- There will be two major policy events taking place in the coming days which are the Budget and a GST Council meeting.
- Both will reveal the government’s intent and vision for the next five years. While there are a number of issues that it can take up at both these events,there are three main problems that are important.
- The first is the issue of private investment which despite the government efforts so far has not recovered enough to shoulder its share of the burden as a prime driver of economic growth.
- The second issue is the fiscal deficit and whether the government is artificially stopping itself by curtailing public expenditure in order to meet an arbitrary target which means can the government afford to shift the target meaningfully to say 4% from the current 3.4%.
- The third important policy element is whether the government can afford to reduce GST rates even further and whether there are any more steps it can take to widen the tax net.
- The government has taken several policy measures for creating an environment for the private sector to grow such as the (a)Insolvency and Bankruptcy Code (b)Make in India initiative (c)power sector reforms, (d)easing of FDI norms and (e)efforts to improve the ease of doing business.
- However,there are a few steps the government can take that can make it more attractive for the private sector to invest such as (a)Government continuing its spending on capital expenditure and (b)Reducing the corporate tax rate to 25% from 30% for the rest of the big companies.
- Further,there is private consumption expenditure which has began to show signs of weakness.The government should encourage individuals to spend more is to increase the amount of money in their pockets by reducing the tax burden.
- The economists has recommended that Government should look at collapsing the GST rates from 12% and 18% categories into a 15-16% single category which will help in expanding the tax base and increase tax compliance.
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