Articles by R Kavita Rao

An alternative methodology to measure the scale of unaccounted income in India (shadow economy) using transport as the universal input is developed. Based on input –output tables and National Accounts Statistics, annual demand for road freight transport is estimated. Correspondingly, annual supply of road freight transport is obtained based on availability of diesel for road freight transport, stock of goods carriages, average freight transport capacity per vehicle, average annual distance travel, and average fuel efficiency per vehicle. The mismatch of supply and demand is broadly considered the unaccounted for portion of the gross domestic product. The methodology is tested for two successive input–output tables and three consecutive financial years. Since the analysis is based on assumptions, a comparative static analysis is carried out to check the sensitivity of estimates to changes in the assumptions. 

This study analyses the impact of keeping crude petroleum, natural gas, motor spirit (gasoline/petrol), high-speed diesel (diesel), aviation turbine fuel and electricity out of the value-added tax scheme. Specifically, the paper finds that keeping these items out of the input tax credit mechanism (either partially or fully) would result in cascading. Through an input-output framework, this study proposes some alternatives to the proposed design of the Goods and Services Tax and assesses the implications for cascading and prices. It captures the degree of cascading across 48 sectors under different scenarios and explores alternative policy options to phase out under-recoveries of oil marketing companies on account of sales of diesel and petrol under the administered pricing mechanism.

For delivering benefi ts to a citizen of the country, the government can choose to adopt an expenditure programme or it can provide a tax concession or exemption. While the former is captured in detail in the budget-making exercise, the latter is not. This is the genesis of the attempts to measure the impact of tax provisions. In India, the government has been publishing a revenue foregone statement since the 2006-07 Union Budget. While there is some discussion on the revenue foregone statement as highlighting the giveaways by the government, this article draws attention to the limitations with the data presented - both in terms of provisions that are included and those that are excluded.

Given the pressures on government expenditure and the need to generate additional revenues without generating too many distortions, it is important to bring back to the discussion table the need to deal with taxation of agricultural incomes. The issue has been discussed at length by a number of reports on taxation as well as in the literature on tax policy in India. This paper seeks to reignite this debate at two levels: one by asking for a more comprehensive taxation of incomes, implying thereby taxation of agricultural incomes as well. The second is the need to use current legislation to ensure that the exemption base of agricultural income from taxation is kept as narrow as possible as against expanding it.

One of the most contentious issues in the discussions surrounding goods and services tax is the likely and feasible rates at which the new regime can be implemented. There have been a number of attempts at estimating the size of the tax base and the corresponding revenue neutral rate. The latest in the series is the report of the Task Force on gst of the Thirteenth Finance Commission. Most of these exercises throw up incredibly low revenue neutral rates resulting in apprehensions about the validity of these estimates and the consequent revenue risk. This paper seeks to estimate the base for the proposed gst on conservative assumptions to arrive at a more realistic estimate of the revenue neutral rates across states.