OECD wants India to unleash more reforms

Hailing India's recent reformist moves, the Organisation for Economic Cooperation and Development urged the country to unleash more reforms to tap its entrepreneurial skills and young population.

"India recently renewed its reform impetus. These are important steps, but further reforms are essential for India," OECD said in its report titled 'India Sustaining High and Inclusive Growth'.

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OECD wants India to reduce trade and foreign direct investment barriers, and issue more banking licences. On financial sector reforms, OECD advised India to further open up the public sector banks and allow more private sector players.

The crucial issue of banking licence has been under consideration for a long time.

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The finance ministry has told the Reserve Bank of India to come out with final guidelines on the issue. The organisation called India to go for more efficient use of subsidies as well as a simpler and broader tax system like the Goods and Services Tax.

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"The current indirect taxation system is complex and involves cascading taxes that bias production decisions and hinder inter-state trade. A national GST, coupled with a state GST, would rationalise indirect taxes while preserving states' financial autonomy," OECD said in its report.

India, which has already missed three deadlines to introduce the GST, is now planning to launch the new indirect tax regime by the next fiscal.

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However, the difference between the Centre and states are yet to be sorted out on many of the GST issues. OECD asked India to ensure "a certain level of stability in the area of international taxation".

The Budget announcement of retrospective amendments to the Income Tax Act to bring overseas deals for Indian assets under the tax net had drawn flak from many a quarters.

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To address the issue, the government had appointed a committee under tax expert Parthasarathi Shome. The panel recommended against retrospective taxation. The panel said that if one must pay retrospective tax, it should be the one who has made capital gains.

OECD also called for transforming rural banks and cooperatives into smaller, privately-owned banks free of governmental shareholding.