New Delhi: Prime Minister’s Economic Advisory Council Chairman Bibek Debroy has suggested the necessity to regulate income tax rates and provide taxpayers the option of either retaining exemptions or pay tax at a lower rate, stated a report.

Talking about the current economic slowdown that the country is experiencing, the PMEAC Chairman noted that the slowdown is binary in nature. He suggested that structural reforms related to land, labour and skills, natural resources are needed and so does disinvestment and privatisation, added the report. India is currently growing at the rate of 5 per cent. Speaking to the Economic Times, Bibek Debroy estimated that, “Potentially, if land and labour reforms happen and states begin to grow fast we might go up to 7-7.5 per cent. But it is safer to talk about 6-6.5 per cent.”  Another report stated that the RBI has reduced India’s GDP growth forecast for Financial Year 2020 from 6.1 per cent in the October policy to 5 per cent.

Calling the Reserve Bank of India as a conservative bank, Debroy, as per a report, said that although inflation is a regressive tax, a higher inflation rate is good for government revenues. He also stated that the target inflation rate should be 6 per cent instead of the 4 per cent target. Note that the existing inflation band lies between 2 and 6 per cent.

Recently, RBI’s monetary policy committee in its fifth review of the current fiscal maintained the repo or short-term lending rate for commercial banks at 5.15 per cent. The apex bank had reduced key lending rates during the last five policy reviews to reverse the current consumption slowdown that has plagued the country’s economy. RBI Governor Shaktikanta Das defended the decision by stating that the central bank’s primary objective was inflation targeting and price control. He also noted that the existing headline inflation was higher due to an increase in food inflation.

(With agency inputs)