Hyderabad: Former Reserve Bank of India (RBI) governor C Rangarajan on Friday said the GST rollout has been smooth barring some initial hick ups and maintained the new regime is just an extension of Value-Added Tax (VAT) and will not put any pressure on GDP growth figures. “I don’t think it (GST) will put any pressure on the GDP growth.
There are always teething problems when a far- reaching scheme is introduced. “But it appears so far things have moved rather smoothly and GST, in some sense, is an extension of VAT, which is already an ongoing scheme in India," he said. “Therefore, some new things have emerged and new things have to be done because of the all-India character of the GST like the transshipment of goods from one state to another.
But otherwise, I think so far my impression is it has gone through reasonably well," Rangarajan told PTI on the sidelines of a programme at the University of Hyderabad. Earlier in his speech at the programme, he stressed on the need to workout a mechanism to complete the “viable" stalled projects and opined the banking system is under stress as non-performing assets (NPAs) are on the rise.
“This (rise in NPAs) has squeezed the profitability of banks with some showing loss. More distressing is the minimal flow of new credit. The problem os often referred to as twin balance sheet problem. “If corporate balance sheets are weak, automatically the banks’ balance sheets also become weak," said the former chairman of the Prime Minister’s Economic Advisory Council.
The noted economist said some of the bad loans are due to a slowdown in the economy and asset restructuring companies are part of the solution. “The solution to clean up the balance sheet of banks lies in taking some hair cut. Even though hair cut can not be avoided, wilful defaulters must not go unpunished."
Rangarajan, who was the helm of the RBI from December 1992 to November 1997, said it is necessary for India to grow at 8 to 9% annually to reach per capita GDP of $8,000 by 2030 from the current levels of $1,600.
Referring to a recent study, he said the total cost of projects initiated by the corporate sector has come down to Rs0.95 trillion (Rs95,000 crore) in 2015-16 from Rs5.6 trillion in 2009-10.