Occupational distribution of population in North East India.

INTRODUCTION

The economic composition clarifies the miscellaneous economic, demographic and cultural attributes of an area, which form the basis for region’s social and economic development. Among all the social attributes of population, work structure or occupational structure is of paramount importance, since it provides an index to many personal, social and demographic characteristics. Occupation and its role in society has always been the subject of considerable public commentary and debate.

The occupational structure of an economy plays a vital role in the overall economic scenario of the economy. The number of workers employed in different sectors of the economy is crucial to determine the level of development of the economy.

The economy of India’s North East Region consists of 8 states is being holding an important place in Indian economy. However the region is still industrially backward despite of huge potentials and is mostly predominated by agricultural activities. The occupational distribution of the population in the region is also the same as its economic scenario. In this seminar paper we have described and analyzed the pattern of occupational distribution of the population of the north east region of India with some objectives mentioned below .from our study we have found some important findings and we have suggest some policy measures on the basis of our study.

Definition and Concepts

§  Workers:

               Persons who have participated in any economically productive activity with or without compensation or profit. There are four categories of workers i.e. cultivators, agricultural labourers, household industries and other workers.

§  Non-Worker:

              Persons who did not ‘work’ at all during the reference period. It includes students, persons engaged in household duties, dependents, pensioners, beggars, etc.

§  Main Worker:

               Persons who ‘worked’ for 6 months or more during the reference (reference period: one year preceding the date of enumeration) year

§  Marginal Workers:

               Persons who ‘worked’ for less than 6 months during the reference (reference period: one year preceding the date of enumeration) year

§  Work Participation Rate:

              It is defined as the number of workers per 100 population

NORTH EAST REGION OF INDIA : AN OVERVIEW

The 8 states in the north eastern region of India namely Arunachal Pradesh, Assam ,Manipur, Mizoram ,Meghalaya, Nagaland, Tripura and Sikkim are together called North East India .It  is mostly consist of hilly regions; it has plains on both sides of the river Brahmaputra and the Himalayan range around it. The flora and fauna of this region is numerous and varied.

The region accounts for 7.9% of the total land space of the country. Hill ranges forming part of the Himalayas guard the northern side of the region. The area is made up of mountains above the snow line and plains a little higher than sea level.

The region is of strategic importance for the country on account of the fact that nearly 90% of its borders form India's international boundaries.

Topography: About 70% of the region is hilly, and the topography varies within each state. Mountains and hills cover most of Arunachal Pradesh, Mizoram, Nagaland, Meghalaya, Sikkim and about half of Tripura, one-fifth of Assam and nine-tenth of Manipur.

The plains of the region are mainly made up of separate land masses - the Brahmaputra Valley and the Barak Valley in Assam and the Tripura plains in the South. In Manipur, the valley is small, comprising only about 10% of the total area of the state.

The Brahmaputra Valley stretches longitudinally for about 730 km, from North Lakhimpur to Dhubri district in Assam. The Barak Valley, formed by the river Barak and its tributaries covers the districts of Cachar, Karimganj and Hailakandi of South Assam. The Tripura plain is an extension of the Ganga-Brahmaputra plain.

 North east india at a glance:

ITEMS/COMPONENTS	NER OF INDIA
Geographical area	262,179 sq.Km
districts	86
villages	44,996
Total population	45,587,982
Sex ratio	956
Child population	6,738,835
Population density	174 per sq km
Literacy rate	74.48 %
Domestic product at current prices	Rs 22,731,388 lacs
Percapita income at current prices	Rs 49,959

Source: 2011 census of india

total			Rural			Urban
persons	males	Females	persons	males	Females	persons	males	Females
45,486,784	23,212,792	22,273,992	37,083,501	18,922,306	18,161,195	8,403,283	4,290,486	4,112,797

Population composition of north east india

Source: Census 2011, RGI.

What is Occupational Structure?

Simply speaking the occupational structure of a country refers to the division of its work force engaged in different economic activities.

Otherwise speaking how many of the total working population are engaged in agriculture and allied activities and how many of them are engaged in industrial and service sector can be known from the occupational structure of the country.

While studying the structural change in any economy, it is important to be familiar with occupational structure of the economy. Occupational structure in a country depends on a number of economic, technological and geographical among various factors determining it, development of productive forces, specialization, level of per capita income and availability of natural resources are somewhat more important. The occupational distribution of population is often mentioned as an objective criterion to divide countries between developed and underdeveloped.

REVIEW OF LITERATURE

The study of working force is not a new field but each and every scholar has a different way of study. Working force as a broad theme has been studied by various scholars, such as educationists, economists, demographers and geographers etc. Geographers and other scholars have carried out many studies about work force from time to time Fisher (1939) studied production in to three categories that are primary secondary and tertiary in Newzealand and Australia. Although he focused on the terminology of production, yet he categorized the occupation into broad three categories that is primary producer, secondary producer and tertiary producer. Ahmad (1950) studied the distribution of population in Uttar Pradesh. He described the position of the U.P. in comparison with other areas in India in respect of some broad facts about population. Chellaswami (1958) the main object of this study is to provide estimates of the future labour force in five year intervals up to the year 1966 by the component method. He observed that the estimation of future labour force of the country has been confined to a relatively short period 1956-66 so that the results may be realistic and useful for purposes of policy formulation. In the same year Gosal G. S. (1958) studied the occupational structure of India's rural population at district level. He found that the proportion of rural non farm population varies widely from region to region. Likely A. Lall (1958) also studies some characteristics of Indian cities of over 100000 inhabitants in India with special reference to their occupational structure and functional specialisation. Ghanasekaran (1960) observed that labour force is one of the most important determinants of economic and social progress of a country in his study entitled as labour force projections for India, 1951-76. In this study a set of labour force projections for India has been prepared up to 1976 under alternative assumptions about demographic and non demographic factors affecting it. Implied changes in the labour force over the period 1951-76 are also examined at the end. Panda (2006) studied rural non-farm employment in India and Thailand with the help of multiple linear regression models. He tries to derive policy implications in the light of study that policy makers should work on the link between rural farm and nonfarm sectors.  Kapoor (2006) also studied female participation with the help of time used method. He analysed as a whole that work participation in both domestic and marketed work combined of urban females was very high.

Some more valuable works on work force have been done in India and abroad atnational, regional and local level. While reviewing literature it is observed that few studies are done on occupational distribution of the population in the north eastern region of india. While a few works has carried out the relationship between male and female in different categories of working force at regional level. This seminar paper tries to fill up that gap.

·                ECONOMIC DEVELOPMENT AND OCCUPATIONAL STRUCTURE

The occupational structure of country refers to the distribution of its labour force in different occupations. As national income increases steadily and the basic necessities of life are met, there is an occupational shift of labour and other resources into manufacturing or secondary production. As national income rises further and the market for manufactured goods becomes saturated, labour and other resources shift into the service or tertiary sector.

Colin Clark in his study Conditions of Economic Progress draws three conclusions about the relationship between economic development and occupational distribution.

In the first phase of economic development, there is considerable decline in the proportion of persons engaged in agriculture and allied occupations, although the total number engaged in them continues to increase.

In the second phase of development, when the economy is sufficiently advanced, the absolute numbers engaged in agriculture begin to decline and shift to manufacturing.

In the third phase of economic development, the growth rate of working population engaged in tertiary occupation becomes greater than that engaged in the secondary sector but the difference in the rates of increase in the two sectors is not wide.

Discussion:

The North Eastern Region of India is of strategic importance, which is one of the richest regions in terms of natural resources in the country. The main natural resources that are available in the region are Crude oil, natural gas, coal, marble, forest resources, other minerals .Though the North Eastern Region is industrially backward ,  it is the region of some important industries like Tea, agro and forest-based products, rubber, natural gas, petroleum, silk, handloom and handicrafts etc. However the economy of the North Eastern Region is predominated by the agricultural activities. The contribution of the agriculture sector of this region is higher to the Gross State Domestic Product(GSDP) than the country average. Primary sector activities mainly constitute cultivation, on which approximately 75 percent of the region’s population depends for employment; agriculture contributes to approximately 30 per cent of the NET STATE DOMESTIC PRODUCT(NSDP). Secondary sector activity comprises infrastructure, construction and mining; contributes to approximately 18 per cent of the NSDP. Industrial products primarily include crude petroleum, natural gas, tea, minerals and steel fabrication. Tertiary sector constitutes tourism-related activities, real estate businesses and public administration; contributing approximately 52 per cent of the NSDP.  The different sectoral contribution to net state domestic product (NSDP) of North Eastern states compared to GDP composition of India can be shown in the following graph:

The north east India where live 45,486,784 people has a big work force of 16,670,984 people according to 2011 census. Among the three different sectors of the economy of the region most of the people are engaged in the primary sector and comparatively a small number of the working population are associated with the secondary and tertiary sector. However the picture is more complicated if we analyzed the occupational structure by dividing the total working population on the basis of rural and urban areas. It is evident from the datas collected in 2001 census which are shown in the following table: 

Source: Census of India,2001

In the rural areas most of the people are engaged in the primary sector and a very less amount of people are engaged in the secondary and tertiary sector. However in urban areas the picture is totally opposite. Most of the people in the urban areas are engaged in the tertiary sector and a less number of people have engaged in both primary and secondary sectors.

·        Work Participation rate among the people of North East :

Work participation rate denotes the percentage of total workers i.e., total main and marginal workers to the total population in an area. Number of Workers, Non-workers and Work Participation Rate in NER can be explained with the help of following table;

states	Workers			Non-workers			Work participation rate
	Persons	Males	Females	Persons	Males	Females	Persons	males	females
Arunachal Pradesh	587,657	350,273	237,384	796,070	363,639	432,431	42.5	49.1	35.4
Assam	11,969,690	8,541,560	3,428,130	19,235,886	7,397,883	11,838,003	38.4	53.6	22.5
Manipur	1,159,053	665,463	493,590	1,411,337	624,708	786,629	45.1	51.6	38.6
Meghalaya	1,185,619	703,709	481,910	1,781,270	788,123	993,147	40.0	47.2	32.7
Mizoram	486,705	290,740	195,965	610,501	264,599	345,902	44.4	52.4	36.2
Nagaland	974,122	547,357	426,765	1,004,380	477,292	527,088	49.2	53.4	44.7
Sikkim	308,138	194,358	113,780	302,439	128,712	173,727	50.5	60.2	39.6
Tripura	1,469,521	1,045,326	424,195	2,204,396	829,050	1,375,346	40.0	55.8	23.6

Source: Census 2011, RGI

Among the 8 North eastern states Sikkim has highest work participation rate while Assam has the lowest .Females of NAGALAND have highest work participation and Assam has the lowest female work  participation rate .

·       State wise Number of Total Worker, Main and Marginal Worker by sex Census of India-2011:

The state wise distribution of the total ,main and marginal worker distribution in the north eastern region of india are given in the following table.

                                  

State	Total workers			Main worker			Marginal worker
	Person	Male	Female	Person	Male	Female	Person	Male	Female
ArunachalPradesh	587657	350273 (59.60%)	237384 (40.39%)	478721	301109	177612	108936	49164	59772
Assam	11969690	8541560 (71.30%)	3428130 (28.60%)	8687123	7034642	1652481	3282567	1506918	1775649
Nagaland	974122	547357 (56.18%)	426765 (43.81%)	741179	442204	298975	232943	105153	127790
Manipur	1159053	665463 (57.41%)	493590 (42.58%)	855012	554518	300494	304041	110945	193096
Mizoram	486705	290740 (59.73%)	195965 (40.26%)	415030	263305	151725	71675	27435	44240
Meghalaya	1185619	703709 (59.35)	481910 (40.64%)	921575	585520	336055	264044	118189	145855
Tripura	1469521	1045326 (71.13%)	424195 (28.86%)	1077019	887881	189138	392502	157445	235057
Sikkim	308138	194358 (63.07%)	113780 (36.92%)	230397	160513	69884	77741	33845	43896

 Source: Census of India 2011

Among the 8 states of the north east India Assam has highest number of total ,main and marginal workers and Sikkim has the lowest number of  total ,main and marginal workers. It is observed from the above table that female share of workers in the total work force is less than half in all the states and Assam has the lowest percentage of female share.

·         Distribution of Workers by Category of Economic Activities in NE:

Distribution of worker in four different economic activities cultivation, agricultural laborers, household industries and other sectors are given in the following table.

STATES	Cultivators	Agricultural Labourers	Household Industries Workers	Other Workers
	Persons       Persons	Persons	Persons	Persons
Arunachal Pradesh	302,723	36,171	8,365	240,398
Assam	4,061,627	1,845,346	491,321	5,571,396
Manipur	457,891	111,061	89,495	500,606
Meghalaya	494,675	198,364	20,488	472,092
Mizoram	229,603	41,787	7,852	207,463
Nagaland	537,702	62,962	22,838	350,620
Sikkim	117,401	25,986	5,143	159,608
tripura	295,947	353,618	41,496	778,46

 Source: Census of India 2011

·       Employment in the Organized Sector in NER:

The organized sector of an economy comprises of public sector and private sector. In the north eastern region the number of  private enterprises is very low ,hence employment in the private sector is also very low. The total number of employment in the public and private sector of the north eastern states are given in the following table.

STATES	Employment (in Lakhs)
	Public Sector	% to Total	Private Sector	% to Total	Total	% to Total
Assam	5.34	3.05	5.83	5.09	11.18	3.85
Meghalaya	0.47	0.27	0.05	0.05	0.52	0.18
Manipur	0.76	0.43	0.03	0.03	0.79	0.27
Mizoram	0.1	0.06	0	0	0.1	0.03
Nagaland	0.73	0.42	0.05	0.04	0.78	0.27
Tripura	1.38	0.79	0.06	0.05	1.44	0.5

Source: Annual Employment Review, 2011, Directorate General of Employment & Training, Ministry of Labour & Employment

It is evident from the above table that employment in the organized sector in the region is very low. While Assam in the top of the list has just only 11.18 lacks workers that are engaged in the organized sector. It is Mizoram which has just only 0.1 lacks workers employed in the organized sector.

·       Growth Rate of Total Workers (Main+ Marginal) in NER of  India, 1991-2001:

While studying the occupational structure of a region it is more or less necessary to study about the growth rate of the total workers in the region. The growth rates of total workers between 1991 and 2001 in the North Eastern states are given in the following table:

STATES	GROWTH RATE
	TOTAL	MALE	FEMALE
Arunachal  PradesH	1.87	1.61	2.31
Assam	1.67	1.78	1.40
Manipur	3.22	3.36	3.05
Meghalaya	2.33	2.05	2.75
Mizoram	3.31	3.12	3.56
Nagaland	4.99	4.84	5.18
Sikkim	4.45	4.03	5.22
Tripura	2.99	2.10	5.73

Source: Annual Employment Reiew, 2011, Directorate General of Employment & Training, Ministry of Labour & Employment

It is seen from the above table that the growth rate of total workers between 1991 and 2001 is highest in Nagaland and it is lowest in Assam. The growth rate of male workers is highest in Nagaland while the same of female is highest in Tripura.

Conclusion:

The scenario of occupational structure in the north eastern region of India is not very impressive .the rate of growth of work force participation is low in the region. Though the relationship between the agriculture and the manufacturing sectors is disappearing and the tertiary sector has emerged significantly even before the economy became highly industrialized is noted in Indian context, however the north east region is lacked far behind the pace .the NER region is still dominated by the agricultural sector and most of the workers belong to the primary sector. Deliberate actions should be taken in order to restructure the economic scenario of the region .the industrial backwardness situation should be eliminated by taking special industrial policies for the region. The north eastern council AND ministry of DONER are doing good in the region but its activities have not reached the remote areas of the region yet. Central government, state governments, private entrepreneurs and other stakeholders should act co operatively and deliberately to develop the region so that the occupational structure get a push to restructure itself.

 REFFERENCES

§  1)Census of India (2001) “Primary Census Abstract”, Total Population, Table A-5, Series-1, Government of India, New Delhi.

§  2)http://planningcommission.nic.in      (ACCESSED ON 5^TH MAY,2017)

§  3)AshwiniMachey,”Economic Issues of Assam”,1^st edition.

§  4)Mdoner.gov.in (accessed on 5^th may,2017)

In India government programs and strategies since independence have not seriously addressed the exclusion problem.

Despite tremendous growth of the Indian economy, failure on distributive front has aggravated the progressive journey towards collective well-being. Inclusive growth has become the buzzword in policy-spheres with recent phenomenon of rapid growth with characteristic patterns of exclusion. In the country government programs and strategies since independence have not seriously addressed the exclusion problem. Exclusion continued in terms of low agriculture growth, low quality employment growth, low human development, rural-urban divides, gender and social inequalities, and regional disparities etc. The sectoral, social and spatial inequalities have raised questions about welfare approaches of Government planning, and emphasized the role of the private sector in addressing development issues in the country. Employment generation, social and developmental infrastructure, health-care and rural diversification are some of the major concerns. Due to faulty approaches and often politically motivated policies, growth has generated inequalities.

“The achievement of high growth must ultimately be judged in terms of the impact of that economic growth on the lives and freedoms of the people.”- Amartya Sen.

Since independence and more specially from July 1991, Indian economy has witnessed several reforms encompassing all the major sectors of the economy. The main objective of these reforms was to put the Indian economy out of the low level equilibrium trap. These reforms have marked a steady break from the previous policy regime. Due to these policies, India has raced to the top of world chart in terms of GDP growth. Since the last decade or so, GDP and Investment growth have recorded historical increase in India. It is projected that the GDP of India will grow at a double digit rate in the next few years. This high Growth, however, continues to bypass a large section of people. A large majority of Indians live in the villages and they have been excluded from India’s growth story. Rural India is facing endemic problems – land holdings are shrinking, slow growth in agricultural production and limited social and economic infrastructure. Women, Children, backward castes & classes and other minorities often are excluded from the growth story. The rise of grass root militant movements which plague nearly one-tenth of India is a direct result of this economic exclusion and the unfulfilled aspirations of the bottom billion. Today, economic power rests with a precious few. According to Credit Suisse, the top 1% of the population own 15.9% of India’s wealth, the top 5% own 38.3% and the top 10% have 52.9% of Indian’s wealth. What this really means is that 90% of Indian, the urban and rural poor has a very small stake in the pie. The policy designers generally claim that with the passage of time the fruit of higher GDP economic growth will ‘trickles down’ to lower levels. But in India, this ‘trickle down’ has not worked yet. The approach of growth with equity or the ‘Inclusive Growth Strategy’ of government has proven to be a failure in key/urgent spheres. Here, we can examine some crucial parameters of Indian economy and thereby can try to bring out the real picture of its performance.

As per economic survey of 2011-12 the share of agriculture in GDP is at all-time low (13.9 per cent during this year) but it is still the most important sector in terms of employment share. On the other hand, the manufacturing and services activities which are contributing more than 85 per cent to GDP and getting a lion’s share of total capital formation are employing less than half of the total workforce. The higher growth and capital formation in the above two sectors have failed to transfer the workforce from low productive activities to high productive activities. The 11th five year plan aimed at generating 58 million work opportunities. But the NSSO survey has reported an increase in work opportunities to the tune of only 18 million between 2004-05 to 2009-10. The growth rate of employment in the organized sector is only 1.9 per cent in 2010. The recent data shows that only 15.6 per cent of India’s workforce has regular jobs whereas remaining 84.4 per cent are either self-employed or working on casual basis. It obviously means that 85 per cent of India’s workforce is working under insecure and irregular conditions. So the theoretical claim regarding the relationship between GDP growths and increasing employment opportunities is nothing else but a myth.

:

Social sector spending in India has recorded secular decline after the introduction of neo-liberal policies, no matter how essential these expenditures are. Wide range of social sector activities accounted only a small per cent of the total budgetary expenditure during last many decades. According to Human Development Report of 2015, India ranks 131 out of 187 countries in terms of human development. India’s public expenditure on health ranks among the lowest in world. Under the neo-liberal agenda it is such planned disinvestment policy of the government that is facilitating the corporate/commercial bodies to invest in health services and earn enormous profits, exploiting the sickness of common people. At present, three quarter of the advanced medical technology and 68 per cent of hospitals are in private sector. This corporate sector led health network is exploiting the bottom strata of society and deepening the health inequality in India

The case is more or less the same in education. In primary education, we are well behind the other nations which have comparable level of economic growth and per capita income. During 2011, the mean year of schooling in India was 4.4 and female literacy rate was lower than the overall average. After the introduction of neo-liberal policies, the private sector investment in education has increased sharply and it has become one of the major profits earning sectors. These corporate sector led universities and institutions are more concerned about the quantitative addition in their strength and higher profits rather than quality of education.

The gap between the haves and have not’s is seriously wide in India and it has more widened after the introduction of new economic policy. Planning commission has adjusted the poverty line for 2009-10 prices, which stood at Rs. 29 per day per capita expenditure in urban areas and Rs. 22 per day per capita in rural areas. On the basis of this, the commission claimed that there was impressive rate of decline in poverty from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10.The orthodox economists are of the view that the higher GDP growth (8.5 per cent) from 2004-05 to 2009-10 has reduced poverty at a record rate of 1.5 per cent point per year.

But in the reality, according to the calorie estimates of poverty, the proportion of households which are unable to consume 2100 calories in urban areas and 2200 calories in rural areas (earlier it was 2400) are considered to be poor. On the basis of this criterion Utsa Patnaik calculated that the proportion of urban population living below this nutrition level has increased from 57 per cent in 1993-94 to 73 per cent in 2009-10. In case of rural areas, the proportion of population below minimum nutrition norms has increased from 59 per cent in 1993-94 to 76 per cent in 2009-10. It is evident that the extent of poverty in India has increased.

SOME REASONS BEHIND THE ISSUE:

Firstly, growth has been jobless, and the employment growth has declined for the same level of economic growth. Despite of remarkable growth which has made India the world's fourth biggest economy, "employment in different sectors has not been rising. This jobless growth in recent years has been accompanied by growth in casualization".

Secondly, growth has been uneven across sectors and locations. For instance, agriculture has been lagging behind and some regions have advanced faster than others. Policies are also relatively ignored the agriculture sector.

Deliberate actions should be taken for lessening vertical inequalities (individual inequalities) and horizontal inequalities (group inequalities).  There is need to create large-scale job otherwise growth becomes, lower down. Growth biased in favor of lower income groups would ensure stability since their consumption patterns are likely to be more stable. Institutions, regulation and economic governance need to acclimate to maintain the economic transformation required for India to tackle its social and economic challenges. Finally, rights of women, children, minority communities and the other marginalized sections of society must be constantly watched and protected if we wish to reach our goal of a truly developed society.

Non- tariff Barriers of International Trade

Introduction:

Trade across political boundaries is interrupted by a bucket of barriers which do not let the countries to exploit their comparative advantages. Whenever a good crosses the international lines a set of duties known to as tariff coupled with some non-tariff restrictions emerge to limit the spirit of international trade.

What is ‘Non-Tariff-Barriers’

Non-Tariff Barriers are obstacle to international trade which are not an import or export duty. They may take the form of import licensing, rules for valuation of goods at customs, pre-shipment inspections, subsidies, customs delays, technical barriers, trade prepared investment measures import quotas or other systems preventing trade.

Discussion

Non-tariff barriers can be discussed by classifying them in the following headings

1.       Protectionist policies

2.       Assistance policies

3.       Non-protectionist policies

Protectionist Policies

Restricting import is a way to protect domestic firms. Protectionist policy helps domestic firms at the expense of other countries. Example of this form of barrier includes Import quotas; local content requirements; public procurement practices etc. Quota limits the trade in physical terms, imposed on import and export of certain goods for a certain period of time. 

Assistance Policies

The instruments included in this category are meant for the help of domestic firms and enterprises irrelevant to the expense of other countries. Examples are -Domestic subsidies, antidumping laws etc. Because of subsidy production cost in a nation falls significantly and prices go down which outcompetes the existing exporters.

Non-protectionist policies

This type of trade-barrier is for the protection of the health and safety of people and the environment. Licensing, packaging, and labeling requirements, sanitary and phytosanitary (SPS) rules, food, plant and animal inspections, import bans based on objectionable fishing or harvesting methods are some of the prominent examples of this type of barrier. The most common instrument is the licensing. It requires that the authority issues permits for foreign trade transactions of import and export commodities included in the lists of licensed merchandises.

Rationalisation of Indian Tax System

What is Rationalization of Taxation?

Rationalization of taxation is an attempt made by the fiscal authority to change the pre-existing  ad-hoc pattern of taxation into one which is based on a set of published rules after simultaneous research and practical observation. The aim and purpose of rationalization of tax system is to bring about efficiency, coordination and control of the tax collecting procedure. 

Rationalization of taxation in India

An introduction: After independence the Govt. of India initiated its Five Years planning in 1951 with an aim to pace the way of economic development in the country. The acceleration of economic development required a huge amount of revenue to meet capital and revenue expenditure as well as bulk development and maintenance imports. Therefore rationalization in the tax system became a need of hour for the economy.

Indian economy was gone through a structural change in 1991 and the government was forced to adopt a set of fiscal reforms. Aim was to reduce the fiscal deficit and inflation. To meet this twin objective it was necessary to increase the tax revenue. On the other hand it was carefully observed by the policymakers that increase in tax rate may lead to the deterioration of willingness to work of the citizens and the strategy may lead to the move for black money. Therefore the rationale behind such policy prescription may appear to be highly questionable. Rationalization was brought through widening of tax base and modernizing of tax administration.

Strategies of Rationalizing of Tax System

One of the reasonable steps was taken by the govt. in 1991 by setting up the Tax Reforms Committee under the Chairmanship of Raja J. Chelliah to examine the then tax structure of the country and suggest appro­priate reforms therein. The committee submit­ted its report in January 1993, it made several recommendations including the simplification of tax system, steps to discourage tax evasion and much more. As recommended by the committee many changes were brought into the Indian tax system. Important among them are:

1.      To make the direct tax system more ef­fective, it was necessary to reduce the tax rate so that there would be less tax evasion and avoidance. There was also the need to narrow down the spread between the lowest rate and maximum mar­ginal rate. To neu­tralize the fall in revenue due to lowering of the rates of taxation some of the tax incentives were withdrawn and the tax base was broadened.

2.      The personal income tax system has been restructured by lowering rates, introducing few slabs, providing a higher exemption limit and by reducing saving-linked tax exemption. Initial exemption limit for the levy of income tax has been raised from Rs. 22,000 in 1991 to Rs. 1,00,000 in 2007-08. The number of slabs has been reduced from 4 to 3 (i.e., 10 p.c., 20 p.c. and 30 p.c.). In 2016-17 budget the exemption limit has been raised to Rs 4 Lakh from earlier 2.5 Lakh of 2015-15.

3.      Presumptive tax (lump-sum) for small traders, retailers and small road transport op­erators has been introduced. To widen the tax net, in the 1994-95 budget, a service tax at the rate of 5 p.c. on the amount of telephone bills, premium payments for non-life insurance and on commission/brokerage charged by the stock-brokers was introduced. At least 100 types of services are subject to service tax as against 3 in 1994-95. In 2015 Union budget also service tax was proposed to increase.

4.      Since 1994-95, a number of provisions were introduced to widen the tax base. These in­clude taxation for small business, estimated income scheme for persons engaged in the business of civil construction, plying, leasing or hiring of trucks; tax deduction at source introduced on interest on term deposits in­come in respect of units of mutual funds, pro­fessional fees and host of contracts.

5.      Corporate tax rates have been reduced and simplified over the past few years. At present, the rate of corporate tax for domestic compa­nies is 30 p.c. and for foreign companies 40 p.c. of their net profit. With a view to tack­ling the phenomenon of zero tax companies having substantial book profits, a ‘minimum alternate tax’ (MAT) was introduced in the 1996-97 budget.

6.      To promote research and development ac­tivities—five-year tax holiday for investments in infrastructure facilities, power generation and distribution in backward states and electronics hardware and software parks.

7.      Government has also taken several meas­ures since 1991-92 to reform the indirect tax structure by reducing the number of rates, re­moving exemptions, and by switching over to ad valorem rates. Import duties which rose to more than 150 p.c. in several cases prior to reform have been reduced in a phased man­ner to 10 p.c. by 2007-08.

8.      The ex-Finance Minister of India, Pranab Mukherjee in his Budget speech indicated the government's intent of merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax by the year 2011. To achieve this objective, the rate of Central Excise and Service Tax were targeted to be progressively altered and brought to a common rate. However, as of May 2015, Goods and Services Tax Bill had not been passed by the Parliament because of disruption by Opposition Allies (INC) on some State level issues.  Now, Service Tax and Excise will be inclusive part of GST in due course of time.

9.      Budget 2016 focused on tax rationalization and simplification while unveiling steps to boost 'Make in India'. In direct tax, the govt. is losing about Rs 1lakh crore because of exemptions. The shortfall in direct taxes to the tune of Rs 40,000 crore is targeted to make up by robust collections in indirect taxes and the total tax collection target for the fiscal will be met for the first time in five years. The income tax department is trying to widen its base, as currently 3.5% of total population pays the income tax.

Consequences of Rationalization

As a consequence of tax reform measures, tax rev­enues increased to 18.3 p.c. of GDP in 2007- 08. Overall tax reforms since July 1991 have helped in correcting the imbalance in the struc­ture of revenue sources. The share of direct taxes in GDP rose from 2.1 p.c. in 1990-92 to 5.7 p.c. in 2007-08. Also, the share of direct taxes in gross tax revenue rose from 19 p.c. in 1990-91 to 30.2 p.c. in 1995-96 and to 48.8 p.c. in 2007-08. Improved performance of the services and manufacturing- sector has helped to keep tax revenues buoyant. Further, higher growth in rev­enues relative to the growth in revenue ex­penditure resulted in a decline in revenue deficit to 1.9 p.c. of GDP in 2006-07 as against 4.4. p.c. in 2002-03. Same is true about fiscal deficit that declined to 3.4 p.c. in 2006-07 from 5.9 p.c. in 2002-03. These macroeconomic changes have allowed India to be more appropriate to become a quick decision maker (in Capital Account Convertibility etc.) and an emerging super power.