New GST will fulfil middle class dreams, power Make in India, says Modi

A day ahead of the new lower Goods and Service Tax rates kicking in, Prime Minister Narendra Modi hailed the reforms as a “bacchat utsav (savings festival)” that will help common people realise their dreams to own a house, purchase a scooter or bike and travel while food, medicines and life and health insurance will cost less.

In a televised address to the nation on Sunday evening, the Prime Minister referred to reforms as a continuous process in response to changing times and needs and said the reduction in GST rates as well as the tax relief announced in the Union Budget would sweeten the festival season. “Sabka mooh meetha hoga (everyone will taste the sweets),” he said.

Modi used his televised address to highlight his appeal for a renewed focus on Make in India amid global uncertainties accentuated by US President Donald Trump’s decision to slap India with a cumulative 50% tariffs and additional negative signals like a steep hike in the H1 B visa application fees.

The GST reforms will accelerate India’s growth story and touch lives of every section of society such as the poor, neo-middle class, farmers, women, shop keepers, businesspersons and entrepreneurs. “The small industry or the MSMEs (Micro, Small and Medium Entreprises) have a big role to play in the development of India.

Modi strongly promoted the “Buy Indian” and “Make in India” themes to reduce reliance on imports for even daily use products. He offered the example of a plastic comb, saying it was unclear whether this item was imported or of local origins. He said the Make in India drive will be led by MSMEs and expressed confidence that the new GST will help this sector to do well.

GST reforms have resulted in almost 99% items being in the 5% category while many are tax free. He said the two-rate structure of 5% and 18% will simplify business and make commerce more efficient.

The Prime Minister reminded the people of the change brought in by GST and referred to a report in a foreign publication that reported a company preferred to ship goods from Bengaluru to Hyderabad via Europe due the maze of local and state taxes and logistic challenges. Though he did not mention the publication, the report appeared in the Financial Times in November, 2014, with the author suggesting that India was in need of an internal trade deal as much as with other nations.

The path to a “Samruddh Bharat,” the Prime Minister said, lay through Swadeshi and he again flagged the central role for MSMEs, regarded as vehicles for employment generation and added that lower rates should make them more competitive.

The Prime Minister’s brief speech was intended to pump up the feel-good factor with many businesses and retailers announcing price cuts and related deals. The new GST rates do involve a loss of revenue but the move is seen as important in bringing about long overdue rate rationalisation and necessary to maintain a buoyant sentiment.

bacchat utsavGSTGST reformsMake in IndiaMSMEsNarendra ModiSamruddh Bharat