Some economic policy proposals need to be refined and even reversed
Now that reforms have returned to the policy agenda, we may ask which reforms should receive priority during the remaining tenure of the present govt.
Now that reforms have returned to the policy agenda, we may ask which reforms should receive priority during the remaining one-and-a-half years of the present government. Simultaneously, we must expose policy proposals on the table that would take the nation backwards.
The recent Vijay Kelkar Committee report offers an excellent roadmap for the reforms the government may tackle during its remaining term. Though the report is principally about fiscal consolidation, the effects of the measures it recommends will go well beyond cutting high fiscal deficits. This is as it should be since the ultimate goal behind fiscal consolidation is to foster efficiency and accelerate growth.
As the report rightly argues, urgent efforts are required to raise the tax-to-GDP ratio. A government that defines itself as the champion of inclusion and, therefore, also redistribution in favour of the poor, can ill-afford the decline in tax revenues from 12% of the GDP in 2007-08 to 10% in 2011-12. The government must widen the indirect-tax base, rethink the proposed Direct Taxes Code that would poke yet more holes in the leaky tax system and, above all, improve tax collection through more improvements in tax administration.