Structural reforms need to be a continuous process, Gita Gopinath, Deputy Managing Director of International Monetary Fund (IMF) said, highlighting that India needs to further rationalise and simplify the Goods and Services Tax regime to increase revenues.
“An additional about 1 percentage points of GDP can be raised from further rationalisation and simplification of GST rates,” said Gopinath at the Diamond Jubilee Conference of Delhi School of Economics.
India raised 6.86 percent of GDP from GST collections in FY24, compared with 6.72 percent in the previous fiscal.
Gopinath noted that India, given its stage of development, is not going to experience a reduction in spending. Therefore, the "creation of fiscal space, should come through raising revenues to GDP”, she pointed out.
“Progressivity needs to be there in the tax system. Making sure that you are getting enough from capital gains is going to be important,” she added.
Gopinath also highlighted the need to get more from property tax revenues in order to raise revenues.
“Further savings can be made by targeting fertiliser subsidies. Karnataka is running a pilot, tailoring the subsidies to the size of farms,” she noted.
DBT is saving money, more can be done on this front too, Gopinath added.
She highlighted the need to focus on skilling, infrastructure, efficiency of justice system, and factor market reforms for India to become a developed economy by 2047. India will have to create between 60-148 million more jobs too, she said. Gopinath talked about the implementation of labour codes as part of the process. “Women's labour force participation needs to go up from 37 percent; without women there's no path to development,” Gopinath added.
Commenting on artificial intelligence, Gopinath said that there is a need to make sure that policies that are in place are not favouring automation inadvertently.
“To be able to best of technology, you don't want to be tilting the ground in favour of technology,” she said, pointing to labour-abundant countries balancing the incorporation of AI and needs of labour force.
India is at an intermediate level of AI preparedness as per an IMF study.
“The indicator where level of skilling a lot more work is required to be able to adapt to changing needs,” Gopinath said.
Gopinath also batted for development of social safety nets, like unemployment insurance, so that workers can train themselves.
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