturing activity as well. Collectively, it has helped raise global interest in the investor-friendly FDI policy of the government, thereby it can easily be ensured that India is looked at as a strong powerhouse and a force to be reckoned with in days to come.