Union Finance Minister Arun Jaitley on Sunday defended the Goods and Services Tax (GST) as a “monumental reform”, a day after former Reserve Bank of India (RBI) governor Raghuram Rajan criticised its implementation.
“You will always have critics and cynics who will come up and say it (GST) slowed down India’s growth,” Jaitley said while addressing the Union Bank of India’s 100th-anniversary celebrations.
Defending the NDA government’s decision to roll out GST in July last year, Jaitley said that it was a smoothly-implemented and even as it slowed down the economy for two quarters, the country witnessed a rise in growth after that.
Countering criticism over the implementation of the tax reform, Jaitley said, “GST slowed down growth for two quarters, but people overlook how growth rose after that.”
The finance minister said that the country’s growth increased to 7 per cent, then to 7.7 per cent and went up till 8.2 per cent last quarter. He specifically pointed out that it was much above the 5-6 per cent growth achieved between 2012-14.
On Saturday, former RBI governor Rajan said that the implementation of demonetisation and subsequently the GST were the two major events that held back India’s economic growth in 2017. Rajan further said that the seven per cent growth rate is not enough to meet the country’s needs. “The two successive shocks of demonetisation and the GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking up,” he said.
Addressing the issue of rising Non-Performing Assets (NPAs) and the need to strengthen the banks, Jaitley said several steps have been taken in order to minimise the NPAs and they are bearing fruit. He also stressed upon the need to improve the strength of the banking system so that liquidity in markets is maintained.
Rajan had commented on the rising Non-Performing Assets (NPA), saying the best thing to do in such a situation is to “clean up”. It is essential to “deal up with the bad stuff”, so that with clean balance sheets, banks can be put back on the track. “It has taken India far longer to clean up the banks, partly because the system did not have instruments to deal with bad debts,” Rajan said.