The Indian economy will grow 8 per cent in the next financial year (FY) as the full-year impact of the landmark goods and service tax (GST) will be seen by that time, Economic Affairs Secretary Shaktikanta Das has said.
The 8 per cent growth rate in FY19 will compare to a projected 7.5 per cent gross domestic product (GDP) expansion in the current FY and 7.1 per cent of 2016-17.
Speaking to select media on the sidelines of the Asian Development Bank’s (ADB) 50th annual meeting, Das said while the government continues to step up on reform measures, the country’s largest ever demonetisation of currency notes led to widening of tax base and curbing of a parallel shadow economy.
“In 2017-18, we are expecting a 7.5 per cent growth. GST will be introduced from July 1. The impact this year will be felt for nine months. By next year, the GST would have stabilised much more. So, a full-year impact of the GST will be seen in 2018-19. It would be reasonable to expect that in 2018-19, India will be close to 8 per cent growth,” he said.
The GST, dubbed as the biggest tax reform since independence, will club nearly a dozen central and state levies into a single national sales tax, helping the country integrate into one market.
Das said not just the GST but the government continues to take other reform measures, including procedural reforms as also stepping up public investment in infrastructure.
“All these factors put together will add to the maintenance of GDP growth,” he said.
Also aiding growth is demonetisation that has curbed the parallel shadow economy and widened the tax base.
“So, all these factors put together, we expect good growth,” the Secretary said adding the Centre is committed to achieving 3 per cent fiscal deficit target next year.
The Fiscal Responsibility and Budget Management (FRBM) committee has recommended a 3 per cent target in next three years.
“So far as the first three years are concerned, already there is a government commitment spelt out by the finance minister in the budget. Even with the 3.2 per cent (fiscal deficit target) spelt out in Budget of current year and 3 per cent in next two years, it should be possible for the government to achieve a debt to GDP of 60 per cent by 2023,” he said.
Das said the principal anchor of the Committee’s recommendations on fiscal road map is debt to GDP ratio of 60 per cent.
“So, our calculation shows it should be possible to reach 60 per cent in 2023. Now, within that, what should be the annual fiscal target, that has to be worked out,” he said adding once fiscal deficit targets are achieved, there is a very good probability that revenue deficit will be as per the road map.
On bilateral investment treaties (BIT), he said India previously had individual pacts but now wherever a treaty is 10-year old, it is issuing notices to terminate them and start fresh negotiations on a new text of such agreements.
“This message was conveyed to several European countries with whom our BIT was coming to a close and we said that let us start the negotiations immediately,” he said.
The European Union, he said, has taken a stand that the European Commission would negotiate the treaty with India on behalf of all member countries.
“We have been repeatedly pressing that let us start the negotiations but from their side, we have not got any response. But we are pursuing with them,” he said.
Das said negotiations are going on with many countries and the same has been finalised with three or four nations.
“We have informed the European Commission and certain European countries with whom our BIT terminated that we are prepared to start the negotiations right away and we are awaiting their response,” he added.