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India should aim for a tax-GDP ratio of 20 per cent in the next two years, the Chief Economic Advisor, Dr Kaushik Basu said on Friday. Currently the combined tax-GDP ratio for the Centre and States put together is 15 per cent.
“We need to have more taxes collected as our performance is still some what poor on this front,” Dr Basu said in a lecture on ‘State of the economy' organised by the International Management Institute, a business school.
Dr Basu pointed out that the Centre's tax-GDP ratio had come down in the recent years from 11.9 per cent to 10.3 per cent. The Centre should look to take its tax-GDP ratio to 14 per cent. He pointed out that tax-GDP ratio's of other countries like Mexico (19 per cent), South Korea (25 per cent), US (25 per cent) UK (35 per cent) are much higher than that of India.
Retail FDI
On FDI in multi-brand retail, Dr Basu said that it was a low hanging fruit and the Government should go for it quickly. But the retail trade sector should be modernised with appropriate regulatory systems.
He also advocated privatisation of higher education. This would encourage private institutions to enter profitable disciplines such as commerce and finance, he noted.
Dr Basu also highlighted that India needs to position better on the exports front and pointed out that there was strong growth in exports in the last eight years.
“It is only in the last five to six months that we have seen some slow down. We need to make concerted efforts to push exports. There is a need to give Rupee based credit lines to countries.”
On fuel pricing Dr Basu called for intelligent decontrol while suggesting that subsidy and taxes for fuels should be done on a per litre basis. He also highlighted that India was not in a position to “fully float” diesel prices.
Dr Basu was of the opinion that there was need for discussion on privatisation of Air India, which he favoured.
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