Implications of Goods and Services Tax reform on the Make in India initiative: A system dynamics perspective

Abstract

AbstractThe paper highlights the implications of Goods and Services Tax (GST), a major tax reform in India launched in July 2017 on the Make in India initiative launched in the year 2014. The GST is expected to trigger its impact on the following eight elements: warehouse efficiency, interstate check‐post operations, informal to formal business transition, interstate business expansion by micro, small, and medium enterprises, simplicity and transparency in tax collection process, logistics cost reductions, ease of doing business in India, and working capital cost realignment, which in turn may accelerate the manufacturing growth in Indian economy. In order to study the impact of the factors of GST on the Make in India initiative and the manufacturing growth, a system dynamics approach has been adopted in this paper. A number of simulation runs carried out using the system dynamics modelling have provided meaningful insights to the policymakers and strategic planners for evolving strategies for manufacturing growth.