India’s GST reform must focus on structural changes, not short-term shocks: ANZ economist

Richard Yetsenga, Group Chief Economist at ANZ Research, believes India’s proposed goods and services tax (GST) reform must focus on long-term structure rather than acting as a quick fix for current trade or economic shocks.

“…it’s important for India’s long-term potential that these changes are done with a view to what the right structural tax system is, rather than trying to use the GST system to buffer against current shocks. Shocks come and go, but the tax system is much more difficult to change,” Yetsenga said, stressing that reform should create a sustainable framework.

He sees the move to simplify the tax regime as a big step forward. Reducing India’s unusual four-tier system to just two rates would, in his view, “reduce half of the complexity in the system” and bring India closer to global practices where most economies operate with one or two GST or value-added tax (VAT) rates.

On the recent credit rating upgrade for India, Yetsenga was positive but measured. He stated that such changes usually reflect what the fundamentals have already achieved, and while they can move markets briefly, “it doesn’t change the strategic picture.”

Looking ahead, Yetsenga underlined that India’s growth story still depends on policy execution. The country’s strong past performance and potential over the coming decades will only be validated if reforms are sustained.

Also Read: From rate cuts to compliance relief, experts outline GST revamp priorities

On the global front, he observed that markets are not reading too much into day-to-day developments in the Russia-Ukraine conflict. Instead, investors are adopting a wait-and-watch approach, taking the news as it comes rather than pricing in forward-looking scenarios.

Also Read: Simpler two-rate GST could cut disputes, boost demand, say tax experts

For the entire interview, watch the accompanying video

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