'Missing middle is the biggest challenge in manufacturing sector'

SMAHENDRA Dev, Chairman of the Economic Advisory Council to the Prime Minister (PM-EAC), speaks to Dipak Mondal on GST reforms, manufacturing scheme, and the growth, Pl impact of AI on jobs.

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The GST and income tax rate cuts have not only boosted disposable income but also led to revenue loss.

How will the government make up for this shortfall? In the last one-and-a-half years, the GST Council has discussed rationalising slabs. Recently, it simplified the four-tier structure into two rates -18% standard and 5% merit-along with 40% for sin goods. The estimated revenue foregone due to GST reforms is about ₹48,000 crore. However, higher disposable income is expected to lift consumption, and if industry passes on benefits, aggregate demand will rise. Along with an expected rise in non-tax revenue, this should offset the revenue loss and help the government stick to the fiscal deficit target of 4.4% of GDP.

After GST and income tax reforms, what other reforms should be prioritised? The Prime Minister has stressed the need for new-generation reforms. The immediate focus is on ease of doing business and deregulation.

Land and labour reforms, as well as disinvestment and privatisation, are also on the table.