India should focus energies on developing a growth model of its own and strive to sustain 6-7 percent growth levels for the next decade, Jayant Sinha, Minister of State for Finance has said.

To finance this aspirational growth, there is a need to get back the tax-GDP ratio (both Centre and States put together) to over 20 percent, Sinha said at the CII’s annual general meeting here.

The Centre is determined to bring dramatic improvement in tax compliance so as to increase the tax-GDP ratio, he said.

The proposed introduction of Goods and Services Tax (GST) will also help boost tax-GDP ratio, he noted.

Currently, India’s tax-GDP ratio hovers around 12-13 percent.

Sinha outlined a three-pronged strategy to help achieve the objective of financing of 6-7 percent GDP growth for the next decade.

Besides improving tax-GDP ratio, there is a need to grow the banking system by 4-5 times and also focus on creating domestic private equity and venture capital industry, Sinha said.

On banks, Sinha said there was a need to increase the size of the banking system by 4-5 times to help boost growth.

While the Government is keen to pare down its stake in public sector banks to level of 51 percent, it does not want to dilute at distress valuation, he added.

Sinha said that the price-to-book of most PSBs are currently at 0.6 to 0.7 and this needs to be ramped up to the levels enjoyed by private sector banks.

"We are encouraging public sector banks to come up with value creating strategies", he said.

Sinha also assured the gathering that the Centre would in the next 2-3 months set up the National Investment and Infrastructure Fund, a dedicated fund for boosting infrastructure financing in the country.

srivats.kr@thehindu.co.in

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