Implementation of GST would help stabilise India’s economy, says S&P

NEW DELHI - The challenge for India’s incoming Modi Government is to regain fiscal prudence in a sustainable way, says ratings agency Standard & Poor’s, pointing to implementation of a goods and services tax as a measure that could help stabilise Government revenues and potentially improve the country's growth prospects by promoting inter-state transactions and the general efficiency of the economy.

In S&P’s view, the incoming Government’s strong election result indicates that it will have a reasonably good political platform to tackle structural issues.
"What the next government says and does in the coming months is crucial to boosting confidence in the policy settings and the economy," said S&P credit analyst Takahira Ogawa. "If confidence rises, investment and consumption in India could strengthen, after being held back by the uncertainty surrounding the election."
However, the Government will face hurdles in sustaining growth in the medium to long term, including reviving investor confidence, managing fiscal consolidation, regaining fiscal prudence, improving the current account balance, and boosting the banking sector's financial strength. Many Indian banks are publicly owned.
Investments, particularly in infrastructure and the mineral resources sector, face slow approval processes at central and state government levels. This has reduced economic growth potential.
"If the next Government fails to lift confidence, its task of turning the economy around will get heavier," Ogawa said. www.standardandpoors.com (ATI).