By : Indranil Sen Gupta
The much awaited Direct tax code is being delayed further as the chances of Parliament’s standing committee on finance submitting its report on the Bill in the ongoing Winter Session, which concludes on December 23, are bleak. With barely a couple of days in this week of the winter session of Parliament, the report may not be tabled in the current session and DTC would miss the April 2012 deadline.
This will be one of the biggest sets back in terms of reform of policies in Indian economy is going to witness. We all know that if the DTC comes into play it will not only replace the old primitive Income Tax Act, 1961 but will also bring growth internally for the Indian economy. The new tax slabs will increase the surplus of the consumers of India and this surplus will lead to increase in consumption of products and services finally leading to growth of Indian economy.
With a young population breeding in India followed with a change in cultural of living life we find substantial growth in consumption of products and services which will lead to increase in demand and production. Household consumption expenditure currently stands (3% of GDP which is the largest component of India’s GDP. Households are also the biggest contributors to India’s savings rate; their savings equal 23% of India’s GDP. Hence the new DTC will further increase the consumption and will make a paradigm shift of India’s fiscal growth model from export to domestic consumption. An economic prosperity of a country is left on the hands of its own people and its resources.
With global turmoil’s and drying up of overseas buyers (export) economic growth can only be achieved through proper utilization of ones own resources. India is well poised to exploit such a growth which will strengthen its pillars of economic growth. Further India will able to reduce the gap of poor and rich which has widened after independence. DTC will leave higher percentage of savings resulting increase in domestic demand which will lead to economic growth of Indian economy. This delay will increase the time frame of India’s development. DTC plays a pivotal role in Indian economic growth in coming days. If DTC was placed in this winter session then in the upcoming budget India should have been able to wither out the dark clouds of global slump on Indian economy. DTC will replace and reduce the dependency of export to meet the fiscal targets as well as companies will find growth from internal sources and will not be affected by global slowdown in shipments. Indian companies will be able to produce more as the demand capacity will grow substantially and resulting proper equilibrium of price.