‘Note ban has led to a cleansing’

In an interview to BusinessLine , NITI Aayog Member Bibek Debroy says that many of the NDA government’s policy measures will have an impact after four-five years. Excerpts:

How do you perceive the government’s policies in these three years?

There are four important issues. The government has introduced institutional changes like decentralisaiton to States, ending the Plan and non-Plan distinction, abolishing the Railway Budget, and the possible change in the fiscal year. The impact of these measures may not be easy to quantify, but they are significant.

Despite scarce resources, the government has chosen to spend on public infrastructure. It is also using data to identify the deprived and is pushing through subsidies by building upon UPA legacies such as direct benefit transfers, financial inclusion and Aadhaar seeding. The last item is a bit intangible, but the government has made citizens participate in schemes such as Give it Up for LPG subsidy and Swachch Bharat mission.

What do you make of demonetisation, six months down the line?

This isn’t only about what happened on November 8... Several economists have shot their mouth saying GDP will decline. But national income is now based on gross value added. Now, we have the data, and it does not show any dip. Demonetisation has led to a complete institutional cleansing. To try and gauge demonetisation in purely economic terms was wrong to start with.

GST was a big reform, but was it rushed?

We have been debating GST for close to 18 years now. We have an idea of an ideal GST with a single rate and inclusive of all products and indirect taxes. But what we have is far from it. One way is to try and get a consensus on the ideal GST and haggle for another 20 years. The other way is that we know this is not a perfect GST, but it can be tweaked as we go along.

There are no government estimates of how far GST will boost the economy. In most countries that have gone through GST, it has taken 10 years for it to settle down. It is not a one-shot increase to the economy.

What more policy measures are needed?

Many things being done by the government... may not lead to immediate payoffs but after four to five years. From what I understand, the Prime Minister has a long-term development template, which is at least 10 years. I would expect current policies to go on.

Your views on taxing agriculture income...

The Centre has no plans to tax agricultural income. Constitutionally, it is a State subject. About seven States tax certain kinds of agriculture. I do think agriculture income should be taxed, in a way similar to personal income taxation, based on a threshold. In his taskforce on direct taxes, Vijay Kelkar had computed that given the levels then, 95 per cent would be below the threshold. Agricultural income is subject to year-to-year variations but you can do an average of three-four years and tax on the basis of that.

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