Skip to main content

Economic Survey: Note ban hit informal economy, raised social insurance demand

Economic Survey: Note ban hit informal economy, raised social insurance demand
The impact was acute between December and March, but has since faded, thanks mainly to social safety net programmes like MGNREGS, the Economic Survey said
The Narendra Modi government’s demonetisation initiative impacted the informal economy, raising the demand for social insurance, especially in less developed states, according to the second volume of the Economic Survey 2016-17 tabled in Parliament on Friday.
The impact was acute between December and March, but has since faded, thanks mainly to programmes like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which performed its stated role of providing a social safety net at times of need, the Survey said in the chapter titled “State of the Economy: An Analytical Overview and Outlook for Policy”.
In a surprise move, Prime Minister Narendra Modi announced on 8 November that effective from midnight, Rs 500 and Rs 1,000 banknotes would not be valid, withdrawing some 86% of currency in circulation by value. The move was aimed at combating black money, fake currency and terror finance, the government said.
According to the Survey, “there is suggestive evidence of increased demand for insurance over the demonetisation period (early November 2016-March 2017). This is especially strong for the less developed states comprising Bihar, Chattisgarh, Rajasthan, Jharkhand, West Bengal and Odisha which witnessed about a 30% increase in man days worked” under the MGNREGS.
“Interestingly, there were four phases in the demonetisation-MGNREGS relationship,” the Survey said.
In the first phase, “for about four weeks after demonetisation, there was a decline in the demand for MGNREGS work”, the survey said, adding that in the second there was a four-week-long period of recovery. In the third phase, there was a 10-week period where demand increased substantially; and finally in the last phase “since the middle of March, there was once again no differential impact on MGNREGS relative to previous years”, the survey said.
According to the Survey, the initial pattern of “reduced demand in the first four weeks following demonetisation is puzzling”.
One interpretation, it said, was that “demonetisation increased demand for MGNREGS employment, but this was initially offset by constraints on the ability of local governments to supply MGNREGS work”.
“In this view, demonetisation affected both the supply and demand for insurance, and in the first few weeks, the decrease in supply overwhelmed the increase in demand. Over time, as cash began to flow and financing constraints lifted, the demand for insurance was more clearly identifiable,” it said.
“Alternatively, it is possible that better agricultural performance in 2016-17, which was especially marked in those four peak harvest weeks after demonetisation, offset any demonetisation impact,” it said.
The Mint, New Delhi, 12th August 2017

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s