The Indian economy is expanding at a fast pace, boosting
living standards and reducing poverty nationwide. Further reforms
are now necessary to maintain strong growth and ensure that all
Indians benefit from it, according to a new report from the
OECD.
The latest OECD Economic Survey of
India finds that the acceleration of structural
reforms and the move toward a rule-based macroeconomic policy
framework are sustaining the country’s longstanding rapid
economic expansion.
The Survey, presented in New Delhi by OECD
Secretary-General Angel
Gurría and India’s Secretary Economic
Affairs Shaktikanta Das, hails India’s recent growth
rates of more than 7 percent annually as the strongest among G20
countries. It identifies priority areas for future action,
including continuing plans to maintain macroeconomic stability
and further reduce poverty, additional comprehensive tax reforms
and new efforts to boost productivity and reduce disparities
between India’s various regions.
“India provides a welcome counter-point to a global economy
that has been under-performing for years,” Mr Gurría said.
“Reforms are historic and are bearing fruit, growth is strong and
other macroeconomic indicators are improving. Maintaining the
reform momentum will be critical to boosting investment and
creating the quality jobs needed to ensure strong and inclusive
growth for future generations, with all segments of society
benefitting from it.”
The implementation of the landmark GST reform will
contribute to making India a more integrated market. By reducing
tax cascading, it will boost competitiveness, investment and job
creation. The GST reform - designed to be initially
revenue-neutral - should be complemented by a reform of income
and property taxes, the Survey said.
The Survey points out the need to make income and property
taxes more growth-friendly and redistributive. A comprehensive
tax reform could help raise revenue to finance much-needed social
and physical infrastructure, promote corporate investment, enable
more effective redistribution and strengthen the ability of
states and municipalities to better respond to local needs,
according to the Survey.
The OECD points out that achieving strong and balanced
regional development will also be key to promoting inclusive
growth. Inequality in income and in access to core public
services between states and between rural and urban areas is
currently large across India, while rural poverty is pervasive.
Continuing efforts to improve universal access to core public
services is essential.
Recent changes in India’s federalism model have given
states more freedom and incentives to modernise regulations and
tailor public policies to local circumstances. Ranking states on
the ease of doing business is opening a new era of structural
reforms at the state level and will help unleash India’s growth
potential. Further benchmarking among states and strengthening
the sharing of best practices, particularly on labour regulations
and land laws, could add to the reform
momentum.
Raising living standards in poorer states will require
increasing productivity in the agricultural sector. With
employment expected to gradually shift away from the agricultural
sector, urbanisation will gather pace. Thus, better urban
infrastructure will be needed to fully exploit cities’ potential
for job creation, productivity gains and improving the quality of
life.
An Overview of the Economic Survey, with the main
conclusions, is accessible at: www.oecd.org/india/economic-survey-india.htm.
