NEW DELHI, Jan 22: As the cash crunch issue following demonetisation seems to be over, the government needs to use the upcoming Budget to provide stimulus and pursue structural reforms to accelerate growth, said Columbia University economics professor Pravin Krishna.
“On India, I remain optimistic. The temporary disruptions associated with demonetisation appear to be behind us, note shortages are a declining problem. A budgetary stimulus and ongoing structural reforms will hopefully put the Indian economy in good position to achieve a higher growth rate this year,” Krishna, Deputy Director, Raj Center on Indian Economic Policies at Columbia University, told PTI in an email interview.
Stressing that infrastructure, health and education are all important priorities, he said the greater challenge is in spending smartly, and perhaps in enabling supply from a well-incentivised and well-regulated private sector, so as to maximise benefits at the micro level.
Explaining further, Krishna who is a Distinguished Professor at Johns Hopkins University said that he feels rationalisation of the current taxation system (both internally and on international trade) can get to lower average tax rates, while being, at least, revenue neutral.
“The ability to evade taxes is greater when tax rules are complex. Liberalising and rationalising the tax regime would be an important step to curb evasion,” he noted.
Asked whether the Indian government’s decision to demonetise higher value currencies served its purpose, the eminent economist pointed out that the extent to which demonetisation succeeds in taxing the stock of black money will depend upon the (yet to be announced) quantum of notes expunged and taxes collected on black money deposits.
“A fuller campaign against future tax evasion and the stock of black wealth stored in forms other than money will obviously require additional reforms,” Krishna, who has written article with globally acclaimed economist Jagdish Bhagwati said.
He, however, pointed out that there has been an impressive take up of digital payments in society, which is a highly encouraging outcome and should bring long-term gain.
Appreciating Prime Minister Narendra Modi’s willingness to take on risks to try and achieve quantum leaps for the Indian economy, Krishna said that Modi’s approach may not be a preferred one for those who are comfortable with status quo or with the processes of incremental change. (PTI)