Home / Politics / Policy /  Don’t raise tax exemption level: Niti Aayog to govt

New Delhi: Federal policy think tank Niti Aayog has proposed a series of measures to spur economic growth to 8% and to make sure the growth is inclusive, in a three-year action plan circulated among chief ministers last Sunday and released for public discussion on Thursday.

The proposals include greater fund allocation to socioeconomic sectors, reducing fiscal deficit to 3% of GDP in 2018-19 from a projected 3.2% for 2017-18 and executive decisions to be taken across sectors.

These include the government taking an active role in auctioning non-performing assets (NPAs) of banks, widening of personal income tax base, providing farm subsidy for produce that usually fall outside the procurement schemes and providing a uniform pricing regime for the natural gas market. “The economy has good prospects to return to a growth trajectory of 8% plus in another two to three years if not sooner," the think tank said.

The think tank noted that between March and September 2016, the gross non-performing advances ratio (GNPAs) has increased from 7.8% to 9.1% for scheduled commercial banks. Since state-run bank managers are reluctant to sell bad debts below face value, the government will need to play an active role in facilitating auctions, the advisory body said.

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To widen the personal income tax base, Niti Aayog said that the nominal exemption threshold of Rs2.5 lakh for individuals should remain unchanged such that the real value of the threshold is reduced, leading to the inclusion of a greater proportion of individuals in the tax net over time.

“However, tax slabs corresponding to the lowest tax rate should be expanded to ensure that the tax liability of lower income individuals does not increase suddenly with the growth in their nominal incomes," said the think tank.

The action plan noted that there has been an excessive focus on the procurement of wheat, rice and sugarcane at the expense of other crops such as pulses, oilseed and coarse grains. “One measure that can help reduce distortions in the MSP system is the system of “price deficiency payment," it said.

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The draft plan also made suggestions to states on sustainable development and environment. It noted that air pollution is a serious concern for the country and in northern India it has reached crisis levels. It suggested steps to increase forest cover and to protect wildlife. For instance, reversal of policies subsidising palm oil cultivation.

The draft plan proposed that all linear projects like road, power lines and rail projects should incorporate mitigation measures at all stages of planning, construction and maintenance as it will allow projects to go ahead without cutting off migration corridors that are essential to prevent wildlife species from going extinct.

Niti Aayog noted that the distinction between rural and urban areas has blurred, resulting in a more integrated economy but creation of jobs has not kept pace with this shift from agriculture to non farm sectors. To address this, existing welfare schemes should be monitored and implemented well, it said.

Elizabeth Roche contributed to this story.

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