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Arun Jaitley hopeful of a 1 July GST rollout, hails GDP growth numbers

LiveMint logoLiveMint 01-03-2017 PTI

New Delhi: Finance minister Arun Jaitley on Wednesday was hopeful that the goods and services tax (GST) will come up for implementation by 1 July, despite all the teething troubles that the tax reform is currently facing.

“The entire process (of GST implementation) has to be completed by 15 September. At the moment, it is the biggest tax reform since Independence. Once implemented, it will be far more efficient tax system. The quantum of taxation will go up. GST will make generation of cash more difficult,” said the finance minister.

Jaitley also hailed the higher-than-expected gross domestic product (GDP) growth numbers that were declared Tuesday, saying a 7% expansion in the December quarter belies exaggerated claims of demonetisation impact on rural economy.

ALSO READ | What explains 7% GDP growth despite Modi’s demonetisation drive?

Jaitley, who returned from his UK visit on Wednesday morning, seemed to agree with Reserve Bank of India (RBI) governor Urjit Patel’s assertion of a sharp V-shaped recovery as remonetisation picks up. The October-December quarter of 2016 was “substantially impacted by demonetisation (of higher denomination currency),” the finance minister said.

“Demonetisation, admittedly, had led to the squeeze of currency because this was the period during which the replacement of high denomination currencies was taking place and many people were apprehensive to what its impact on overall growth would be,” he said.

But, with a 7% growth in GDP the worst fears for the economy have been put behind, Jaitley added. “I had consistently maintained that the revenue (tax collection) figures, which actually show the real level of growth, indicated that the growth was there, and some areas could be adversely impacted, particularly those which were cash dominated and also a part of the shadow economy and even constituted parts of the informal economy,” he said.

But demonetisation has helped integration of informal with the formal economy, he said, adding the money that was deposited in the banks is now being spent through a system which is being recorded. “And I think, the GDP data for Q3 really reflects that position,” he said.

ALSO READ: Bouncing back from demonetisation, India chasing V-shaped recovery

“First of all it belies exaggerated claims made by many that the rural sector was heavily in distress.” Agriculture growth, he said, this year is at a record high. “Obviously, high rate of agriculture growth has contributed to Q3 GDP. Also, manufacturing increase has contributed to the Q3 GDP and this was already reflected in the VAT data of the states and also the excise data of the central revenue collection,” he said.

The Central Statistical Organisation (CSO) Tuesday projected a 7.1% economic growth in the year ending 31 March, the slowest since 2014 but still the fastest among major economies. “Now that we are in the month of March, remonetisation has picked up substantially. I think a combination of remonetisation, resilience of Indian economy and some signs of growth returning back to the world, are evident and, therefore, I do expect in the future quarters this figure itself will grow further,” he said.

ALSO READ | The GST: so far so good, but not good enough

“With remonetisation at an advanced stage, today money is in the market, demand is also increasing, economic activity is picking up... Economic reforms undertaken by the government will help propel GDP growth in coming quarters,” he added.

Defending the government’s move to ban Rs500 and Rs1,000 notes last November, Jaitley said, “one of the reasons for note ban was tax non-compliant. One of the objectives of the demonetisation was to reduce and eliminate anonymity... Today there is much greater support for any reform in India.”

On trade deal with the UK, Jaitley said “in my discussion with my counterpart here, he clearly convinced me that Brexit should not be confused with protectionism”. On visa liberalization, he said it depends on the policy of the UK government.

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