The International Monetary Fund has recently projected that India will again record one of the world’s highest economic growth rates this year. According to IMF, the Indian economy is expected to expand 6.7 percent in 2017, in spite of a slump caused by demonetization and the introduction of a unified VAT.
But the country’s GDP per capita at purchasing power parity continues to be very low. The IMF stated that it is expected to amount to just USD 7,173, which is 2.3 times lower than China’s figure and a bit higher than Vietnam’s.
India’s tax base, which continues to be one of the smallest in Asia, is expected to be restrained by low incomes. But in the medium to long term, the introduction of VAT might underpin possible growth and therefore increase India’s income levels, noted BNP Paribas.
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