India will need more reforms to stay on growth path, create jobs, says Gita Gopinath

According to the IMF Deputy Managing Director, Gita Gopinath, while speaking at an event on Saturday, more reforms would be required by India if it were to keep the momentum of growth and create enough jobs. Gopinath called for a reduction in import tariffs by India if it wanted to have a share in the global supply chains.

"The significant improvements made by the government over the years in terms of structural reforms," Gopinath said. She also pointed that despite the current global environment when the world is questioning trade integration, it was important for India to be open to the global trade.

"Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it's going to require reducing those tariffs," she said.
Gopinath insisted that attaining the status of a developed country was an ambitious plan requiring continued, detailed work across various sectors.

"India has grown well in terms of its overall growth rate, and at 7 per cent it is the fastest growing major economy in the world. Obviously, the question is what to do to keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy," she added.

Asked about taxation, Gopinath answered that the situation in India—like in other developing nations—is an over-reliance on indirect rather than direct taxes like income taxes.

"We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there," she explained.

Gopinath termed the Modi government's reduction of corporate tax rate as pro-growth but opined that the system is more geared towards closing loopholes and trimming exemptions.

"It is very important to have enough progressivity in your tax system… making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical," she said.

He added that property taxes could benefit from such technological advances and remain an area where work needs to be further developed.