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MCI in an interaction with Professor Rasananda Panda on the new reality that is dawning upon the Indian Economy - GST

 
By : Guest on 28 June 2017 E-mail Comments     Print Print  Report Abuse
 



Editorial Team of MBAclubindia reached out to Professor Rasananda Panda to get his economist perspective on the new reality that is dawning upon the Indian Economy - GST.

 

Dr. Panda, specializes in Macroeconomics and Applied Econometrics. Prior to his current position at MICA as Professor of Economics and Area Leader -  Business Management Area, Panda has worked as an Associate Professor, Economics,  School of Petroleum Management (2007-2011), a constituent School of the Pandit Deendayal Petroleum University (PDPU), Gandhinagar. He was Chief Economist (on contract) at the Gujarat State Petroleum Corporation (GSPC) - a Govt. of Gujarat undertaking from October 2009 to September, 2010. He was also with MICA between 2002 to 2007 as an Associate Professor in Business Economics and Finance. He started his career as a Trainee Academic Associate in Economics Area at the Indian Institute of Management, Ahmedabad (IIMA) and worked there for three years. He was a Lecturer and Senior Lecturer for five years with the P.G. Centre for Management Studies (self- financed, (SLIMS)), Gujarat University, Ahmedabad. His recent areas of interests are studying the dynamics of business and economic environment of India along with other emerging markets. A consultant to select industries and organizations, Dr. Panda is widely published. 

 

A vivid reader and analyst of post independence political and economic history of India, his current areas of research and consultancy are in the field of Industry Analysis, Behavioural Economics, Political Economy and Econometric Modelling.

 

Here is a brief of the Q&A with Prof.Panda.

 

1. How important or revolutionary is the introduction of GST in the economic history of India?

 

Perhaps the next big reform since liberalization of the economy in 1991. One may say the biggest in fiscal policy front.

 

Revolutionary yes. But not as we are thinking because almost 140 countries are having GST in some form or other. We are one among them. But what makes it different is given the size of our country, the political diversity.

 

Getting all concerned under one roof in the shortest possible time is significant. No single party can claim for its success. Rather GST in present form is an evolution since 1987 when FM VP Singh in Rajiv Gandhi government thought of MODVAT.

 

Given the size of our economy, GST is a logical eventuality.

  

2. Which Industries are going to be the most effected by GST- i.e. both good and not so good ways?

 

Almost all industries are going to be affected by GST in some way or other. The industries that are dependent on traders are going to be affected severely. A case in point is textile industry. Apart from it, other industries such as leather, jute and related industries shall be affected adversely. Industry that shall get positive benefit are largely FMCG, consumer durables and others operating in un organized sector. However, as it is the adverse impact on the industries will be more in the short run i.e for next 1-2 quarter or one may say till the end of this financial year. Going ahead, the benefits of GST shall be much more than the loss. In a way, GST shall boost the manufacturing sector in a big way.

 

 

3. What is the one major challenge you see in the process of India adopting GST?

 

The biggest challenge could be the on line filling of GST. It will be the GSTN (GST Network) that is going to play the crucial role in the success of GST implementation. Any problem in the IT system facilitating the implementation of GSTN shall play havoc in its success. However, given the penetration of mobile and internet across the country where WhatsApp, Facebook are available, working of GSTN shall not pose a problem. However, it needs to be watched.

 

4. Can you give us a micro and a macroeconomic picture, of how it is going to be a few years down the line, again w.r.t GST?

 

From a microeconomic viewpoint, GST shall increase the price in selected commodities and reduce in some.  Specifically speaking it will be price elasticity of demand that shall be the determinants of the price. The rates as decided by GST council are definitely dependent on price elasticity of demand of these products and also on income and cross elasticity of demand. Market structure of the products and cost considerations are equally important. Therefore, both consumer surplus and producer surplus shall going to be higher and thus reducing the dead-weight loss of taxation.

 

 

From a macroeconomic viewpoint, tax base shall be higher. Tax revenue, of course, shall be more and thus narrowing the fiscal deficit going ahead. In addition, as it is widely believed, GDP may increase by 150 to 200 basis points in next 2-3 years.

 

Again, going ahead let us imagine that we will have one tax across all commodities and services and let this tax be decided once in a year at the time of Budget and we paying the same during the year. And let us dream further that this rate be decided on the basis of other macroeconomic variables such as growth in per capita income, inflation, interest rate etc.

 

Imagine, the stability that this will bring to the economy and thus reducing the moral hazards in the system.

 

As an economist, this will be a real fantasy to have.

 

5. On a general note, what is your take on current Economy of India? We have been bullish for a very long time now, what’s next in store for us and the world?

 

Indian economy is poised to grow. The last quarter slowdown is a mere snake in the tunnel. What is in store for the Indian economy is more stability i.e. growth with low inflation. Thus reducing the cost of doing business and improving the ease of doing business. As such there is no threat to the Indian economy from any quarter. Rather with demonetization and now with GST and further emphasis on cleaning the balance sheet of Indian banks through making the debtors pay by following appropriate managerial practices such as mergers, acquisitions or other forms of corporate restructuring, the Indian economy in next 3-7 years is poised for a neat and clean growth devoid of any data fudging. Employment etc. shall automatically improve.

 

6. Is the #PMNaMo initiative "Make in India" going to see success, as big as we all account it for? 

 

There is no second opinion about the effectiveness of Make in India. I keep on emphasizing that Make in India is a logical eventuality and there is no substitute for it as far as improving Indian economy is concerned. All kind of right steps are being undertaken towards making this a great success. One is the GST and others being improving the physical infrastructure of the country along with skilled human resources. To me, it is too early to gauge the success of the program but the intention of the program is well timed and well meant. Time will be testimonial to its success and personally, I have no doubt it given the green shoots that we are having in the manufacturing sector.

 

Thank you Sir, from the Entire Team of MBAclubindia.com and its members. 
Dipeeka Saboo

 

We look forward to the comments of our Readers. Let us know what's your take a GST from the management perspective. 

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