Failure to pass GST may affect Govt's ability to ramp up

The World Bank warned that failure to pass the Goods and Services Tax (GST) bill by Parliament could hamper the Indian government's ability to ramp up spending on infrastructure. "A failure to pass the Goods and Services Tax could hamper the government's ability to ramp up spending on infrastructure needs and preserve the status quo of fragmented domestic markets," it said in its latest report Global Economic Outlook. The Constitution Amendment bill to roll out GST is stuck in the Rajya Sabha where the ruling NDA does not have a majority of its own.

The bill is being opposed by Congress although many other opposition parties are on board. Congress is seeking three changes in the bill, including a constitutional cap on the GST rate, to support it. In its report, the World Bank said that risks are mostly of domestic origin and mainly on the downside.

"Slow progress on land reforms could add to investment delays, and private investment growth may be unable to build further momentum," the report said, adding that the financing of public-private partnerships also remains a challenge. It said although India has made good progress on reducing external vulnerabilities and strengthening the credibility of the macro policy framework, high levels of nonperforming loans in the banking sector, concentrated in construction, natural resource and infrastructure sectors, could impede a pickup in investment if left unaddressed. "There are also downside risks to growth in the near term from sub-par monsoon rainfall across most of India, and farm output growth may prove weaker than projected," it added.