Former Prime Minister Manmohan Singh said that GST (Goods and Services Tax) had been implemented in the wake of demonetization and haste behind the ongoing recession.
The GST was introduced at a time when the economy was already recovering from the harmful effects of demonetization, and it was affecting the economy; the noted economist said it would take a few years to revive the sluggish economy.
Manmohan Singh told the Hindi daily Dainik Dainik Bhaskar in an interview that the current economic weakness is the result of lack of liquidity in the system. The former finance minister said that the government needs to address both structural and cyclical problems so that the economy returns to a higher rate of growth in 3 to 4 years.
Suggesting ways to improve the situation, the former Prime Minister said that the Modi government needs to rationalize GST even if there is a revenue loss in the near term.
He said that increasing consumption in rural areas and reviving agriculture should be high on the government’s agenda. He said that there is a need to introduce measures to increase liquidity in the system. Major employment generation sectors including automobiles, textiles and electronics should be promoted, and easy credit should be given to small businesses, especially for this purpose.
Regarding the merger of the bank, he said that this might give a boost to the banking sector, but the timing of the move can be questioned. Meanwhile, various industry bodies have demanded incentives from the government to boost the low demand.
Finance Minister Nirmala Sitharaman has also announced several measures in the past few weeks aimed at improving investor sentiment and promoting economic growth.
“Government should not waste its political capital by adopting a sector-wise piecemeal approach, or on monumental blunders such as demonetization,” Singh said in an interview to The Hindu Business Line.
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