On Saturday, India will start implementing a new, streamlined tax system – the Goods & Service Tax (GST) – which unifies the country’s tax code, making it easier to do business across state lines and internationally. The law also aims at increasing transparency in a system long-plagued by inefficiency.
Cornell University economist Prabhu Pingali directs the Tata-Cornell Institute for Agriculture and Nutrition, a program that takes a food systems approach to solve problems of poverty, malnutrition and rural development in India. Pingali says the GST could potentially transform India’s agricultural industry and enhance rural prosperity.
“The Goods and Service Tax could be enormously beneficial to small farm agriculture in India. Indian farmers will now have access to a national market, rather than be restricted to a local or state level market.
“By eliminating state level taxes and levies, the GST will make inter-state trade in food products easier and will also help reduce transactions costs associated with their transport (including reducing the need for bribing officials at state border check points).
“Also, produce-carrying trucks will no longer have to stop at border check points for extended periods, hence the potential for food waste and spoilage during transit, could be reduced substantially.
“I would anticipate significant new private sector investments in procuring food products from small farms and for integrating them into the modern retail value chains that are supplying food for the urban masses. Implementation of the GST is an important and necessary step for the commercial transformation of small farm agricultural systems and for enhancing rural prosperity.”