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The committee set up by the government to recommend a revenue-neutral rate (RNR) for the goods and services tax (GST) will give its report in the next four to six weeks, Chief Economic Advisor (CEA) Arvind Subramanian, who is also heading the panel, said.
“We are going to do our best to implement GST. We will have the report (to recommend possible RNR rate under GST) ready in four-six weeks. The government is going to do its best to stick to the deadline,” Subramanian said at an event here.
“India is seeing good institutional reforms like GST, which is likely to be implemented on April 1, 2016,” he said.
Last month, the government had formed a committee under Subramanian to recommend possible tax rates under GST that would be consistent with the present level of revenue collection of the Centre and states.
The committee was asked to take into account expected levels of growth of economy, different levels of compliance and broadening of tax base under GST.
Talking about foreign direct investment (FDI) in the retail sector, Subramanian said he hoped there would be a change in the narrative in how FDI in retail benefits people, in the next three-four months.
About the Direct Benefits Transfer (DBT) scheme, the CEA said, “There is a lot of talk going on to roll out DBT scheme for food and kerosene. The government is committed to extend DBT benefit to other commodities,” he said.
Some of the recent and proposed reform measures which Subramanian termed “game-changing” include GST, the JAM (Jan Dhan-Aadhaar-Mobile number) trinity for cash transfers, recent transparent auctions of coal and telecom spectrum, recommendations of the 14th Finance Commission and the gold liberalisation scheme.
“JAM has been tried to some extent for pension and salaries, and we had a fruitful experiment with liquefied petroleum gas (LPG) subsidies through direct benefit transfer (DBT),” Subramanian noted. He added that although the Centre was looking at expanding DBT to other petroleum products such as kerosene, it might not be easy.
The CEA called the nationalisation of banks in the late 1960s by the Indira Gandhi government as one of the biggest economic blunders made in independent India.
“Bank nationalisation in India was a huge historical mistake. We feel recapitalisation strategy should differentiate between banks. We feel one-size-fits-all strategy doesn’t work for banks. While we need to shrink some banks, we also need to diversify and give more licences,” he said.
Subramanian said the government and the Reserve Bank of India (RBI), led by Governor Raghuram Rajan, are on the same page on monetary policy front, as announced in the Budget, and inflation targeting.
Subramanian added that the gross domestic product (GDP) growth rate from 2014-15 to 2015-16 would be greater than that of 2014-15 from 2013-14.
Speaking on the trajectory of India’s economic policymaking, Subramanian said India has gone from socialism with restricted entry to capitalism with no exit and that exiting a non-viable venture should be made easier. He hoped the proposed bankruptcy laws would help in the matter.
“In India, good economics can now become good politics. We saw an example of that in the 2014 elections,” he said. “That, combined with increased competitive federalism, could bring about an androgynous change in the country.”
