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19-Apr2018

India must fully implement GST regime to evade tax revenue underperformance: IMF

International Monetary Fund (IMF) in its Fiscal Monitor report titled 'Capitalising on Good times', has said that India, which recovered from the adverse effects of demonetization and implementation of goods and services tax (GST) regime, should now fully implement the new nationwide indirect tax to avoid tax revenue underperformance resulting in cuts to capital expenditures. Besides, it said that relatively buoyant revenues supported by base-broadening efforts and lower capital expenditures were offset by higher spending and lower profit transfers from the Reserve Bank of India (RBI) due to costs incurred during the demonetisation exercise.

IMF has stated that emerging market and middle-income economies' overall fiscal deficits fell marginally in 2017 for the first time after four years of steady increase, largely by fiscal adjustment among commodity exporters. It indicated that on average, the overall deficit dropped to 4.4 percent of GDP in 2017 as compared to 4.8 percent of GDP in 2016, with diverging fiscal developments across countries. Further, it pointed out that commodity exporters have continued to push through reform to adjust to 'lower for longer' oil prices. It added that the headline fiscal balances improved in most commodity exporters, backed by a pickup in commodity prices and by expenditure cuts.

According to the report, in emerging market and developing economies, fiscal policy is appropriately focused on consolidation, especially in those countries that are still adjusting to lower commodity prices. However, it said that the speed of adjustment could be fine-tuned and, in some cases, it can be more ambitious. It noted that several countries could step up the speed of their fiscal adjustment. It added that given the strength of the recovery, Brazil should quicken the pace of consolidation and front-load the fiscal effort.



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