Former Niti Aayog Vice-Chairman Arvind Panagariya on Wednesday pitched for a two-rate Goods and Services Tax (GST) structure with a small exemption list.
Panagariya also said that the Indian economy has grown fairly rapidly in the last 17 years, and it will grow at 7-8 per cent in the next couple of decades.
"We should get to two GST rates(structure)....Also, we need to prune the GST exemption list," Panagariya at an event organised by Columbia Global Centers here.
The decision of the GST Council to impose 5 per cent tax on pre-packaged and labelled food items such as cereals, pulses and flour weighing less than 25 kg has generated political controversy.
For a commodity measured in litres like curd and 'lassi, the limit is 25 litres.
A nationwide Goods and Services Tax (GST), which subsumed 17 local levies like excise duty, service tax and VAT and 13 cesses, was rolled out at the stroke of midnight on July 1, 2017.
Under GST, a four-rate structure that exempts or imposes a low rate of tax of 5 per cent on essential items and top rate of 28 per cent on luxury goods and cars is levied. The other slabs of tax are 12 per cent and 18 per cent. In the pre-GST era, the total of VAT, excise, CST and their cascading effect led to 31 per cent as tax payable, on an average, for a consumer.
On India's macroeconomic situation, Panagariya said, "We have been growing fairly rapidly in the last 17 years...We will grow 7-8 per cent in the next couple of decades.
While noting that the Indian economy grew by 7.4 per cent between 2014-15 to 2019-20, the first five year of the Modi government, the eminent economist blamed reckless lending by banks during the previous UPA government from 2008-12, which led to rise in NPAs and plummeting of economic growth to 4 per cent in 2019-20 The World Bank has cut India's economic growth forecast for the current fiscal to 7.5 per cent as rising inflation, supply chain disruptions, and geopolitical tensions taper recovery.
India's economy grew 8.7 per cent in the last fiscal (2021-22) against a 6.6 per cent contraction in the previous year.
On some experts and politicians comparing the current situation in Sri Lanka with India, Panagariya said, "It is nonsense to compare the current economic situation in Sri Lanka with India. India is a very stable economy."
Panagariya, currently a Professor of Economics at the Columbia University also stressed on the need of good job creations.
