Unreformed Financial Sector
India is in desperate need of reform of its tax laws. Financial sector reforms have led to a booming stock market which has aided large firms finance their expansions easily. However, small and medium enterprises – which are an important engine for growth and productivity – have not been able to access finance as they are too small to be of interest to equity markets or foreign direct investment. For over two years, there has been an extensive delay on passing laws on the goods and services tax which allow the central government to regulate taxing on services and certain goods, rather than the current system of state regulations. Growth in the financial sector has been slow due to the closely regulated and publicly owned banking systems which have few incentives for innovation followed by a large deficit with the attendant fears of making new loans.
Link(s):
http://www.policymic.com/articles/16089/india-economic-growth-once-a-shining-economy-india-is-in-danger-of-running-out-of-gas
http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARREGTOPMACECO
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