The Goods and Services Tax (GST) is a “hugely beneficial reform” which will cut both transaction costs and double taxation and its long-term benefits far outweigh the likely short-term impact such as a price rise, World Bank Chief Economist and Senior Vice President Kaushik Basu said.
“I would cheer it..it is a tribute to Indian democracy,” Mr. Basu said here before delivering the Arijit Mukherjee lecture at IIM Calcutta.
The Rajya Sabha on August 3 passed the Constitutional Amendment Bill, to enable both the Centre and the States to simultaneously levy the GST, by a two-thirds majority. The Bill will now be returned to the Lok Sabha for its approval.
The GST will subsume all indirect taxes currently levied, including excise duties and service tax. It will be levied on consumption rather than production.
Mr. Basu said the government must make a rule that (post-GST) trucks should be allowed to ply unhindered from the point of its loading to unloading against the present practice of stopping it at every check post for various tax collections. “Aside from checking freight, there should no stoppage.”
“We have to make a fetish of efficiency and cutting bureaucratic costs. And this (GST) is a step towards that,” he said.
When asked about reports on his joining the race for the top job at the Reserve Bank of India, he declined to comment. Asked whether he had met any government officials, he said: “Not on this trip.”
He said that he had complete faith in India’s growth numbers. “They were dependable and above board in terms of cleanliness.” He said that room for some conceptual doubts were created as there was some “reloading on account of incorporating the value added in the corporate sector.” However, despite this lack of clarity, “it is above board and is done in a very transparent manner.”
India vs China
Propelled by three growth-drivers – well-conducted fiscal and monetary policies and the good fortune of declining oil prices – India’s growth surpassed China’s in 2015.
“As Chief Economic Adviser, I had forecast it at 2016… I was wrong .. it happened in 2015,” Mr. Basu said adding that India was now a front runner in World Bank’s chart of major emerging economies.
Later at the lecture, he said India needed to improve its ease of business and also ensure private sector participation in higher education.