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GTAP Resources: Resource Display

GTAP Resource #3232

"Moving to Goods and Services Tax in India: Impact on India’s International Trade"
by Chadha, Rajesh, Anjali Tandon and Ashwani

Moving to Goods and Services Tax in India:
Impact on India’s International Trade
Rajesh Chadha, Anjali Tandon and Ashwani

The broad objectives of this study refer to analysing the impact of introducing comprehensive goods and services tax (GST) on economic growth, international trade and changes in rewards to the factors of production The results and conclusions of this study are comparative static in nature and may not be interpreted as forecasts of the variables under analysis. The differential multiple tax regime across sectors of production leads to distortions in allocation of resources thus introducing inefficiencies in the sectors of domestic production. Further indirect taxes paid at the intermediate stages of production are not fully offset. This leads to lack of international competitiveness of the sectors which would have been relatively efficient under distortion-free indirect tax regime.

Implementation of a comprehensive GST across goods and services is expected, ceteris paribus, to provide gains to India’s GDP somewhere within a range of 0.9 to 1.7 per cent. Gains from economies of scale are expected to raise the output per firm of textiles and readymade garments; minerals other than coal, petroleum, gas and iron ore; organic heavy chemicals; industrial machinery for food and textiles; beverages; and miscellaneous manufacturing is expected to increase.

The sectors with relatively high proportional increase in exports include textiles and readymade garments; beverages; industrial machinery for food and textiles; transport equipment other than railway equipment; electrical and electronic machinery; and chemical products: organic and inorganic.

GST would lead to efficient allocation of factors of production. It is expected that the real returns to land would go up 0.4 and 0.8 per cent. Wage rate gains vary between 0.7 and 1.3 per cent. The real returns to capital would gain between 0.4 and 0.7 per cent.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference Paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2010
Created: Chadha, R. (4/9/2010)
Updated: Chadha, R. (4/9/2010)
Visits: 2,916
- Economic growth
- Dynamic modeling
- Asia (East)
- Asia (Southeast)

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