June 30, 2017

WE ARE ALL NEOCONOMIST NOW:

India is finally getting its 'big bang' tax reform (Rishi Iyengar, June 30, 2017, CNN Money)

The new Goods and Services Tax will replace more than a dozen central and state tariffs, duties and fees levied -- often at different rates across India's 29 states -- on nearly everything sold in the country.

From Saturday, all goods and services will be placed in one of five different tax brackets -- from 0% for most agricultural and food products to 28% for items like jewelry and large electronic appliances.

Each product will now attract a single tax rate across the country, at a stroke removing the long delays faced by truck drivers at every state border where they've had to complete multiple forms and pay officials.

"We should be looking at this as a really big positive," said Shilan Shah, India economist at research firm Capital Economics. The reform will "boost trade among different states, which will help lift domestic demand," he added.

The International Monetary Fund forecasts that the GST will eventually lift India's gross domestic product growth back above 8%. It slipped to 6.1% last quarter following the country's massive cash ban last year.

Oxford Economics estimates that the reform could add 0.6% to India's annual growth rate over the next 15 years.

"It should also go a long way in reviving investors' confidence in Modi's series of 'big-bang' reforms," noted Priyanka Kishore, lead Asia economist at Oxford Economics.

Posted by at June 30, 2017 5:30 PM

  

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