It's now time for 100% GDP growth



A simple question to begin with. Who do you think spends money more productively, the Government or the private sector? We bet you don't have to do a detailed analysis on this one. A casual observation of things around you would take you to the answer. It is indeed the private sector that spends its money more productively. Infact, it will not be wrong to say that by taxing the private sector, the Government tends to divert quite a bit of productive resources away from it and thus, actually ends up hurting GDP growth.

The problem is more acute in case of countries like India. Because apart from taxes, what also hurts India is the rather distorted nature of taxes. We certainly do not expect the Government to reduce taxes substantially. There are simply too many vested interests involved for it to take such a step. But we would certainly love it if the Government took steps to correct the current distorted tax regime. It seems the Government has not disappointed us.

A huge step in this direction has been taken in the form of Goods and Services Tax (GST). Infact, the Finance Minister believes that the gains from GST will propel the country from US$ 1 trillion to US$ 2 trillion in a short span of time. A well designed GST, as per the FM, could see an increase of 2-2.5% in the GDP growth per annum.

We are all for such kind of a step. The Government certainly needs more money and hiking taxes would have meant robbing Peter to pay Paul. If the FM is indeed right, GST would ensure more money for both Peter as well as Paul without taking anything away from either of them. What's more, it could also mean greater wealth creation for shareholders as firms rake up more profit growth than usual. Is this the best thing to have happened to India after the LPG (Liberalisation, Privatisation, Globalisation) of the early 1990s? Well, let's just wait and watch.