The government and its advisers may have initially underestimated the so-called twin balance sheet (TBS) problem faced by the banks and Corporate India, chief economic adviser Arvind Subramanian said on Wednesday. He said even though the TBS problem found mention in the December 2014 mid-year economic review, even it did not fully gauge the seriousness of the issue or call for its urgent tackling. Also he said, the belief that once growth picked up, the TBS issue could also get addressed to an extent automatically, weighed on everyone’s mind.

Referring to the RBI-initiated debt-resolution schemes like 5/25 and SDR, he said these also lulled everyone to think that the twin balance sheet problem would get resolved on its own. The latest Economic Survey has advocated the creation of a public sector asset reconstruction agency, given that private-sector ARCs haven’t been very successful. The government is, however, treading cautiously on this advice.

Subramanian said that the goods and services tax (GST) rates must be as low as possible, while the new tax must have a broad base and a simple structure. The GST Council had earlier decided that the proposed comprehensive indirect tax will have a four-rate (5%, 12%, 18% and 28%) structure. A panel headed by the CEA had estimated the revenue-neutral rate for GST — on a tax base it assumed — would be 15-15.5%