New Delhi. International Monetary Fund (IMF) Deputy Managing Director Gita Gopinath said that India will need to do more reforms to move forward on the path of economic growth and ensure adequate employment generation in the country. Addressing a program here, Gopinath said that if India wants to become an important partner in the global supply chain, then it will have to reduce import duty. He said, “In terms of structural reforms, the government has done important reforms in the last few years.”
Gopinath said the world is in an environment where trade integration is being questioned, and it is important for India to remain open to global trade. “India has higher tariff rates than other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it will have to reduce those tariffs,” the leading economist said. Gopinath said achieving developed country status is a great aspiration, but it does not happen automatically. It requires sustained, coherent efforts at a broad level across multiple sectors.
He said, “India’s overall growth rate has been good and at 7 per cent it is the fastest growing major economy in the world.” Gopinath said, “The question is how to maintain this momentum and increase it further so that India can increase its per capita income and become an advanced economy.” In response to a question on taxation, he said India’s situation is similar to other developing countries where most of the tax revenue collected is indirect tax, not direct tax, and is not in the form of income tax.
“We are also advising other developing countries that it would be beneficial to broaden the personal income tax base so that more income can be drawn from there,” he said. Referring to the reduction in corporate tax rate by the Modi government, Gopinath said though it was helpful, it was important to ensure that there were no loopholes and not too much leakage in terms of tax exemptions. “It is very important to have enough progressivity in your tax system… It is important to ensure that you (India) are getting enough money from your capital gains tax as from your income tax,” he said. Gopinath also suggested that better technology is now available to implement wealth tax and this too is an area that needs work.
