'Rationalise and simplify': IMF's Gita Gopinath gives tips to increase GST revenue
New Delhi: Emphasising that structural reforms should be continuous, Deputy Managing Director of the International Monetary Fund (IMF) Gita Gopinath said that India should continue to rationalise and simplify its Goods and Services Tax (GST) system to boost revenue, media reports said.
“An additional about 1 percentage points of GDP can be raised from further rationalisation and simplification of GST rates,” said Gopinath at the Diamond Jubilee Conference of Delhi School of Economics, reported Moneycontrol.
India collected 6.86 percent of its GDP from GST in FY24, up from 6.72 percent in the previous fiscal year.
Gopinath remarked that, given India's stage of development, a reduction in spending is unlikely.
Therefore, the "creation of fiscal space, should come through raising revenues to GDP”, she highlighted.
“Progressivity needs to be there in the tax system. Making sure that you are getting enough from capital gains is going to be important,” she added, according to the report.
Gopinath also stressed the importance of increasing property tax revenues as a means to boost overall revenue.
“Further savings can be made by targeting fertiliser subsidies. Karnataka is running a pilot, tailoring the subsidies to the size of farms,” she noted.
Gopinath noted that Direct Benefit Transfers (DBT) are already saving money, but there is potential to achieve more in this area.
She stressed the importance of focusing on skilling, infrastructure development, improving the efficiency of the justice system, and implementing factor market reforms for India to achieve developed economy status by 2047.
Further, she pointed out that India will need to create between 60 to 148 million more jobs and mentioned the implementation of labour codes as a crucial part of this process.
“Women's labour force participation needs to go up from 37 percent; without women there's no path to development,” Gopinath added.
Regarding India's readiness in artificial intelligence, Gopinath emphasized the need to ensure that current policies do not unintentionally favour automation.
“To be able to best of technology, you don't want to be tilting the ground in favour of technology,” she said, pointing to countries with abundant labour, balancing needs of labour force and incorporation of AI.
According to an IMF study, India is at an intermediate level of preparedness for artificial intelligence.
“The indicator where level of skilling a lot more work is required to be able to adapt to changing needs,” Gopinath said.
Gopinath also advocated for the development of social safety nets, such as unemployment insurance, to enable workers to pursue training and skill development.
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