Need to be pro-industry to service the poor, says Arun Jaitley

Written by ENS Economic Bureau | New Delhi | Updated: Jul 25 2014, 14:03pm hrs
FM Arun JaitleyFM Arun Jaitley said a pick-up in manufacturing activity would in turn stimulate growth and boost government revenues to help in social sector schemes.
FINANCE minister Arun Jaitley on Thursday justified the governments decision to hike the foreign direct investment limit (FDI) in insurance sector to 49 per cent, saying that the step was required to raise funds for the sector.

Insurance sector is cash starved. The health sector is not picking up because of this The hard reality is that we need to expand insurance in several sectors, he informed the Rajya Sabha during his reply to the debate on the Appropriation Bill.

Jaitley said that the NDA government has come back to the original proposal on which the Congress had also agreed. By December 2013, we had made some considerable headroom but due to elections it was not carried forward it was the NDA government which had originally conceived of 49 per cent FDI in the sector but at that time the Congress had no appetite for it, he said.

He asserted that profit is not a bad word, and that the low tax regime envisaged in the Budget is aimed at boosting economic activity. We have reached a stage where profit is not a bad word. Unless there is a profit, there will be no taxes. He also argued that the Budget was both pro-business and pro-middle class.

Some members said this Budget was pro-business... I will make a candid confession... Does it help middle class and neo middle class. yes it does. I have worked on the premise that low taxation is good for the economy. People want to buy goods, they dont want to buy taxes. I have no hesitation in saying that this Budget is pro-business. It also helps the middle-class, the neo-middle class and the poor. You need to be pro-industry, to garner revenues and then to service the poor, the minister said.

Jaitley said a pick-up in manufacturing activity would in turn stimulate growth and boost government revenues to help in social sector schemes and ultimately in poverty eradication and job creation.

The real challenge is to return to 8 per cent to 9 per cent growth rate, he said, while underlining challenges created by the previous UPA government.

Though there are some initial signs of recovery in the economy, Jaitley also said that concerted national efforts must be made to ensure that investments return to the country, In the last few years, there has been a reverse flow of investments, he said.

The earlier government could have been more decisive. It could have avoided a drift in policy decisions. It could have taken steps when the economic environment got impacted by the various scams, he said.

Jaitley also clarified that the government would move ahead with hiking the FDI cap in the defence sector to 49 per cent but the policy would remain the same.

As announced in the Union Budget on July 10, the government as a policy would not use the power on retrospective taxation, he said. A framework has been created in the CBDT to deal with any fresh issues, while pending litigations would be allowed to continue, he added.