Instability after 14 polls biggest threat: FM

Written by Press Trust of India | Singapore | Updated: Jan 24 2013, 07:13am hrs
The biggest threat to reforms in India is an unstable government at the Centre after the 2014 elections, finance minister P Chidambaram said on Wednesday, reaffirming the government's commitment to reforms and confidence about passage of pension and insurance bills in Parliament's Budget session beginning next month.

Behind the noise there were quiet negotiations with the Opposition parties and support from them on these legislation, according to a note by Bank of America Merrill Lynch, which co-hosted an investor conference with DBS.

Addressing over 300 city-based FIIs, debt investors and corporates, Chidambaram, who is on the second leg of his east Asia tour wooing foreign investment, said the goods and service tax (GST) regime is a major reform and hoped that the legislation would be approved by Parliament in the winter session in December this year.

He acknowledged that the GST Bill was unlikely to be passed by April 2013 but hoped to introduce in the monsoon session and get it passed in the winter session of Parliament based on a consensus with states.

While efforts would be made to widen the tax base, Chidambaram expects the government revenues to rise by 20% every year though not by raising rates but by through stable tax regime, non-adversial compliance and fair dispute mechanism.

He said the fiscal target in 2012-13 would be maintained at 5.3% of the GDP which would be achieved through cost cuts and austerity measures.

The finance minister promised a 0.6% reduction in the fiscal deficit every year to bring the deficit to 3% by 2016-17 without raising tax rates. He expected the GDP growth rate to be 5.7%this year and around 6-7%in 2013-14 and 8% in 2014-15.

Chidambaram said the newly formed Cabinet Committee on Investments (CCI) would speed up project approvals. The CCI would for the first time meet before end of this month in which clearances to 47 oil and gas blocks would be considered.

The next meeting would take up coal and other minerals, he said, adding the process would speed up removal of inter-ministerial disputes which hamper implementation of projects.

The minister further said that take-out financing by Infrastructure Development Funds (IDFs) would free bank finances and encourage them provide money for fresh projects.

Referring to the issue of General Anti Avoidance Rules (GAAR), Chidambaram said most of the issues have already been sorted out. The minister has earlier said that "ghost" of GAAR had been "buried".

Noting that the rising current account deficit (CAD), which reflects the difference between inflow and outflow of foreign exchange, was a "tricky" issue, the minister said it would be curtailed in the near term. He also expressed confidence that India would be able to bridge the gap through capital flows.

On the issue of disinvestment, Chidambaram said the government has drawn a time-table to achieve the target of R30,000 crore.