GST made doing business easier, increased market size for traders: Jaitley

Javier Stokes
December 3, 2017

Moody's Investors Services recently upgraded India's sovereign rating for the first time in almost 14 years, saying the country was poised for fast growth because of wide-ranging economic and institutional reforms by Prime Minister Narendra Modi's government.

The GDP for the July-September quarter showed a growth rate of 6.3 per cent after the previous quarter recorded a three-year low of 5.7 per cent. That's slower than the 6.4% median estimate in a Bloomberg survey of 51 economists but faster than 5.7% in the previous quarter. We should wait for the growth rates over the next 3-4 quarters before we can reach a definite conclusion.

GST has consolidated central and local taxes including value added tax, excise and service tax into a single levy. He also said the GDP growth of 6.3 per cent this quarter had been helped by a rapid growth in manufacturing that increased from 1.2 per cent in the first quarter to 7 per cent in the second quarter.

However, the growth of eight core-sector industries slowed to 4.7 per cent in October and agriculture growth slumped to 1.7 per cent.

The government will focus on infrastructure and rural India in the build-up to next year's budget, finance minister Arun Jaitley said on Thursday, saying the two areas can expect more spending. "The last five quarters had witnessed a downward trend".

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Finance Ministry officials hope the central bank will cut interest rates soon, but analysts say that rising global oil prices, which could pinch consumers through higher inflation, may instead force the RBI to hike in the second half of 2018, denting growth momentum.

Going forward, future rationalisation of rates would depend on revenue collections, he said, indicating the merger of 12 per cent and 18 per cent rates into one while keeping a "thin" line of luxury and demerit items in the top 28 per cent band.

"The improvement in the GVA growth of manufacturing and mining was the key factor underpinning recovery in Q2 FY18".

" The economic activities which registered growth of over 6.0 percent in Q2 of 2017-18 over Q2 of 2016-17 are "manufacturing", "electricity, gas, water supply & other utility services and "trade, hotels, transport & communication and services related to broadcasting".

Moody's had upgraded India's sovereign credit rating for the first time in 14 years on account of progress in economic and institutional reforms boosting growth potential.

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