Acknowledging that under the Indian system, areas like land acquisition and labour laws are both central and state subjects, Nakao said
Lauding India for the forthcoming rollout of the GST, the Asian Development Bank (ADB) on Thursday said the country needs to continue with reforms in various sectors to integrate better with the global market. “After 1990, India has continued with reforms. But compared to East Asia, it has grown at a lesser pace,” ADB President Takehiko Nakao told reporters here, listing the areas that required further reforms as land acquisition, labour laws and in rules concerning investment by foreign firms.
Describing the Goods and Services Tax (GST) to be implemented pan-India from July 1 as a “very important” step towards integrating the domestic economy, the ADB President said that “India is not so well integrated to the value chain of Asia, as compared to East Asian countries”.
Acknowledging that under the Indian system, areas like land acquisition and labour laws are both central and state subjects, Nakao said: “Further reforms at both central and state levels for improving efficiency in the land and labour markets and strengthening the banking sector will boost growth.”
Nakao was addressing the media on the last day of his three-day visit to the country, during which he also met Finance Minister Arun Jaitley and Commerce Minister Nirmala Sitharaman here on Thursday. He said he had discussed about further reforms with Jaitley, without mentioning any specific areas. “Based on the Indian government’s sound macroeconomic management, reforms and the improving global economic scenario, ADB projects India’s GDP to grow at 7.4 per cent this fiscal and at 7.8 per cent next year,” Nakao said.
Praising the switch to the GST regime as a “historic” measure, he, however said that its multiple tax rate structure could pose a challenge in implementation. Besides, from his Japanese experience he said businesses would be forced to think of “adjusting prices to the new tax burden”. “The new tax burden will be reflected in the prices as businesses try to shift it to the consumer.” The ADB also announced their new $10-billion country strategy for India, with the focus on supporting low-income states and the development of economic corridors.
The multilateral lender will assist with $5 billion over a five-year period for the needs of poorer states including Uttar Pradesh, Bihar, Jharkhand, Odisha and Chhattisgarh. Besides, the bank is ready to invest up to $5 billion in these five years to develop the East Coast Economic Corridor.