The GST, Goods and Services tax, to be unrolled from July 1 is expected to add about 1 per cent additional growth each year to the GDP, says Shobana Kamineni, the newly elected President, The Confederation of Indian Industry (CII) in a press conference on Thursday (04 May), to reach a possible figure of 10 per cent GDP in the next three years.
“The industry is completely ready for the introduction of the landmark tax reform from 1 July 2017 and we have been calling for a single national tax for the last 10 years and will try to make the implementation as smooth as possible”, says Kamineni, adding the overall economic outlook of the country to be positive, with a forecast of 7.5-8 per cent GDP in 2017-18.
CII forecast growth of 8.5 per cent for services, 7.5 per cent for manufacturing and 4 per cent for the agriculture sector.
Addressing the conference, Shobana says 10 per cent GDP growth rate in the next 3 year is possible on the back of GST, greater participation of women in the labour force, urbanisation process which would drive greater economic activity in areas like construction and government spending of up to Rs 30 trillion in various infrastructure projects over the next few years.
“It is eminently possible to create 5 million jobs each year if the GDP growth rate can be boosted by an extra 1 per cent. Our analysis shows that as of now we are creating 3.7 million jobs annually. 10-12 million people enter the working age population every year. Of these, about half do not look for jobs as they prefer to go into education or other activities”, says CII president.
Being the first women president of CII, Shobana laid great emphasis on women parity and greater participation of women in the workforce which could raise the GDP by $ 700 billion, adding how this should have been done earlier but would make serious efforts towards the same.
Challenges, however, remain in the reviving the investment sentiment in the country, especially the credit off-take and the interest rates. “Solutions to the NPA issue can no longer be postponed. We are encouraged by the package approved by the cabinet last night. In addition, we feel that the current interest rate structure is still too high to induce investments and RBI must find ways to continue on a downward interest rate path”, says Shobana.
Shobana says that the corporate income tax should be brought down to 25 per cent and later 18 per cent accompanied by effecting a sunset clause for all incentives. Eventually, there could be a removal of all incentives and concession.
“For the economy to move to a higher growth path, the slowdown in investments must be reversed.
CII would request the government for quick action in reducing the corporate income taxes for all the corporates. Kamineni adds that this has become urgent given the lowering tax rates across many countries.
"The 25 per cent rate is currently is applicable to only for companies with a turnover up to Rs 50 crore. Eventually, it needs to be brought down with the removal of incentives which would lead to much better tax compliance”, adds the CII president.
BW Reporters
Naina Sood is a Economics graduate and has done her post graduation in International economics and Trade. She has deep interests in Indian economy and reforms
