Discuss the impact of the GST implementation on inflation and GDP with special reference to the Make in India campaign?

Model Answer:
The current indirect tax regime suffers from significant cascading which leads to higher cost of goods and services consumed in the country. State taxes and central taxes on a single sale of a good add to increase tax costs for business and consumers. Such increase costs add to the inflationary pressure in the economy decrease the tax cost for businesses. The proposed GST tax regime is a reduced ad valorem tax rather than earlier cost based tax, and aims to reduce or control inflation to large extent. The reduction of costs in India will not only make our products more competitive in the international market, but will also increase country’s GDP and reduce capital account deficit of the country.
The ‘Make in India’ campaign proposes to make India a world-class manufacturing hub. The tax reforms through GST promises to avoid cascading and tax burden on goods.GST will reduce the cost of production and allows the hassle free supply of goods. This can increase the ease of doing business India and will attract more FDI under the manufacturing sector in the country.

Topics: GS-III: Economic Growth Development