We wrote about the electricity sector stymeing Indian development The underlying research is out as an @MIDS_Chennai working paper: mids.ac.in/assets/doc/WP_… which discusses the striking new facts about electricity pricing, the principles to shape reform, & the forces driving it
As India responds to tariff shock to improve competitiveness, power sector reforms are critical: @IndianExpress: indianexpress.com/article/opinio… New facts: Electricity imposes a 100% tax on mfg. because middle class & rich households are heavily subsidised, almost as much as farmers
Of course, other aspects of the recent reforms--growth impact, revenue consequences for the Center and states, and implications for cooperative federalism--are uncertain and/or challenging These are discussed in the @EconomicTimes piece below end
Complexity Of the 4 categories: (1) duty inversion, (2) arbitrary (3) value-based and (4) end-use/input-use based classifications: substantial progress has been made on (1) & some on (2) Overall, a Good and Simple Tax is still elusive but real progress has been made 3/
Multiplicity The 2 tables show number of rates pre & post reforms 1st table: Rows highlighted in blue are eliminated rates 2nd table: The bulk of goods & services are now in the 0, 5, 18 & 40 percent slabs (blue rows). But about 30 rates (on selected products) remain 2/
On Sep. 2 we summarized in @bsindia, the multiplicity of rates in, & complexity of, the GST in two tables Did the recent reforms address these issues? Answer: yes, considerably @abhishekecon, Varun Balotia, Navneeraj Sharma, Praveen Ravi & I show this in the next 2 tweets 1/
Question for today's GST Council Meeting: How simple is India's GST? Answer in our @bsindia piece is sobering Nearly 45 distinct rates (Table 1) Complexity from duty inversion & arbitrary, value- & end-use based classifications (Table 2) Costs to govt. & taxpayer are huge 1/
Devesh Kapur & I are excited to share that our @HarperCollinsIN book on 75 years of Indian development-A Sixth of Humanity-will be released in New Delhi on Oct. 24 @ 6 PM @ Teen Murti Bhavan We'll be in conversation w/ Montek Ahluwalia moderated by @menakadoshi Details below
GST’s rate cuts deliver a clear gain: a simpler, fairer structure. Yet the bigger picture raises four unresolved questions—on growth, fiscal resilience, state revenues, and the spirit of cooperative federalism.
In today's @EconomicTimes, @abhishekecon @FelmanJosh & I describe the unambiguous benefit of the recent GST reform and discuss four open questions relating to its impact on: -growth -long-run fiscal situation -state finances and -cooperative federalism
1/ Today, the GST Council meets to consider long-overdue reforms. The big proposal: eliminate the 12% & 28% slabs. But the truth is India’s GST is far more complicated than the “5-slab system” we think it is. 🧵
The good and simple tax? All eyes on GST Council's two high-rate slabs @abhishekecon, Varun Balotia, Praveen Ravi, @navneerajs & @arvindsubraman explain how not-simple the GST is, which leads to serious but under-recognised problems of arbitrary and coercive implementation Read…
Costs: -arbitrary & coercive implementation -rent-seeking -revenue loss -unease of doing business The GST Council must not only eliminate high rates on some goods, especially those in 28% slab it must address broader challenge of complexity for GST 2.0 to be better than GST 1.0
Question for today's GST Council Meeting: How simple is India's GST? Answer in our @bsindia piece is sobering Nearly 45 distinct rates (Table 1) Complexity from duty inversion & arbitrary, value- & end-use based classifications (Table 2) Costs to govt. & taxpayer are huge 1/
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