Implementation of the proposed Goods and Services Tax will contribute to growth and help reduce inflation. This, in turn, will create space for interest rates to come down, according to Dr Subir Gokarn, Deputy Governor, Reserve Bank of India.

“GST will be a critical reform to catalyse growth,” he said at a seminar organised by CII, here on Friday.

GST is likely to be implemented from 2013 onwards and will ensure a steady revenue flow for the government.

In his address, Dr Gokarn said that the three macro factors required for high growth are sustained low inflation, fiscal consolidation and high investment-to-GDP ratio. It is a challenge to re-create the high growth environment that India saw between 2003 and 2008, Dr Gokarn said.

Two of the major global factors that aided the high growth during the 2003-2008 period were low oil price and rapid global growth. These are not present now. So that puts the onus of recreating high growth on domestic factors. However, there are negatives such as high inflation and high fiscal deficit.

“Dealing with inflation is very important. That has been the focus of monetary policy,'' he said. Fiscal consolidation is necessary and the government is committed to it. In this regard, it has indicated that it will carry out some important changes — the intention to reactivate the FRBM framework and capping of subsidies — going by the statements in the Budget, said Dr Gokarn.

Dr Gokarn emphasised that creating more capacity in infrastructure, whether it is by private investment or public investment, is important for high growth.

> priyan@thehindu.co.in

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