India's note ban will help the country move to a less-cash society, thereby giving greater financial penetration and consumer protection, according to Organisation for Economic Co-operation and Development (OECD) Secretary General Angel Gurria.
The OECD's Economic Survey of India 2017 has pegged the real GDP growth at 7 per cent in the 2016-17 fiscal year. The acceleration of structural reforms, the move towards a rule-based policy framework and low commodity prices have provided a strong growth impetus. Recent deregulation measures and efforts to improve the ease of doing business have boosted foreign investment, the survey said.
"The impact of demonetisation that has been on consumption in the last quarter is temporary," said India's economic affairs secretary Shaktikanta Das at the launch of the OECD Economic Survey of India.
"With remonetisation almost complete now, the adverse impact on consumption will not spill over to the next quarter," added Das.
The OECD survey further highlighted that a comprehensive tax reform would promote inclusive growth and raise revenue helping the government effectively deal with high poverty rate.
Timely and effective implementation of the GST would support competitiveness, investment and economic growth and government's plan to reduce corporate income tax rate and broaden the base will serve the objective.
The survey recommended "gradual reduction in the corporate income tax from 30 per cent to 25 per cent while broadening the tax base and providing certainty regarding tax rules and their implementation."
Given that poverty is high in India, the survey suggested that there should be increased focus on farm output, urban infrastructure, liberalised product and labour market as these would improve living conditions across the country. Further, since wealth is concentrated in the country, the survey recommended introduction of inheritance tax.
