More tax reforms needed for fiscal consolidation aims

India must implement further tax reforms to meet its medium-term fiscal consolidation plans, the International Monetary Fund has observed in a note. "In India, the fiscal deficit is expected to continue narrowing in the near-term; however, further subsidy reduction and tax reforms, including a robust design and full implementation of the goods and services tax, are necessary to attain medium-term fiscal consolidation plans," the agency's staff said in a note titled 'Global Prospects and Policy Challenges'.

The note comes ahead of the meeting of G-20 finance ministers and central bank governors, scheduled for Mar 17-18 in Baden Baden, Germany, reports Cogencis.

India is aiming to reduce its fiscal deficit to 3.2% of GDP in the next fiscal year from 3.5% in the year ending March. As per the government's current fiscal consolidation roadmap, the deficit will be reduced to 3.0% of GDP in 2018-19 (Apr-Mar).

Implementation of the Goods and Services Tax, the government's flagship tax-reform agenda, has faced several delays, with the Apr 1 deadline replaced by a "more realistic" Jul 1 date.

India's subsidy bill is seen rising by 4.5% in the next fiscal to 2.72 trln rupees. The IMF note also warned that protectionist trade policies deter investment and reduce productivity globally.

"Unilateral actions would likely trigger retaliation by others, leaving all countries worse off."