Prime Minister’s Economic Affairs Council member Sanjeev Sanyal on September 22 said India needs more “process reforms”, instead of going for massive, one-time reforms as the government goes for next-gen reforms.
Explaining why process reforms are required, Sanyal said, “People like to think of massive, one-time reforms when they think about reforms. I have been arguing, however, that most of what needs to be done is process reforms.”
The economist said small changes such as changing three words in a law could ease most of the pains of businesses. “Then there are all kinds of defunct departments that need to be closed down or merged. So, these small, process reforms are what needs to be done,” he said at the Network18 Reforms Reloaded, an event discussing India's next phase of growth.
He said most of these reforms are sectoral and very specific, and the accumulation thousands of these “small reforms” is what needs to be done.
“I and my team at PMEAC are working on this for some time. The committee under Rajiv Gauba is now looking into deregulation.”
Meanwhile, Sanyal reiterated that the government is unlikely to introduce anti-profiteering mechanism to force companies into passing on the benefits of goods and services tax (GST) cuts to consumers. The new rates under GST 2.0, passed by the Council on September 3, came into effect from September 22. However, there are concerns that some companies may not pass on the rate reduction benefits to customers.
"Government has been clear that we don't want to introduce an anti profiteering provision because we don't want an inspector raj. So it is good if GST cuts are passed through, some may want to pass it through increasing their package size. But there should be public pressure on the companies to pass this through because the windfall is for consumers," Sanyal said.
He said the country expects "good behaviour" from the companies, and pressures should come from the consumers as giving additional power to bureaucrats has its own connotations. "So I see the GST cuts being passed through over a period of time. The market may force it through anyway to some extent."
Sanyal said a conclusion was reached in 2024 that the GST slabs need to be relooked. The new indirect tax system provides a "logical, consistent system of GST" and issues such as inverted duty has been resolved.
"...now we don't have to get into debates of whether the popcorn is salted or caramelized."
However, Sanyal refused to provide any estimate of the consumption and growth benefits of the GST rate cut, saying they depend on various other factors as well, including Trump tariffs and the government's own spending.
Explaining the evolution of the GST regime, Sanyal said, "The original GST was like a FTA that India signed with itself. And now the second round of GST overhaul is to further simplify the system to ensure that our producers can make in India by utilising a simpler system and benefits the consumers."
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