The International Monetary Fund ( IMF ), on Wednesday said that full and smooth implementation of Goods and Services Tax ( GST ) in India would help to avoid low revenue to the Government exchequer.
“In India, a return to a gradual path of growth-friendly fiscal consolidation is desirable to create fiscal space, but full and smooth implementation of the new goods and services tax is necessary to avoid tax revenue underperformance resulting in cuts to capital expenditures,” IMF said in its Fiscal Monitor report titled ‘Capitalising on Good times’.
In India, Consolidation is expected to resume in fiscal year 2018/19 and after, but further measures—including to ensure smooth implementation of the new goods and services tax, reductions in fuel and food subsidies, and tax reforms—are needed to support it over the medium term, the report said.
“Fiscal consolidation was paused in fiscal year 2017/18 at the federal level as the economy recovered from disruptions related to demonetization and the rollout of the new national goods and service tax. Relatively buoyant revenues supported by base-broadening efforts and lower capital expenditures were offset by higher spending (including higher compensation to states for the rollout of the new goods and service tax) and lower profit transfers from the Reserve Bank of India due to costs incurred during the demonetization,” it said.
It further added that the commodity exporters have continued to push through reform to adjust to “lower for longer” oil prices.
According to the report, overall fiscal deficits in emerging markets and middle-income economies fell marginally in 2017 for the first time after four years of steady increase, explained mainly by fiscal adjustment among commodity exporters.
It also said that in emerging market and developing economies, fiscal policy is appropriately focused on consolidation, especially in those countries that are still adjusting to lower commodity prices.
