GST will reduce inflation, create growth: Gokarn | business | Hindustan Times
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GST will reduce inflation, create growth: Gokarn

business Updated: Mar 30, 2012 23:25 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Subir Gokarn, deputy governor, Reserve Bank of India, on Friday said rollout of goods and service tax (GST) will help reduce inflation. He said GST will ensure steady revenue flow for the government, limiting chances of gross fiscal slippage. He added that this will pave way for lower interest rates.


"GST will improve the way government manages its finance," he said while speaking at a seminar organised by CII on Friday. "This will be a critical reform to catalyse growth."

Gokarn also said that fiscal consolidation is necessary and the government is committed to it. "The government has indicated its intention to reactivate the Fiscal Responsibility and Budget Management (FRBM), its commitment to cap subsidies," Gokarn added.

Low inflation, fiscal consolidation and high investment to the GDP ratio have contributed to high economic growth during 2003 to 2008 period. Two of the major global factors that aided high growth during that period were low oil prices and rapid global growth.

"Yet today the two factors of good global growth and benign oil prices no longer exist. This puts the onus of recreating high growth much more squarely on the domestic factors." he said. "We can do these by managing inflation, capping of subsidies to make its framework reliable and predictable and bringing control of deficit into a rule-based framework."

Policy reform, fiscal consolidation, creating more capacity infrastructure and developing skills in people to take advantage of demographic dividend are other things that will catalyse growth, he said.