There cannot be sustained manufacturing growth and economic justice to the poor, unless a government exercises fiscal prudence, and controls inflation. Mr. Jaitley has accepted this by keeping very challenging targets for the fiscal deficit.
The finance minister has not spelt out in his speech as to how the income would be adequately enhanced to contain the deficit. However, divestment of PSU shares, allowing banks to augment their capital by selling shares to the public, a more targeted and effective use of subsidies and a reduction of expenditures on the basis of the report of the proposed Expenditure Management Commission are what appear to be in his mind. He probably expects higher economic growth to also result in better tax revenues.
The introduction of the GST is considered to be of great value for the efficient working of industry and business. In the past it was largely the BJP-ruled states that were not happy with the contents of the proposed Act. The current political situation in the country should enable the Centre to persuade the states to accept GST before this financial year ends. The finance minister has indicated that this may happen and GDP growth would benefit as a result.
The tax regime, and the way the laws were implemented, has been a huge bottleneck for investment and growth, as well as the competitiveness of Indian industry. It has frightened away many foreign investors. This issue is now being addressed. Retrospective taxation will not be introduced and past legislation and cases would be dealt with on the basis of a High Level Commission report. Many other necessary changes in the law are being contemplated. Lets hope they all happen soon.
The finance minister has clearly articulated many steps that will promote infrastructure development, another key to industrial and manufacturing competitiveness.
The increase of FDI limits in defence and insurance will be welcomed by foreign investors, especially the provision that they can, via the FIPB route, have full management control. Manufacturing growth, job creation and reduced foreign exchange outgo would be the result in the next few years. The task is now to speedily implement all these policy measures. The people believe that Mr. Modi can do so.
R C Bhargava
The writer is Chairman, Maruti Suzuki India Limited