Global think-tank OECD today pitched for a rating upgrade for India and said global rating agencies had become “overtly cautious” and conservative in not revising India’s rating for last 14 years. “I believe India deserves a better rating,” said Angel Gurria, Secretary General of the Organisation for Economic Cooperation and Development (OECD).
He said the rating could be changed to “neutral” and then “positive”. “With the kind of reform programmes that you are putting out they can’t fail to notice so this should have.”
Coming out in support of the India government’s decision to demonetise high value currency notes, Paris-based Organisation for Economic Cooperation and Development (OECD) said the move will lead to financing of the economy and higher tax compliance.
The note-ban will help the country move to a less cash society and facilitate greater financial penetration and better consumer protection, he said. Its impact may be felt on the consumption pattern in a quarter, but it is going to “bite” in the medium and long term, he added. “This will not affect investment or jobs.”
However, in its survey, OECD has lowered India’s real GDP growth forecast to 7 per cent in the current fiscal, from its earlier estimate of 7.4 per cent. In FY18 and FY19, it expects the economy to grow at 7.3 per cent and 7.7 per cent respectively.
- Gurria termed India as one of the top reformers amongst G-20 countries but stressed that the reform momentum must continue for more inclusive growth. “India has been a star performer in gloomy times. We do not have many cases of 7 per cent growth,” he said.
- The report also identified priority areas for future action, including continuing plans to maintain macroeconomic stability and further reduce poverty, additional comprehensive tax reforms and new efforts to boost productivity and reduce disparities between India’s various regions.
- Gurria also called for implementation of the GST as soon as possible, as it will spur competitiveness and investment, making India one market. The government is targeting July 1 for the rollout of the indirect tax reform.
- Noting that less than 6 per cent of the population pays personal income tax, Gurria suggested that the government should raise more revenues from property taxes and personal income tax.
- “There should be fewer exemption and more statutory rates,” he said, adding that the benefits of tax reliefs to housing sector are availed of mostly by those who are well off.
- The report recommended that India cut the corporate tax rate to 25 per cent, introduce inheritance tax and provide certainty in rules.
- Meanwhile, the OECD and the Confederation of Indian Industries also signed an MoU to cooperate and work on areas of common interest such as economic, social, governance and environmental policy.