India is working to develop policies and regulations that would encourage more non-cash payments in the country to effectively tackle the problem of undeclared income on which tax is not paid.
India’s chief economic adviser, Arvind Subramanian, said that the government was looking to encourage more electronic payments when he addressed an audience at the Peterson Institute for International Economics in Washington DC this week.
Subramanian said he is surprised by the dynamics of e-commerce and that companies such as Flipkart are challenging global giants like Google.
“But one of the challenges for India is to improve the financial regulation. Because a lot of these companies find it is actually better to locate in Singapore, both for regulatory reasons and for tax reasons.
“So I think that’s something that we are going to (address). The government is very aware of it. The financial sector reforms are kind of geared to actually addressing this problem,” he said.
However, Subramanian added that India is “still very much a recovering economy, not a surging economy”. The government was moving ahead slowly, but steadily with a series of key policy and fiscal reforms that would change the face of India in the years ahead, but “big bang reforms’ to accelerate the pace of change were not on the agenda.
In his presentation on the annual Indian budget presented by the country’s finance minister, Arun Jaitley, Subramanian said the focus was on key areas that included more public investment. “We are pushing growth via public and private investment. It is not coming at the cost of fiscal consolidation. It’s accompanied by an improvement in the quality of fiscal consolidation.”
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Despite faster payment technologies, business-to-business payments by paper cheque show no sign of decline from three years ago.