GST and Employment: Agenda of NITI Aayog VC

NITI Aayog welcomes the first Vice Chairman, Arvind Panagariya and other members appointed by Prime Minister Narendra Modi on Monday. Economist Bibek Debroy and former DRDO chief VK Saraswat were appointed as full-time members by the Prime Minister who is the formal head of the Aayog.   images1

62-year-old Panagariya is an Indian-American economist and Professor of Economics at Columbia University. month before he was appointed he has highlighted the current structure of the proposed goods and services tax regime as ‘counter-productive’ and mooted a course correction in some policies adopted by the NDA government.

Mentioning about his assessment of the first six months of the government, he feels that though there is a huge change from the state of affairs under UPA, still there is lagging behind in terms of growth.

While talking about the GST regime, he says that it appears very emaciated and has a lot of exceptions built in which would result in a very high taxation rate. He suggested a rethink on GST and said the Centre should try to first ‘straighten out’ central taxation. This can open the door a lot better for states to come on board.

Focusing too much on one reform will lead to others being delayed. The government had introduced a Constitutional amendment bill in the Lok Sabha in late December to enable the GST regime.

Panagariya had said it would be a little less than satisfactory if growth only recovers from 4.7% inherited from the UPA to the ‘scaled down’ projections of 6% in 2015-16. Although he was optimistic about India clocking 8% growth in 2016-17.

Panagariya is concerned about creating jobs in India which is also lacking in Make In India programme too.He appeals to Indian Industry to hire more and more workers. He imagines of firm like China’s Foxconn which employs1.3 million people to emerge in India unlike the present successful industry in India are capital intensive. As none of these industries really create a lot of jobs per unit of capital invested.

While talking about employment, he connects this to labour reform taking at the centre. Referring to two specific initiatives of the union labour ministry, viz. linking minimum wages to inflation and bringing contract workers on par with regular employee, had noble goals, but would lead to a fall in employment.

Views of Panagariya raises the hope of people for betterment from NITI Aayog. Also will inspire industries to create more employment as the real challenge will be to increase employment rate in India. With Panagariya coming into power our in our article,  Will GST forever remain in files in India?? , will come to an end.

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