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GST passage could lead to 2 per cent GDP growth

05-August-2016
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GST passage could lead to 2 per cent GDP growth

The long pending GST bill was finally passed by the upper house of the parliament though there are still a few possible hiccups before the final implementation. However, economists are quite sure that the implementation of the GST will be a boon for the Indian economy.

One of the major reasons for optimism, say economists and analysts we spoke with, is the fact that finally the country, as a whole, will be within a single, common tax regime.  In fact, it is quite generally held that the implementation of GST will lead to a 2 per cent increase in the country’s GDP. It is something that economists have been speaking about since the first time GST was introduced.

The Hindu Business Line quotes a study done by NCAER that explores the impact on growth due to reduction in direct cost and cost reduction on capital inputs pegged the improvement in growth rates between 2 and 2.5 per cent.

Of course, there is still the one, and very important fact, of the rate being decided. With widely diverging figures coming out over the past few months, India Inc. is still waiting for a final verdict and this will be crucial. It still seems that neither the states or the major political parties have come to any common ground on this and this will remain a major stumbling block for the bill to come to reality.

The fact remains; as one analyst told us, anything above 20 per cent is not going to be accepted by the states, but, at the same time, anything below 16 per cent (as some quarters are rooting for) might be too impractical. There is still a fine line to walk here and the success (or failure) of the GST bill will depend upon this.

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