New Hope for India

Tax reform. India’s complex system of national and state sales taxes distorts domestic trade. Replacing these taxes with a national value-added tax and using revenue-sharing to the states has been long debated and should now be enacted.

Corruption. Major cases of high-level corruption have undermined economic confidence and impeded official decision-making. India is also handicapped by small-scale corruption, with bribery a common feature of all forms of business and personal transactions. The government should crack down on instances of high-level graft and use the new system of cash transfers to limit the scope of petty corruption.

The Indian stock market is in anticipation of stronger growth and rising profits. Now it is up to Modi and the BJP to show that they can deliver on their campaign promises.

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984.

Copyright: Project Syndicate, 2014.