Progress of Indian Economy

A developing country (or a low and middle income country (LMIC), less developed country, less economically developed country (LEDC), underdeveloped country) is a country with a less developed industrial base and a low Human Development Index (HDI) relative to other countries.
A nation’s GDP per capita compared with other nations can also be a reference point.
Developing countries include, in decreasing order of economic growth or size of the capital market: newly industrialized countries, emerging markets, frontier markets, least developed countries. Therefore, the least developed countries are the poorest of the developing countries.

Developing countries tend to have some characteristics in common. For example, with regards to health risks, they commonly have: low levels of access to safe drinking water, sanitation and hygiene; energy poverty; high levels of pollution (e.g. air pollution, indoor air pollution, water pollution); high proportion of people with tropical and infectious diseases (neglected tropical diseases); high number of road traffic accidents. Often, there is also widespread poverty, low education levels, corruption at all government levels and a lack of so-called good governance. Effects of global warming (climate change) are expected to impact developing countries more than wealthier countries, as most of them have a high “climate vulnerability”

The Sustainable Development Goals, by the United Nations, were set up to help overcome many of these problems. Development aid or development cooperation is financial aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.

A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. There is not only one definition of a mixed economy, but there are two major definitions recognized for “mixed economy”. The first of these definitions refers to a mixture of markets with state interventionism, referring to capitalist market economies with strong regulatory oversight, interventionist policies and governmental provision of public services. The second definition is apolitical in nature and strictly refers to an economy containing a mixture of private enterprise with public enterprise.

Capitalism is an economic system based upon private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

A market economy is an economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

Market economies range from minimally regulated “free market” and laissez-faire systems – where state activity is restricted to providing public goods and services and safeguarding private ownership – to interventionist forms where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning — which guides but does not substitute the market for economic planning — a form sometimes referred to as a mixed economy.

Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan by a single organizational body that owns and operates the economy’s means of production.

———————————————–Indian Economy————————————————

The economy of India is a developing mixed economy.It is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). The country ranks 139th in per capita GDP (nominal) with $2,134 and 122nd in per capita GDP (PPP) with $7,783 as of 2018. After 1991 economic liberalisation, India achieved 6-7% average GDP growth annually. In FY 2015 and 2018 India’s economy became the world’s fastest growing major economy, surpassing China.

The long-term growth prospective of the Indian economy is positive due to its young population, corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India topped the World Bank’s growth outlook for the first time in fiscal year 2015–16, during which the economy grew 7.6%. Despite previous reforms, economic growth is still significantly slowed by bureaucracy, poor infrastructure, and inflexible labor laws (especially the inability to lay off workers in a business slowdown).

bureaucracy – a system of government in which most of the important decisions are taken by state officials rather than by elected representatives. / excessively complicated administrative procedure.

However India is slowly improving in it ease of doing business.

What is the ‘Dependency Ratio’
The dependency ratio is a measure showing the number of dependents, aged zero to 14 and over the age of 65, to the total population, aged 15 to 64. It is also referred to as the “total dependency ratio.” This indicator gives insight into the amount of people of nonworking age compared to the number of those of working age.

Dependency Ratio

Number of dependents/Population (Ages 15-64) x 100%

India has one of the fastest growing service sectors in the world with an annual growth rate above 9% since 2001, which contributed to 57% of GDP in 2012–13. India has become a major exporter of IT services, Business Process Outsourcing (BPO) services, and software services with $154 billion revenue in FY 2017. This is the fastest-growing part of the economy.The IT industry continues to be the largest private-sector employer in India. India is the 2nd-largest start-up hub in the world with over 5,299 start ups. The agricultural sector is the largest employer in India’s economy but contributes to a declining share of its GDP (17% in 2013–14). India ranks second worldwide in farm output. The industry (manufacturing) sector has held a steady share of its economic contribution (26% of GDP in 2013–14). The Indian automobile industry is one of the largest in the world with an annual production of 21.48 million vehicles (mostly two and three-wheelers) in 2013–14. India had $600 billion worth of retail market in 2015 and one of world’s fastest growing e-commerce markets.

The combination of protectionist, import-substitution, Fabian socialism, and social democratic-inspired policies governed India

Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. Proponents claim that protectionist policies shield the producers, businesses, and workers of the import-competing sector in the country from foreign competitors. However, they also reduce trade and adversely affect consumers in general, and harm the producers and workers in export sectors, both in the country implementing protectionist policies, and in the countries protected against.

Import substitution industrialization (ISI) is a trade and economic policy which advocates replacing foreign imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. The term primarily refers to 20th-century development economics policies, although it has been advocated since the 18th century by economists such as Friedrich List and Alexander Hamilton. (Make in India)

India had adopted the policy of import substitution post independence till Economic reforms in 1991 by imposing heavy tariffs on import.
The government of India has launched “Make in India” campaign to boost manufacturing by increasing output from the present level of about 16% of the gross domestic product (GDP) to 25% by 2022. Expansion in the manufacturing sector will create employment opportunities and become a major growth driver.
Make in India has been viewed as Import Substitution strategy as it stresses on production in India. Manufacturing within the country would reduce imports and help country develop capabilities to meet its needs. It would help generate employment.
Make in India is not an Import substitution strategy because:

Aim of Make in India is to make Indian manufactured goods globally competitive by harnessing demographic dividend.
Government is not pursuing a protectionist policy in trade and is rather advocating open flow of goods, services and professionals.
Many sectors have been opened to foreign investment by raising FDI limits, abolishing FIPB etc.
Thus Import Substitution and Make in India have common objectives of generating employment, driving economic growth but adopt different means to achieve it.

The Fabian Society is a British socialist organization whose purpose is to advance the principles of democratic socialism via gradualist and reformist effort in democracies, rather than by revolutionary overthrow.

As one of the founding organisations of the Labour Representation Committee in 1900, and as an important influence upon the Labour Party which grew from it, the Fabian Society has had a powerful influence on British politics. Other members of the Fabian Society have included political leaders from countries formerly part of the British Empire, such as Jawaharlal Nehru, who adopted Fabian principles as part of their own political ideologies. The Fabian Society founded the London School of Economics and Political Science in 1895.

Today, the society functions primarily as a think tank and is one of 15 socialist societies affiliated with the Labour Party. Similar societies exist in Australia (the Australian Fabian Society), in Canada (the Douglas–Coldwell Foundation and the now disbanded League for Social Reconstruction), in Sicily (Sicilian Fabian Society) and in New Zealand (The NZ Fabian Society).

Democratic socialism is a political philosophy that advocates political democracy alongside social ownership of the means of production with an emphasis on self-management and/or democratic management of economic institutions within market socialism or decentralized and participatory planned economy.Democratic socialists hold that capitalism is inherently incompatible with the democratic values of liberty, equality and solidarity; and that these ideals can only be achieved through the realization of a socialist society. Democratic socialism can be supportive of either revolutionary or reformist politics as a means to establish socialism.

The term “democratic socialism” is sometimes used synonymously with “socialism”, but the adjective “democratic” is sometimes used to distinguish democratic socialists from Marxist–Leninist inspired socialism which is viewed as being non-democratic in practice.Democratic socialists oppose the Stalinist political system and Soviet economic model, rejecting the authoritarian form of governance and highly centralized command economy that took form in the Soviet Union in the early 20th century.

Democratic socialism is further distinguished from social democracy on the basis that democratic socialists are committed to systemic transformation of the economy from capitalism to socialism whereas social democracy is supportive of reforms to capitalism. In contrast to social democrats, democratic socialists believe that reforms aimed at addressing social inequalities and state interventions aimed at suppressing the economic contradictions of capitalism will only see them emerge elsewhere in a different guise. As socialists, democratic socialists believe that the systemic issues of capitalism can only be solved by replacing the capitalist system with a socialist system—i.e. by replacing private ownership with social ownership of the means of production.

Indus Valley Civilisation
The citizens of the Indus Valley Civilisation, a permanent settlement that flourished between 2800 BC and 1800 BC, practised agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. Evidence of well-planned streets, a drainage system and water supply reveals their knowledge of urban planning, which included the first-known urban sanitation systems and the existence of a form of municipal government.

The spice trade between India and Europe was the main catalyst for the Age of Discovery.
For a continuous duration of nearly 1700 years from the year 1 AD, India is the top most economy constituting 35 to 40% of world GDP.

West Coast
Maritime trade was carried out extensively between South India and Southeast and West Asia from early times until around the fourteenth century AD. Both the Malabar and Coromandel Coasts were the sites of important trading centres from as early as the first century BC, used for import and export as well as transit points between the Mediterranean region and southeast Asia. Over time, traders organised themselves into associations which received state patronage. Historians Tapan Raychaudhuri and Irfan Habib claim this state patronage for overseas trade came to an end by the thirteenth century AD, when it was largely taken over by the local Parsi, Jewish, Syrian Christian and Muslim communities, initially on the Malabar and subsequently on the Coromandel coast.

Silk Route
trading from India to West Asia and Eastern Europe was active between the 14th and 18th centuries. During this period, Indian traders settled in Surakhani, a suburb of greater Baku, Azerbaijan. These traders built a Hindu temple, which suggests commerce was active and prosperous for Indians by the 17th century.

Further north, the Saurashtra and Bengal coasts played an important role in maritime trade, and the Gangetic plains and the Indus valley housed several centres of river-borne commerce. Most overland trade was carried out via the Khyber Pass connecting the Punjab region with Afghanistan and onward to the Middle East and Central Asia. Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers, while their craftsmen received a part of the crops at harvest time for their services.

Mughal era (1526–1793)
The Indian economy was large and prosperous under the Mughal Empire, up until the 18th century. Sean Harkin estimates China and India may have accounted for 60 to 70 percent of world GDP in the 17th century.
The Mughal Empire had a thriving industrial manufacturing economy, with India producing about 25% of the world’s industrial output up until 1750

British era (1793–1947)
There is no doubt that our grievances against the British Empire had a sound basis. As the painstaking statistical work of the Cambridge historian Angus Maddison has shown, India’s share of world income collapsed from 22.6% in 1700, almost equal to Europe’s share of 23.3% at that time, to as low as 3.8% in 1952.

Pre-liberalisation period (1947–1991)
Indian economic policy after independence was influenced by the colonial experience, which was seen as exploitative by Indian leaders exposed to British social democracy and the planned economy of the Soviet Union. Domestic policy tended towards protectionism, with a strong emphasis on import substitution industrialisation, economic interventionism, a large government-run public sector, business regulation, and central planning, while trade and foreign investment policies were relatively liberal. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, telecommunications, insurance, and power plants, among other industries, were effectively nationalised in the mid-1950s.

Low annual growth rate of the planned economy of India before the liberalisations of 1991, which stagnated around 3.5% from 1950s to 1980s, while per capita income growth averaged 1.3%.

Since 1965, the use of high-yielding varieties of seeds, increased fertilisers and improved irrigation facilities collectively contributed to the Green Revolution in India, which improved the condition of agriculture by increasing crop productivity, improving crop patterns and strengthening forward and backward linkages between agriculture and industry. However, it has also been criticised as an unsustainable effort, resulting in the growth of capitalistic farming, ignoring institutional reforms and widening income disparities.

Subsequently, the Emergency and Garibi Hatao concept under which income tax levels at one point rose to a maximum of 97.5% – a world record for non-communist economies – started diluting the earlier efforts.

In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small-scale industries in large numbers.

Post-liberalisation period (since 1991)
The collapse of the Soviet Union, which was India’s major trading partner, and the Gulf War, which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans. India asked for a $1.8 billion bailout loan from the International Monetary Fund (IMF), which in return demanded de-regulation.

In response, the Narasimha Rao government, including Finance Minister Manmohan Singh, initiated economic reforms in 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies. By the turn of the 21st century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation. This has been accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than rural residents.

While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been raised to investment level in 2003 by Standard & Poor’s (S&P) and Moody’s. India experienced high growth rates, averaging 9% from 2003 to 2007. Growth then moderated in 2008 due to the global financial crisis. In 2003, Goldman Sachs predicted that India’s GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035, making it the third-largest economy of the world, behind the US and China. India is often seen by most economists as a rising economic superpower which will play a major role in the 21st-century global economy.

Starting in 2012, India entered a period of reduced growth, which slowed to 5.6%. Other economic problems also became apparent: a plunging Indian rupee, a persistent high current account deficit and slow industrial growth. Hit by the US Federal Reserve’s decision to taper quantitative easing, foreign investors began rapidly pulling money out of India – though this reversed with the stock market approaching its all-time high and the current account deficit narrowing substantially.

India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the previous year’s 5.5%. The acceleration continued through 2014-15 and 2015–16 with growth rates of 7.5% and 8.0% respectively. For the first time since 1990, India grew faster than China which registered 6.9% growth in 2015. However the growth rate subsequently decelerated, to 7.1% and 6.6% in 2016-17 and 2017-18 respectively, partly because of the disruptive effects of 2016 Indian banknote demonetisation and the Goods and Services Tax (India).

India is ranked 100th out of 190 countries in the World Bank’s 2018 ease of doing business index, up 30 points from the last year’s 130. This is first time in history where India got into the top 100 rank. In terms of dealing with construction permits and enforcing contracts, it is ranked among the 10 worst in the world, while it has a relatively favourable ranking when it comes to protecting minority investors or getting credit. The strong efforts taken by the Department of Industrial Policy and Promotion (DIPP) to boost ease of doing business rankings at the state level is said to impact the overall rankings of India.

2016 Indian banknote demonetisation
On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1000 banknotes
The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism. he sudden nature of the announcement and the prolonged cash shortages in the weeks that followed created significant disruption throughout the economy, threatening economic output.
Indian Prime Minister Narendra Modi announced the demonetisation in an unscheduled live televised address at 20:00 Indian Standard Time (IST) on 8 November

The BSE SENSEX and NIFTY 50 stock indices fell over 6 percent on the day after the announcement.the country faced severe cash shortages with severe detrimental effects across the economy. People seeking to exchange their bank notes had to stand in lengthy queues, and several deaths were linked to the rush to exchange cash. Initially, the move received support from several bankers as well as from some international commentators. The move has also been criticised as poorly planned and unfair, and was met with protests, litigation, and strikes against the government in several places across India. Debates also took place concerning the move in both houses of parliament. The move reduced the country’s industrial production and its GDP growth rate.By the end of August 2017, 99% of the banned currency had been deposited in banks: only approximately ₹14,000 crore of the total demonetised currency had been discarded, leading analysts to state that the effort had failed to remove black money from the economy.

The Indian government had demonetised bank notes on two prior occasions—once in 1946 and then in 1978—and in both cases, the goal was to combat tax evasion by “black money” held outside the formal economic system. In 1946, the pre-independence government hoped demonetisation would penalise Indian businesses that were concealing the fortunes amassed supplying the Allies in World War II. In 1978, the Janata Party coalition government demonetised banknotes of 1000, 5000 and 10,000 rupees, again in the hopes of curbing counterfeit money and black money.

In 2012, the Central Board of Direct Taxes had recommended against demonetisation, saying in a report that “demonetisation may not be a solution for tackling black money or shadow economy, which is largely held in the form of benami properties, bullion and jewellery.”According to data from income tax probes, black money holders kept only 6% or less of their wealth as cash, suggesting that targeting this cash would not be a successful strategy.

On 28 October 2016 the total banknotes in circulation in India were valued at ₹17.77 trillion (US$260 billion); what proportion of this derived from ₹500 and ₹1,000 banknotes was unknown. In its annual report of March 2016, the Reserve Bank of India (RBI) stated that total bank notes in circulation valued ₹16.42 trillion (US$240 billion) of which nearly 86% (around ₹14.18 trillion (US$210 billion)) derived from ₹500 and ₹1,000 banknotes. In terms of volume, the report stated that 24% (around 22.03 billion) of the total 9026.6 crore (90.26 billion) banknotes in circulation were ₹500 and ₹1,000 banknotes.

Effects:
Nobel laureate Kailash Satyarthi and others working to fight human trafficking said that the note ban had led to a huge fall in sex trafficking

Demonetisation has badly hit Maoist and Naxalites as well. The surrender rate has reached its highest since demonetisation was announced. It is said that the money these organisations collected over the years have now lost their value making them take such a decision.

The move also reportedly crippled Communist guerrilla groups (Naxalites) financing through money laundering. On 10 November the police arrested a petrol pump owner at Ranchi when he reportedly tried to deposit ₹2.5 billion, belonging to a person affiliated with the banned Communist Party of India (Maoist). According to Chhattisgarh Police demonetisation has affected the Naxalite activities. It is reported that insurgents have stashed more than ₹70 billion in the Bastar region.

The demonetisation was initially seen by some sources as a significant step towards making India a cashless economy.

More people began using cards and e-wallets, and the demand for point of sales (POS) or card swipe machines increased. This led to the acceleration of installation of POS machines According to data of Pine Labs, the demand for its POS machines doubled after the decision. The company stated that the debit card transactions rose by 108% and credit card transactions by 60% on 9 November 2016. However concerns were raised regarding the lack security of mobile apps used for digital transactions.

Several e-commerce companies hailed the demonetisation decision as an impetus to an increase in digital payments, hoping that it would lead to a decline in COD returns which could cut down their costs.

In December 2016, the government launched an app called BHIM (Bharat Interface for Money) based on the Unified Payment Interface In September 2017, Google launched its first India-only banking app using UPI called Google Tez, that can be used by customers of over 50 banks on the UPI platform, and is available in several Indian languages.

Both the Immediate Mobile Payments System (IMPS) and the Unified Payments Interface (UPI), which support instant payments using mobile phones, have grown substantially since demonetisation, even as cash has returned to the economy.

Tax impacts
PMO received around 700 calls giving information about black money and it directly forwarded the information to various law enforcement agencies for further action.
Income Tax departments raided various illegal tax-evasive businesses in Delhi, Mumbai, Chandigarh, Ludhiana and other cities that traded with demonetised currency. The Enforcement Directorate issued several FEMA notices to forex and gold traders. Large sum of cash in defunct notes were seized in different parts of the country. In Chhattisgarh liquid cash worth of ₹4.4 million (US$66,000) was seized.

The number of I-T returns filed between 1 April 2017 and 5 August 2017 grew by 24.7 per cent to 2.82 crore over the same period in 2016, and the advance tax collections between 1 April 2017 and 5 August 2017 rose 41.8% over the corresponding period in 2016. Aarati Krishnan, writing for The Hindu, writes that the impact of demonetisation on tax base has been mostly a good news. An analysis of the economic data shows that there has been no substantial increase in the number of new tax payers or direct tax collection due to demonetisation. As the use of the demonetised notes had been allowed by the government for the payment of municipal and local body taxes, it led to people using the demonetised ₹500 and ₹1,000 notes to pay large amounts of outstanding and advance taxes. As a result, revenue collections of the local civic bodies jumped. The Greater Hyderabad Municipal Corporation reported collecting about ₹1.6 billion (US$24 million) in cash payments of outstanding and advance taxes, within 4 days.

A jewellery store in a shopping mall with a notice “We accept ₹500 and ₹1000 notes”, even after they were no longer valid banknotes.
Gold purchases
In Gujarat, Delhi and many other major cities, sales of gold increased on 9 November, with an increased 20 to 30% premium surging the price as much as ₹45,000 (US$670) from the ruling price of ₹31,900 (US$480) per 10 grams (0.35 oz).

Income Tax officials raided multiple branches of Axis Bank and found bank officials involved in money laundering acts, exchanging old notes for gold.

Donations in temples
In India, the cash deposited into hundis, or cash collection boxes in temples and gurudwaras are exempted from inquiry by the tax department. This exemption is sometimes misused to launder money. After the note ban, there was a spike in donations in the form of the demonetised notes in temples. Authorities of Sri Jalakanteswarar temple at Vellore discovered cash worth ₹4.4 million (US$66,000) from the temple hundi in the form of defunct notes.

Multiple bank transactions
There have been reports of people circumventing the restrictions imposed on exchange transactions by conducting multiple transactions at different bank branches and also sending hired people, employees and followers in groups to exchange large amounts of banned currency at banks. In response, the government announced that it would start marking customers with indelible ink. This was in addition to other measures proposed to ensure that the exchange transactions are carried out only once by each person.

Railway bookings
As soon as the demonetisation was announced, it was observed by the Indian Railways authorities that a large number of people started booking tickets particularly in classes 1A and 2A for the longest distance possible, to get rid of unaccounted cash. A senior official said, “On November 13, 42.7 million passengers were nationally booked across all classes. Of these, only 1,209 were 1A and 16,999 for 2A. It is a sharp dip from the number of passengers booked on November 9, when 27,237 passengers had booked tickets in 1A and 69,950 in 2A.”

The Railways Ministry and the Railway Board responded swiftly and decided that cancellation and refund of tickets of value ₹10,000 and above will not be allowed by any means involving cash. The payment can only be through cheque/electronic payment. Tickets above ₹10,000 can be refunded by filing ticket deposit receipt only on surrendering the original ticket. A copy of the PAN card must be submitted for any cash transaction above ₹50,000. The railway claimed that since the Railway Board on 10 November imposed a number of restrictions to book and cancel tickets, the number of people booking 1A and 2A tickets came down.

Backdated accounting
The Enforcement Directorate raided several forex establishments making back dated entries.Money laundering using backdated accounting was carried out by co-operative banks, jewellers, sellers of iPhones, and several other businesses.

By 28 December 2016, official sources said that the Income Tax department detected over ₹41.72 billion (US$620 million) of un-disclosed income and seized new notes worth ₹1.05 billion (US$16 million) as part of its country-wide operations. The department carried out a total of 983 search, survey and enquiry operations and has issued 5,027 notices to various entities on charges of tax evasion and hawala-like dealings. The department also seized cash and jewellery worth over ₹5.49 billion (US$82 million) out of which the new currency seized (the majority of them ₹2000 notes) is valued at about ₹1.05 billion (US$16 million). The department also referred a total of 477 cases to other agencies like the CBI and the Enforcement Directorate (ED) to probe other financial crimes like money laundering, disproportionate assets and corruption

The number of income tax returns filed for 2016–17 grew by 25 per cent to 2.82 crores (compared to growth rate of 9.9% in the previous year), and the advance tax collections during that period rose 41.8% over the one-year period, as more individuals filed their tax returns after demonetization.

Though inspite of the growth in tax complinces and sizure of black money Demonetisation withnessed deaths, fall in GDP and industrial and farming outputs, loss of jobs and several other disruptions.

GST
Goods and Service Tax (GST) is an indirect tax (or consumption tax) levied in India on the sale of goods and services. GST is levied at every step in the production process, but is refunded to all parties in the chain of production other than the final consumer.

Goods and services are divided into five tax slabs for collection of tax – 0%, 5%, 12%,18% and 28%. Petroleum products, alcoholic drinks, electricity, and real estate are taxed separately by the individual state governments.

The tax came into effect from July 1, 2017 through the implementation of One Hundred and First Amendment of the Constitution of India by the Modi government. The tax replaced existing multiple cascading taxes levied by the central and state governments.

The tax rates, rules and regulations are governed by the GST Council which comprises finance ministers of centre and all the states. GST simplified a slew of indirect taxes with a unified tax and is therefore expected to dramatically reshape the country’s 2.4 trillion dollar economy. Trucks travel time in interstate movement dropped by 20%, because of no interstate check posts.

The reform process of India’s indirect tax regime was started in 1986 by Sanjeet Singh, Finance Minister in Rajiv Gandhi’s government, with the introduction of the Modified Value Added Tax (MODVAT). Subsequently, Prime Minister P V Narasimha Rao and his Finance Minister Manmohan Singh, initiated early discussions on a Value Added Tax (VAT) at the state level. A single common “Goods and Services Tax (GST)” was proposed and given a go-ahead in 1999 during a meeting between the Prime Minister Atal Bihari Vajpayee and his economic advisory panel, which included three former RBI governors IG Patel, Bimal Jalan and C Rangarajan. Vajpayee set up a committee headed by the Finance Minister of West Bengal, Asim Dasgupta to design a GST model.

The Ravi Dasgupta committee which was also tasked with putting in place the back-end technology and logistics (later came to be known as the GST Network, or GSTN, in 2017). it later came out for rolling out a uniform taxation regime in the country. In 2002, the Vajpayee government formed a task force under Vijay Kelkar to recommend tax reforms. In 2005, the Kelkar committee recommended rolling out GST as suggested by the 12th Finance Commission.

After the defeat of the BJP-ledNDA government in the 2004 Lok Sabha election and the election of a Congress-led UPA government, the new Finance Minister P Chidambaram in February 2006 continued work on the same and proposed a GST rollout by 1 April 2010. However, in 2010, with the Trinamool Congress routing CPI(M) out of power in West Bengal, Asim Dasgupta resigned as the head of the GST committee. Dasgupta admitted in an interview that 80% of the task had been done.

Around 38 lakh new taxpayers have registered under GST regime and the total count has crossed crore if we include the 64 lakh earlier ones.

The single GST replaced several taxes and levies which included: central excise duty, services tax, additional customs duty, surcharges, state-level value added tax and Octroi. Other levies which were applicable on inter-state transportation of goods have also been done away with in GST regime. GST is levied on all transactions such as sale, transfer, purchase, barter, lease, or import of goods and/or services.

India adopted a dual GST model, meaning that taxation is administered by both the Union and State Governments. Transactions made within a single state are levied with Central GST (CGST) by the Central Government and State GST (SGST) by the State governments. For inter-state transactions and imported goods or services, an Integrated GST (IGST) is levied by the Central Government. GST is a consumption-based tax/destination-based tax, therefore, taxes are paid to the state where the goods or services are consumed not the state in which they were produced. IGST complicates tax collection for State Governments by disabling them from collecting the tax owed to them directly from the Central Government. Under the previous system, a state would only have to deal with a single government in order to collect tax revenue.

Goods Kept Outside the GST
Alcohol for human consumption.
Petrol and petroleum products (GST will apply at a later date) viz. Petroleum crude, High speed diesel, Motor Spirit (petrol), Natural gas, Aviation turbine fuel