The International Monetary Fund (IMF) in its report on Fiscal Monitor has said that India has recorded quite an impressive growth performance in recent years which makes room for tax broadening efforts by the government. The report also stated that India returned to fiscal consolidation in the fiscal year 2016-17 largely due to the near-elimination of fuel subsidies and enhanced targeting of social benefits, notwithstanding the impact of demonetization. It further stated that India is also making progress toward strengthening its fiscal responsibility framework, through anchoring fiscal adjustment by means of a debt-to-GDP ratio of 60 per cent to be achieved by fiscal year 2022-23.
The director of IMF Fiscal Affairs Department, Vitor Gasper said the elimination of fuel subsidies and the targeting of social benefits have delivered in terms of allowing the union budget target to be achieved at 3.5 percent of Gross Domestic Product (GDP). He added that they have been collaborating with the Indian authorities in terms of looking at fiscal structural measures, including expenditure rationalization, while protecting infrastructure investment, tax broadening efforts.
Gasper further said that in this context, the rollout of Goods and Services tax (GST) is an extremely important step that will create a true unified national market in India. He also said that there are rooms for tax broadening efforts and for more progressive income taxes in line with trends in income inequality.