The goods and service tax (GST) is “absolutely a good thing” for the country, said RBI Governor Raghuram Rajan here on Thursday.
According to him, imposition of GST would lead to an increase in the tax net. Interestingly, he pointed out that this would not necessarily mean higher tax rates.
More people coming under the tax ambit would mean more revenues and people sharing the revenue burden; which, he maintained, was a good thing for the country.
“If you ask for my opinion, GST is absolutely a good thing for the country. There are two big effects.... increase in tax net; while not increasing the tax rate. The other would be reducing barriers between States,” he said while responding to queries from students and guests after delivering the Eighth Dipak Banerjee Memorial Lecture at the Presidency University here.
The GST will unify the country, reduce barriers between States and provide a “common market”, he added.
BorrowingsCalling for a “golden mean”, Rajan pointed out that it was the best option between the two extremes of “excess borrowings” and equity and debt-less growth.
“Moderation is required and some debt is good. But not too much. Avoid over borrowings,” he said.
Citing the instance of Indian banks, Rajan said the foreign share in government debt is 3-3.2 per cent, which is very reasonable.
PopulismThe RBI Governor also came down hard on populism of both the Left and Right wing variety.
“My definition of populist summary is who proposes simple solutions to everything. And, who doesn't recognize the world is really a complex place. I think, we are today in the world of populism; whether populism of Left or Right who always have simple, clear and absolute wrong solutions to everything,” he added. He maintained that distorting price in a significant way eventually leads to misallocation of resources and hurts the economy in the long term.