GST may have transitional challenges: ADB President

Ahead of the roll out of the goods and services tax (GST) from July 1, the Asian Development Bank (ADB) has said the new levy would create a single national market and spur economic growth, but cautioned that there could be transitional challenges.

Speaking from his own experience in Japan, ADB President Takehiko Nakao on Thursday said that businesses have to adjust to the new tax vis-à-vis their pricing strategies. “If they can’t adjust the tax burden, it will impact their profits,” he noted, while stressing that the roll out of the GST is a big achievement for the government.

Nakao, who concluded a three-day visit to India, also said it was difficult to assess the impact of GST on economic growth.

The ADB has pegged India’s GDP growth in the current fiscal at 7.4 per cent and then at 7.6 per cent in 2018-19.

The ADB President met Finance Minister Arun Jaitley as well as Commerce and Industry Minister Nirmala Sitharaman and outlined the multilateral agency’s new country strategy for India.

As part of the new strategy, ADB proposes annual lending over a five-year period of 2018-2022 of $3-4 billion from sovereign and non-sovereign operations. This would be about $3 billion of sovereign funding and about $1 billion of non-sovereign funding, said Nakao.

“The final amounts will depend on the implementation readiness of projects under preparation and the borrowing policies of the Central and State governments,” said a release, adding that the new country strategy aims at boosting competitiveness and job creation, providing inclusive infrastructure and services and addressing climate change and environmental challenges.

ADB is also prepared to invest up to $5 billion during 2018-2022 for infrastructure building to develop the East Coast Economic Corridor.

Additionally, Nakao has also assured the government that ADB will meet the meet immediate development needs of up to $5 billion over the five-year period for less developed States, including Uttar Pradesh, Bihar, Jharkhand, Odisha, and Chhattisgarh to address critical infrastructure and capacity deficits.

Addressing a press conference, the ADB President also said India should initiate more reforms in sectors such as labour laws, foreign direct investment and land acquisition.

“It (reforms) are improving but still there is room to improve, especially with regard to foreign capital,” he said.

Earlier during his visit, Nakao also met Uttar Pradesh Chief Minister Yogi Adityanath in Lucknow and discussed ADB’s possible investment in smart cities, water supply and sanitation, state and district roads, rapid rail transport, electricity distribution and heritage restoration.

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