Economic Survey 2007-08: Some Observations and Views

The survey tabled by the Finance Minister has some interesting data about the country’s economy and obviously for its people to look at future with hope. It also says that with some constraints on the road to growth removed, the country can easily attain a rate of growth that can alleviate the curse of poverty among a significant section of the population faster.And so all sacrifices, if any, are justified for getting into a growth rate of double digits. Mainly, some political parties must change its mindsets.


The full year gross domestic product (GDP) at factor cost at constant 1999-2000 prices is to grow at 8.7%.

GDP at current market prices is projected at Rs 46,93,602 crore in 2007-08 – making it the first time that the size of the economy at market exchange rate will cross $1 trillion. At the nominal exchange rate (average of April-December 2007), GDP is projected at $1.16 trillion during the year while the per capita income is pegged at $1,021. GDP growth at market prices has exceeded 8% in every year since 2003-04. The rate of growth of per capita income has sharply climbed to 7.2% per annum – implying that average income of the Aam Aadmi can virtually double in a decade. Private final consumption expenditure at per person level is up and so are the saving rates. The growth rate of consumption has almost doubled to 5.1 per cent per year during the subsequent five years from 2003-04 to 2007-08, with the current year’s growth expected to be 5.3 per cent, marginally higher than the five-year average.

The rate of investment (gross capital formation) rose to an unprecedented 35.9% of GDP in 2006-07, and is projected to increase in 2007-08. Similarly, the savings rate scaled new highs in 2006-07 reaching 34.8% of GDP in the year.

The total number of IPOs issued in 2007 was 100 when compared with 75 in the previous year. Rs 33,912 crore was mobilised by initial public offerings (IPOs).

Assets under management (AUMs) of domestic mutual funds grew 1.7 times from Rs 3.23 lakh crore during 2006 to Rs 5.50 lakh crore in 2007. Valuation of Indian stocks, as reflected in the price-to-earning multiples, of around 27 times at end December 2007 was the highest among emerging market economies. At present, the market capitalisation as a percentage of GDP is 150 – higher than economies such as China, Japan, South Korea and America.

Interestingly, as reported, the tax collection both the direct and indirect has been rising significantly.


Direct tax collection till February 15, 2008 had registered 41% rise, while the budget had assumed about 17% growth over the revised estimates for 2006-07. The total receipts rose by 22.4% (with net tax revenues rising by 29.3%), according to provisional figures released by the Controller General of Accounts (CGA).

Corporate tax receipts, which now account for about three-fifths of direct taxes, rose to Rs 1,27,683 crore, a growth of 39.84% compared to the previous April-December period. Personal income tax, which accounts for the rest of direct taxes, rose to Rs 77,380 crore, a growth of more than 50% from the last comparable period. Exceeding indirect tax receipts for the first time, direct tax collection now looks set to cross Rs 3 lakh crore or (Rs 3 trillion) this fiscal. The budget estimate of a tax (both direct and indirect) to GDP ratio of 11.8% is likely to be exceeded.


But 41% rise of tax collection raises certain queries. It must be because of the significant rise in the revenue earning and so the output of the taxpayers, both individuals and corporate. It means the individuals and corporate are working hard and efficiently, producing more, perhaps with better productivity, and growing richer. Why does it not reflect in GDP growth rate too that has gone down actually compared to last year?

The rise of tax collection certainly indicates the efficiency of the tax administration and its officers and better compliance of the taxpayers. Should not the tax rates be reduced to reduce the unbearable load on the existing taxpayers and to encourage those who must pay but don’t pay in the net willingly?

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