This year has already become one of institution-building for India. Close on the heels of the formation of the Monetary Policy Committee and clearing of the Insolvency & Bankruptcy Code, this week's passage of the much-awaited GST Bill will fortify India's economic system and in the process prepare it for the next stage of take-off.
India has been through several game-changing reforms -- including institutionalization of centralized planning, the Green and White Revolutions, bank nationalization, the 1991 liberalization, the Golden Quadrilateral, savings rate deregulation and FDI liberalization -- that have structurally exalted its economic status. The implementation of the GST is one such landmark reform, and it will change the way business is done in India.
GST is a landmark reform that will change the way business is done in India.
The GST Bill will unify and strengthen India's tax architecture and bring it in sync with some of the best tax geographies in the world. Not just that, it also cements the status of the current administration as a pro-reforms government. This one decisive move will also make manufacturing efficient and boost ease of doing business. It will usher in a virtuous growth cycle in India for several decades up to 2050. With this, confidence and conviction in "Believe in India" is only going to get stronger.
Implementation of GST can definitely be termed as a breakthrough reform for India's manufacturing sector. It will create a transformational shift from a complex, multi-layered and cascading indirect tax system to a single unified indirect tax system that permits tax set off across the value chain, both for goods and services. Indian goods will become more competitive and in the long run, more profitable, as a result of lower cost of production as compared to imports.
Restructuring of inter-state transactions will result in a level-playing field and the creation of a common national market. In this context, I congratulate the government for deciding to scrap the 1% inter-state levy as it would have undermined the true benefit of GST by increasing the compliance costs.
I expect the advent of GST to improve ease of doing business and herald a new phase of start-up culture in India. The unified tax system will simplify the launch of start-ups by enabling a favourable eco-system that will rest on centralized and standardized GST registration.
As ease of doing business improves, India's attractiveness as a preferred investment destination will naturally get a fillip, resulting in a further inflow of FDI. In the medium term this will usher in a cycle of higher sustainable growth amid stable inflation.