OECD Economic Survey of India 2017: Boosting Inclusive Growth Through Strong Reforms
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OECD Economic Survey of India 2017: Boosting Inclusive Growth Through Strong Reforms
- 1. 2017 OECD ECONOMIC SURVEY OF INDIA Strong reforms are boosting inclusive growth @OECD @OECDeconomy http://www.oecd.org/eco/surveys/economic-survey-india.htm http://oe.cd/1No Delhi, 28 February 2017
- 2. India is undertaking major reforms Prosperity is rising quickly, but growth could be more inclusive Comprehensive tax reform, building up on the landmark GST reform, would lift all boats Reducing regional inequality is key Main messages 2
- 3. 3 Growth has been very strong -2 -1 0 1 2 3 4 5 6 7 8 Brazil Russia South Africa Chile Mexico Colombia Turkey Indonesia China India % Average annualised GDP growth rate between 2014 and 2016Q3 Source: CSO; and OECD Economic Outlook 100 database.
- 4. 4 Inflation is under control 0 2 4 6 8 10 12 14 2012 2013 2014 2015 2016 Y-o-y % change Consumer price index Source: Reserve Bank of India.
- 5. The current account deficit has narrowed 5 Source: Reserve Bank of India. -7 -6 -5 -4 -3 -2 -1 0 -7 -6 -5 -4 -3 -2 -1 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % of GDP % of GDP Current account balance
- 6. 6 Exposure to external risks is relatively low 0 20 40 60 80 100 120 140 160 India China Saudi Arabia Russia Indonesia Turkey Brazil Mexico South Africa % of GDP External liabilities 2016Q3 or latest available Foreign-currency Total Note: Foreign-currency external liabilities are approximated by the sum of a positive difference between debt securities issued by nationals and residents from the BIS debt securities database (a proxy for off-shore external bond liabilities) and external liabilities for financial derivatives and other investments (the latter includes bank loans) from the IMF international investment position database. Source: Reserve Bank of India; Bank for International Settlements; and OECD calculations.
- 7. Structural reforms are boosting growth Source: OECD compilation. Key reforms approved Key ongoing reforms Goods and Services Tax (GST) Financing system for the states FDI deregulation Bankruptcy laws Inflation targeting Budget making process Competitive and co-operative federalism Subsidies (oil, food and fertilisers) Financial inclusion Corporate income tax Tax evasion and compliance Ease of doing business Banks Labour regulations 7
- 8. 8 India has been a top reformer Note: The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. Source: OECD FDI Regulatory Restrictiveness Index database. -0.06 -0.04 -0.02 0 0.02 0.04 India China Malaysia Turkey Mexico Korea OECD CostaRica Chile SouthAfrica Italy Japan Tunisia Brazil UnitedStates Morocco Egypt UnitedKingdom France Ireland Greece Colombia Germany Russia Argentina Indonesia FDI regulatory restrictiveness index, changes over the period 2011-16 (More restrictive) (Less restrictive)
- 9. 1.1 billion unique identification numbers (Aadhaar) created to better target support to the poor 276 million bank accounts opened for the poor since August 2014 34 million toilets built since October 2014  7 108 villages electrified in 2015-16 (out of the 18 452 unelectrified villages) Inclusiveness stands high on the agenda 9
- 10. It is crucial to revive investment 10 Note: Gross fixed capital formation. Source: Central Statistical Organisation. 20 22 24 26 28 30 32 34 36 38 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % Investment to GDP ratio
- 11. 11 Non-performing loans are high 0 2 4 6 8 10 12 Malaysia China Argentina Chile Philippines Indonesia Colombia Turkey South Africa Brazil India Russia % of gross advances Non-performing loans September 2016 or latest data available Source: Reserve Bank of India and IMF.
- 12. 12 More progress on FDI is needed Note: The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. Source: OECD FDI Regulatory Restrictiveness Index database. 0 0.1 0.2 0.3 0.4 0.5 China Indonesia India Malaysia Tunisia Mexico Russia Korea Brazil UnitedStates OECD Morocco Egypt UnitedKingdom Turkey Chile SouthAfrica Italy Japan CostaRica France Ireland Argentina Greece Colombia Germany FDI regulatory restrictiveness index, 2016 or latest (higher scores indicate greater restrictiveness)
- 13. 13 More social infrastructure is needed in some regions 0 5 10 15 20 25 30 35 40 45 Mizoram Megahlaya Kerala Nagaland Puducherry Daman&Diu Lakshadweep Delhi Goa Sikkim Manipur A&NIslands Chandigarh Assam Tripura Maharashtra HimachalPradesh TamilNadu Uttarakhand Punjab Haryana Gujarat Karnataka ArunachalPradesh Dadra&NagarHaveli WestBengal Chhattisgarh India Jammu&Kashmir Odisha MadhyaPradesh Jharkhand AndhraPradesh UttarPradesh Rajasthan Bihar % Illiteracy rate, persons of 15 years and above Source: NSS Report No. 566: Status of Education and Vocational Training in India; and Census of India. Data are for 2011-12.
- 14. 14 Rural areas lack access to core infrastructure 0 10 20 30 40 50 60 70 80 90 100 Bihar UttarPradesh Assam Jharkhand Orissa WestBengal Meghalaya India ArunachalPradesh Rajasthan MadhyaPradesh Tripura Manipur Mizoram Chhattisgarh Maharashtra Nagaland A&NIslands Jammu&Kashmir Uttarakhand Gujarat Karnataka Haryana AndhraPradesh Sikkim TamilNadu DadraandNagarHaveli Kerala Punjab Goa Puducherry HimachalPradesh Chandigarh Delhi DamanandDiu Lakshadweep % total Households whose main source of lighting is electricity Source: Census of India 2011.
- 15. 15 Public debt is high 0 10 20 30 40 50 60 70 80 90 100 Chile Indonesia Turkey China SouthAfrica Mexico Brazil India OECD % Public debt-to-GDP ratio, 2015 or latest year Data for India are revised estimates by the Reserve Bank of India for the fiscal year 2015-16. Source: OECD Economic Outlook 100 database; Reserve Bank of India; Brazilian ministry of economy; and World Bank World Development Indicators database.
- 16.  Strengthen public banks' balance sheets by recapitalisation, bank consolidation and lowering the 51% government share  Increase public spending on physical and social infrastructure  Gradually extend the subsidy reform to other products including fertilisers and food  Raise more revenue, especially from property and personal income taxes, to ensure that government debt to GDP return to a declining path Key recommendations to strengthen macroeconomic resilience and growth 16
- 17. Tax reforms to make growth more inclusive
- 18. 18 GST is a landmark reform but India needs to raise more revenue 0 5 10 15 20 25 30 35 40 Indonesia Russia India China Mexico Chile Colombia SouthAfrica Turkey Brazil OECD % of GDP Tax revenue, 2015 or latest Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- 19. 19 The personal income tax raises little revenue Note: Social security contributions are not included. Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation. 0 2 4 6 8 10 12 14 16 China India Indonesia SlovakRepublic CzechRepublic Russia Brazil Turkey Korea Poland Hungary Slovenia Estonia Latvia Japan Greece Israel Spain Portugal Ireland Netherlands France Luxembourg OECD UnitedKingdom SouthAfrica Germany Switzerland Norway UnitedStates Austria Australia Italy Canada Sweden Belgium Finland NewZealand Iceland % of GDP Revenues on income tax 2015 or latest year available
- 20. 20 Combined corporate tax rates are high 0 5 10 15 20 25 30 35 40 45 50 UnitedKingdom SaudiArabia Russia Italy Turkey Australia China Canada Germany Korea Mexico SouthAfrica Indonesia Brazil France Japan Argentina UnitedStates India % Combined statutory tax rates on international dividend payments in G20 countries, 2016 Note: Foreign source income is assumed to be exempted in the residence countries. For India, the 45% rate comprises the 30% CIT rate on corporate profits, plus 12% surcharge on CIT and 3% earmarked tax (on CIT and surcharge amount), plus the 15% dividend distribution tax. Source: Thomas et al. (forthcoming).
- 21. 21 Reducing the corporate tax rate would attract FDI 0 1 2 3 Japan Korea Germany SouthAfrica Brazil Argentina Russia Italy SaudiArabia UnitedKingdom France Australia Indonesia UnitedStates India China Turkey Canada Mexico % of GDP FDI net inflows in G20 countries, 2015 Note: FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: OECD FDI main aggregates database.
- 22. 22 More resources for the tax administration would raise tax compliance 0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 Russia OECD SouthAfrica Non-OECD Indonesia Brazil India Citizens per tax administration employee Note: Data for India relates to the CBDT. Source: OECD (2015), Tax Administration 2013: Comparative Information on OECD and other advanced and emerging economies.
- 23.  Remove the tax expenditures that benefit the rich most (e.g. those related to housing investment) and freeze the income thresholds from which rates apply.  Enable municipalities to raise more real estate taxes.  Implement the reduction in the corporate income tax rate from 30% to 25% while broadening the base.  Increase the number and training of staff employed in the tax administration. Key recommendations to ensure taxes better support inclusive growth 23
- 25. Regional disparities are large 25 0 100 200 300 400 500 600 700 NOR IRL JPN SVN KOR CHE AUT DNK FIN GRC ESP PRT EST SWE NLD ITA TUR AUS NZL POL HUN LVA DEU FRA GBR BEL CAN CZE SVK CHL USA MEX ZAF CHN BRA IND COL IDN RUS % Regional variation in GDP per capita as a % of national average, 2013 (TL2) Minimum Country average = 100 Maximum Note: Regions in OECD member countries have been classified according to two territorial levels to facilitate international comparability. The territorial level 2 (TL2) consists of macro-regions, states in the case of India. Source: OECD Regional Statistics database.
- 26. 26 There is little evidence that poor states are catching up Note: The population data are from Census 2001 and 2011. For the other years, population was estimated by linear interpolation and extrapolation. Source: Central Statistics Office; and NSSO. 0.2 0.22 0.24 0.26 0.28 0.3 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Weighted and unweighted Ginis across states over time Unweighted Gini coefficient Weighted Gini coefficient
- 27. 27 Rural poverty is very high in some states 0 10 20 30 40 50 60 70 Lakshwadeep DamanandDiu A&NIslands Chandigarh Goa Punjab Himachal… Kerala Sikkim AndhraPradesh Jammu&… Uttarakhand Haryana Meghalaya Delhi TamilNadu Rajasthan Tripura Puducherry Nagaland Gujarat WestBengal Maharashtra Karnataka AllIndia UttarPradesh Assam Bihar Mizoram Orissa MadhyaPradesh Manipur Arunachal… Jharkhand Chhattisgarh Dadra&… % Rural poverty rate across states, with poverty line measured in terms of per capita consumption expenditure Note: Poverty is calculated by using the Tendulkar methodology, which expresses the poverty line in terms of monthly per capita consumption expenditure based on a mixed reference period. Data refer to FY 2011-12. Source: Reserve Bank of India.
- 28. 28 Productivity differences across states contribute to regional inequalities 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 Bihar UttarP. Manipur Assam MadhyaP. AndhraP. Jharkhand J&K Chattisgarh Orissa Tripura Meghalaya Rajasthan WestBengal Mizoram Nagaland India ArunachalP. Karnataka Kerala TamilNadu Punjab Uttarakhand HimachalP. Gujarat Maharashtra Haryana Puducherry A&NIslands Delhi Chandigarh Goa Labour productivity as a ratio of all India productivity States Union territories Note: Labour productivity is measured as the ratio of value added (GDP) per worker. Source: CSO; and OECD Economic Outlook 100 database.
- 29. 29 Agriculture still employs many Notes: Employment data for China refer to the primary sector (including farming, forestry, animal husbandry and fishery). Source: NSSO; National Bureau Statistics of China; and World Bank. 0 10 20 30 40 50 60 South Africa OECD Russia Mexico Brazil Turkey China Indonesia India % Share of agriculture in total employment 2014 or latest year available
- 30. 30 Agriculture productivity is low Notes: Employment data for China refer to the primary sector (including farming, forestry, animal husbandry and fishery). Source: NSSO; National Bureau Statistics of China; and World Bank. 0 10 000 20 000 30 000 40 000 50 000 60 000 India China Indonesia Mexico Brazil Turkey South Africa Russia OECD 1990 PPP USD per employee Productivity in agriculture 2014 or latest year available
- 31. 31 States’ ability to tailor public policies is high 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 Italy Argentina Austria SouthAfrica Spain Russia Canada Switzerland Brazil Australia Mexico UnitedStates Belgium Germany India Spending autonomy The higher the indicator, the higher the level of fiscal autonomy of sub-national government Source: CSO; and OECD Economic Outlook 100 database.
- 32. 32 Urban population will increase fast in India Note: Forecasted data are shown in red. Source: United Nations, Department of Economic and Social Affairs, Population Division (2014). 0 2 4 6 8 10 12 1950-1960 1960-1970 1970-1980 1980-1990 1990-2000 2000-2010 2010-2050 Millions of persons Average annual increase in urban population
- 33. 33 Urbanisation gains are not fully exploited 500 000 550 000 600 000 650 000 700 000 750 000 800 000 850 000 900 000 Less than 50.000 50.000 to 250.000 Over 250.000 to 1 million Over 1 million Rupees City population Productivity in the organised/formal manufacturing sector in cities Note: Productivity is calculated as a median value added per worker in the organised manufacturing sector. Source: NSSO, Employment and unemployment survey, round No. 68; and World Bank Enterprise survey 2014.
- 34. 34 Local air pollution is high Patna Delhi Bangalore Mumbai Hyderabad Beijing Shanghai Johannesburg Istanbul Milan Santiago Warsaw Budapest Moscow Mexico city Bruxelles Wien Paris Berlin Rio de Janeiro Amsterdam Barcelona London Los Angeles Montreal 0 50 100 150 200 250 µg/m³ Average annual concentration of fine particulates (PM2.5) in selected cities National guideline (40 µg/m³ annual mean) WHO guideline (10 µg/m³ annual mean) Note: Indian cities are marked in red. The other selected cities are marked in blue. PM2.5 refers to particulate matter less than 2.5 micrometers in diameter; these fine particles are particularly damaging to health as they can penetrate deep into the lungs when inhaled. Source: World Health Organisation, Ambient Air Pollution Database, May 2016.
- 35.  Continue efforts to improve universal access to core public services  Continue the benchmarking of states and strengthen the sharing of best practices, in particular on labour regulations and land laws  Enable reforms in land ownership laws, improve the land registry and step up the digitisation of land records  Give municipalities more and clearer spending and taxing powers Key recommendations for a strong and balanced regional development 35
- 36. 36 For more information….. Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Visit the OECD Economics department website to download this presentation; an overview of the 2017 Economic Survey of India and more www.oecd.org/eco/surveys/economic-survey-india.htm http://oe.cd/1No OECD OECD Economics follow us on Twitter https://oecdecoscope.wordpress.com/ Keep up with the latest ideas with the OECD Economics department Blog
Editor's Notes
- Source: CSO; and OECD Economic Outlook 100 database.
- Source: Reserve Bank of India.
- 1. Foreign-currency external liabilities are approximated by the sum of a positive difference between debt securities issued by nationals and residents from the BIS debt securities database (a proxy for off-shore external bond liabilities) and external liabilities for financial derivatives and other investments (the latter includes bank loans) from the IMF international investment position database. Source: Reserve Bank of India; Bank for International Settlements; and OECD calculations.
- The FDI Regulatory Restrictiveness Index measures statutory restrictions on foreign direct investment across 22 economic sectors. It gauges the restrictiveness of a country’s FDI rules by looking at the four main types of restrictions on FDI: 1) Foreign equity limitations; 2) Discriminatory screening or approval mechanisms; 3) Restrictions on the employment of foreigners as key personnel and 4) Other operational restrictions. Restrictions are evaluated on a 0 (open) to 1 (closed) scale. The overall restrictiveness index is the average of sectorial scores. The FDI Regulatory Restrictiveness Index reflects the situation at end 2016 for India and at end 2015 for other countries. Data for Costa Rica refer to the period 2012-15. 4. FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: Reserve Bank of India; OECD FDI Regulatory Restrictiveness Index database; Brazilian Central Bank; and OECD FDI main aggregates database. Several measures have been implemented in India to deregulate FDI but are not reflected in the index.
- Source: Central Statistical Organization.
- Source: Reserve Bank of India and IMF.
- Source: OECD FDI Regulatory Restrictiveness Index database.
- Source: NSS Report No. 566: Status of Education and Vocational Training in India; and Census of India. Data are for 2011-12.
- Source: Census of India 2011.
- Data for India are revised estimates by the Reserve Bank of India for the fiscal year 2015-16. Source: OECD Economic Outlook 100 database; Reserve Bank of India; Brazilian ministry of economy; and World Bank World Development Indicators database.
- Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- Social security contributions are not included. Source: OECD Economic Outlook 100 database; OECD Revenue Statistics database; World Bank; Reserve Bank of India; Central Statistical Organisation.
- Foreign source income is assumed to be exempted in the residence countries. For India, the 45% rate comprises the 30% CIT rate on corporate profits, plus 12% surcharge on CIT and 3% cess (on CIT and surcharge amount), plus the 15% dividend distribution tax Source: Reserve Bank of India; Technical Background paper; Brazilian Central Bank; and OECD FDI main aggregates database.
- Note: FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy net of repatriation of capital and repayment of loans. Source: Reserve Bank of India; Technical Background paper; Brazilian Central Bank; and OECD FDI main aggregates database.
- Source: OECD (2015), Tax Administration 2013: Comparative Information on OECD and other advanced and emerging economies.
- Regions in OECD member countries have been classified according to two territorial levels (TL) to facilitate international comparability. The higher level (territorial level 2) consists of macro-regions, while the lower level (Territorial level 3) is composed of micro-regions. Source: OECD Regional Statistics database.
- Note: The population data are from Census 2001 and 2011. For the other years, population was estimated by linear interpolation and extrapolation. Source: Central Statistics Office; and NSSO.
- Poverty is calculated by using the Tendulkar methodology, which expresses the poverty line in terms of monthly per capita consumption expenditure based on a mixed reference period. Data refer to FY 2011-12. Source: Reserve Bank of India.
- Data refer to FY 2011-12. Source: Central Statistics Office of India; and Census of India.
- Source: NSSO; and World Bank. Share of agriculture in total employment
- Source: World Bank.
- Note: The autonomy indicators capture the assignment of fiscal power across government levels and the extent to which sub-federal governments can conduct policy in the area of taxation and spending. High levels of the indicators are associated with a high level of fiscal autonomy. Source: OECD Fiscal Network database.
- Note: Forecasted data are shown in red. Source: United Nations, Department of Economic and Social Affairs, Population Division (2014).
- Notes: Wages are calculated using total wage and salary earnings of all individuals who, during the reference period, worked as a regular wage or salaried employee. Productivity is calculated as a median value added per worker in the organised manufacturing sector. Source: NSSO, Employment and unemployment survey, round No. 68; and World Bank Enterprise survey 2014.
- Note: Indian cities are marked in red. The other selected cities are marked in blue. PM2.5 refers to particulate matter less than 2.5 micrometers in diameter; these fine particles are particularly damaging to health as they can penetrate deep into the lungs when inhaled. Source: World Health Organisation, Ambient Air Pollution Database, May 2016.