The World Bank believes the demonetization of high value currency notes last year and the upcoming introduction of the goods and services tax (GST) will help India’s economy to grow by 7.2% in fiscal year 2017-18 – the highest rate in the world.
The World Bank believes that demonetization, which caused widespread disruption to the country’s diamond trade – which deals mostly in cash-based transactions – only caused temporary disruption in the growth of the national economy.
“In the long-term, demonetization has the potential to accelerate the formalization of the economy… the implementation of the GST is a key complementary reform that will support formalization, as firms have a strong incentive to register with GST to obtain input tax credits,” the World Bank said in its biannual report.
GST will lead to a higher rate of tax collection, a greater uptake of digital financial methods and will make India’s economic fundamentals stronger without increasing the burden on the poor.
