Making the entire country an SEZ - GST will help

Dated 5th December, 2014

The whole country needs and can have efficient infrastructure, functional, speedy administration and taxation that prevents cascading of taxes and keeps track of the incidence of tax at any stage of production. The challenge is to realize this nationwide potential for growth. The government should quickly allow the private sector to commercially mine coal to increase supplies to power plants. It should also fast-track project approvals and rationalize labour laws. State governments administer much of the regulation, and clearly the onus lies on them to improve the regulatory environment. The goods and services tax (GST), meant to usher in a borderless market, will allow, at every stage of production, seamless offset of taxes paid at the previous stage. It will achieve, with a zero rate of tax on exports, the goal of not exporting any tax.

India does need to raise the share of manufacturing in its economy. To do that, we need to implement GST, invest in efficient infrastructure, clean up politics so that rent seeking ceases to be a systemic defect that cripples ease of doing business in the country, train young people in assorted skills, reform labour laws and create a new compact between labour and capital that allows both to gain from globalised growth. SEZs are part of a decrepit culture of milking tax breaks. That is not progress.