India need to undertake more reforms to continue on path of raising economic growth: IMF’s Gita Gopinath

International Monetary Fund (IMF) deputy managing director Gita Gopinath has said that India will need to undertake more reforms to be able to continue on the path of raising economic growth and to make sure that enough job creation happens in the country. Gopinath further said that India will be required to reduce import tariffs if it wants to be an important player in the global supply chains. She added ‘The significant improvements have been made by the government over the years in terms structural reforms’. While noting that the world is in an environment where trade integration has been questioned, Gopinath said it is important for India to remain open for global trade.

She said ‘Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs’. She said it is a tremendous aspiration to get to a developed country status but it does not happen automatically, and requires ongoing, consistent efforts, pretty broad scale, across many areas to deliver on that. She also said ‘India has grown well in terms of its overall growth rate, and at 7 per cent, it is the fastest growing major economy in the world. The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy.’

About taxation, she said India has parallels with other developing countries, where most of the tax revenue that is collected is indirect taxes and not direct taxes, not in form of income taxes. She said ‘We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there’. Referring to the cut in corporate tax rate by the Modi government, she said although it was helpful it is less the tax rate that matters, but what matters is just making sure that there are no loopholes and there are not too many leakages that happen in terms of tax exemptions. She said ‘It is very important to have sufficient progressivity in your tax system...making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical’. She also suggested that now there is better technology to implement property tax and this is again another area where work is needed.