The GDP growth rate is determined by two factors: the investment rate and the efficiency in the use of capital. The Harrod-Domar equation defines the relationship: the growth rate is equal to the investment rate divided by the incremental capital-output ratio (ICOR). The ICOR measures the capital required to produce one unit of output.
This pain of adjustment is slowing down the economy. On completion of this adjustment, the economy will be larger, cleaner, more formal and poised for fast growth. In the interim, as the economy adjusts to these changes, the panellists at the India Economic Forum made suggestions for relief measures for ensuring that the cost paid for the adjustment in terms of slower growth would be minimum and medium term measures to ensure reversal of the slowdown.
The Goods and Services Tax (GST) was introduced in India with so much of fanfare. It was dubbed as the biggest reform that would prove to be a game-changer initiative for the economy. The new indirect tax regime is in place for two and a half years now. Today, very few people agree that the GST framework has succeeded in achieving the desired outcome.
Roles and responsibilities of the Centre and the states have been listed in the seventh schedule of the Indian Constitution. It has three lists: List I - Union List, List II - State List and List III - Concurrent List. While the List I and List II have roles and responsibilities defined for the Centre and states, respectively, the List III include the areas that overlap between the Centre and the states and thus, fall in the purview of both.
Prime Minister Narendra Modi has secured voter trust through his agenda of welfare programmes. Among the programmes that stand out in the overall welfare bouquet are: First, Ayushman Bharat that has improved capacity utilisation of healthcare infrastructure through better monitoring. Combining insurance and technology, the scheme has revolutionised delivery of free and quality healthcare services.
Investment plays a critical role in sustaining high economic growth. Revival of investments is among the most important factors that the government needs to fix in order to achieve $5 trillion GDP target by 2024-25 and $10 trillion target by 2030.
Different departments and institutions of the government owe huge amounts of money to companies, vendors and contractors. In order to revive the investment cycle it is very important that such payments are cleared immediately. Arvind Virmani, Chairman of EGROW Foundation and former Chief Economic Adviser, Government of India said the government has started the process of clearing the dues, but they are done in a piecemeal manner.
Big technology companies are extracting huge profits from the Indian market but are paying hardly any taxes. Majority of these companies are from the US and a few are from Japan, South Korea and China. "Value capture is happening by a few companies and they are not paying tax on the value capture here in India," said Sharad Sharma, Co-Founder, iSPIRT Foundation.