January 11, 2019

Moving from chaos to order: The overdue step to a simpler GST

Research Director and Senior Fellow Niranjan Rajadhyaksha writes in Mint on simplifying the currently complicated GST structure.

 

"Most economic policy follows an entropic path. The first iteration is a relatively clean structure that gets complicated either as experience kicks in or interest groups begin to get their way. The Indian tryst with indirect tax reform seems to be moving in the opposite direction—from chaos to order. The initial version of the new goods and services tax (GST) was extremely complicated. There are now welcome moves to simplify it.

 

This is a good time to reiterate three core economic principles. First, one of the key insights from Adam Smith is that the division of labour is limited by the extent of the market. India now has a truly common market some seven decades after its political integration. The integration of the Indian market as well as the rewiring of supply chains because of GST should lower transaction costs and improve economic efficiency."

 

Read the full article here.

Topic : State Capacity / In : OP-EDS
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