GST adding to economic growth is rubbish, says NITI Aayog member Bibek Debroy

With petroleum, electricity, alcohol and other products kept out of the purview of GST, the gains to GDP will not accrue in the same proportion as projected, he says.

Claims that the Goods and Services Tax (GST) will boost the country’s economic growth by 1.5 percentage points are “rubbish”, NITI Aayog member and economist Bibek Debroy said, hours before its roll out on midnight Friday.

Finance minister Arun Jaitley hits the GST Bell at India Today's Conclave on GST in New Delhi on Friday.(PTI Photo)

Debroy’s remarks contrast with finance minister Arun Jaitley’s comments that the tax reform will help increase growth in gross domestic product by 1-2 percentage points. Prime Minister Narendra Modi is the chairman of NITI Aayog, which suggests policy for economic growth and development.

“Such speculations are based on the assessment of the 13th Finance Commission, which gave that figure for an ideal GST. We are nowhere near an ideal GST,” Debroy said. Asked about Jaitley’s and Adhia’s claims, he said, “I won’t contradict them.”

With petroleum, electricity, alcohol and other products kept out of the purview of GST, the gains to GDP will not accrue in the same proportion as projected, Debroy at an event on GST organised by media group India Today in the capital.

Opposition parties have criticised the government for pushing ahead with the tax without adequate preparations.

But Debroy defended the GST rollout from July 1. “This is not a perfect GST but the country could have waited another 17 years for a perfect GST. Hopefully the glitches will lead to tweaks.”

“What bothers me the most is the multiple registrations in different states. However good the intentions of the government, you cannot anticipate all the glitches.”

Reacting to criticism that the GST will lead to inflation, Debroy said, “Emprical studies from other countries show that initially there is an inflationary impact but efficiency gains in the longer run outweigh that impact.”