OECD tells India to go for more reforms

Patting India on the back for initiating recent reforms, the Organisation for Economic Cooperation and Development (OECD) has pitched for more such measures so that the country takes advantage of its inherent talent like young population and entrepreneurial skills. OECD wants India to reduce trade and FDI barriers, besides issuing more banking licenses.

"India recently renewed its reform impetus. These are important steps, but further reforms are also essential for India," OECD said in its report, titled India Sustaining High and Inclusive Growth.

OECD called India to go for more efficient use of subsidies as well as a simpler and broader tax system like Goods and Services Tax (GST).

 

“The current indirect taxation system is complex and involves cascading taxes that bias production decisions and hinder inter-state trade. A national GST, coupled with a state GST, would rationalise indirect taxes while preserving states’ financial autonomy,” the report said.

India has already missed three deadlines for introduction of GST and is now planning to come out with the new indirect tax regime by next fiscal.

However, difference between the Centre and states are yet to be sorted out on many of the GST issues.

It wanted India to “ensure a certain level of stability in the area of international taxation”.

The Budget announcement of retrospective amendments to the Income Tax Act to bring overseas deal for Indian assets under tax net had drawn flak from many a quarters. To address the issue, the government appointed a committee under tax expert Parthasarathi Shome. The panel recommended to first of all not to go for retrospective taxation. Even if there is need for that, the committee wanted the one who has made capital gains to pay the tax.

On financial sector reforms, OECD advised India to further "open up capital of public sector banks" while allowing more private sector players. The issue of banking license has been hanging in balance for quite some time now. The Finance Ministry has nudged RBI to come out with final guidelines on the issue.

OECD also called for transforming rural banks and cooperatives into smaller privately-owned banks free of governmental shareholding.

The organisation also batted for reforms to efficiently use spending on social issues like eduction and healthcare.