India has its “hands full” in bringing about structural changes and implementing key reforms to boost economic growth, Finance Minister Arun Jaitley has said and hoped that the country will be able to improve its growth this year from the 7.6 per cent achieved last fiscal.
Outlining the direction forward for the Indian economy in his address at the Asia Society, Jaitley said the country still requires a lot of structural changes and the government has taken steps to ease processes, make the business environment easier and bring in greater transparency into the system. Jaitley expressed hope that the bankruptcy law would be approved over the next fewÂ weeks and said the government “is in the final stages” of passing a law that deals with commercial indebtedness.
The government has also changed arbitration laws, amended some of the “onerous provisions” of the Companies Act and will bring down corporate tax to 25 per cent over the next couple of years.
On indirect taxes, he said India is in the “last stages” before the Goods and Services Tax (GST) is approved by the Parliament and then with supporting legislations, it actually gets into implementation.
“I think we have all our hands full, the next couple of years bringing about each one of these structural changes. In addition to this, two significant directions which I have followed are increased expenditure in infrastructure and in rural India.
“These are the two areas which were lacking and these appear to be the focus area. That probably will be the direction of the economy in the next few years,” Jaitley said.
He said the world at the moment still faces serious challenges and India cannot “immune” itself from most of the challenges.
He however expressed hope that the country will be able to register improved economic growth this year as compared to the previous fiscals.
“Notwithstanding that we have consistently even in the slowdown environment grown by about 7 per cent, 7.2 per last year, 7.6 this fiscal which ended a few days ago and hopefully this year we could improve on that data,” he said in his address on ‘Make in India- the New Deal’ hosted by CII and the Asia Society Policy Institute.
Jaitley underscored that while India has done fairly well in an environment of global economic challenges, it has the potential to grow even faster.
“I have always believed that given by global standards in a slowdown environment, India is doing significantly well. But given by our own standards and our expectations of being able to grow faster, eradicate poverty and transform into a developed country, we probably can do a little better,” he said, adding that steps that are being taken in this regard to help India register faster economic growth.
“Each one of these steps is now bringing structural changes, bringing in more investment, better amenities in the rural areas, more infrastructure, creating the groundwork for the Indian economy itself to now concentrate on manufacturing,” Jaitley said.
He said legislations like the Goods and Services Tax (GST) are capable of adding to the India’s growth story and the fact that a good monsoon has been predicted after two bad ones “itself has a very positive impact as far as the economy is concerned.
“A good monsoon in turn will also improve upon domestic demand. And if a series of these factors within the country takes place, notwithstanding the slowdown of exports which is essentially on account of global slowdown, we are capable of improving upon our present growth figures which last year seems to have been at around 7.6 per cent,” he said.
Jaitley said there has been “significant transformation” in India and the country is “better off” than it was a few years ago.
“What was being referred to as policy paralysis is now referred to as the bright spot,” he said, adding that the government took decisions in its initial years to open up FDI in segments like defence, railways, real estate and food processing and simplified procedures so that investments become more attractive. He said another “important advantage” that has taken place is “decisiveness” despite the noise of democracy.
“When the decisions by the executive are required, India has now recently shown a tendency to decide quickly. Decisions don’t hang around for a long period of time,” he said.
Describing the other “great transformation” that has taken place in the country, Jaitley said there was a “great stigma” that decision-making was not transparent in India and “where there could be some decisions taken for collateral reasons.
“That is all something that belongs to the past now. Government discretion in allocation of resources have virtually been completely eliminated and replaced by a market mechanism. That has also added to the credibility of the decision making process in India,” he said.
He said another challenge for the government was how to bring administration and the tax levels in India down to global levels.
“This was another area where India had earned a significantly bad name, that it was a very difficult jurisdiction to deal with. Taxation policy was unpredictable and this concerned both domestic and international investors.
“It was extremely important in the initial years for the government to put these fears (to rest) of retrospective taxes and arbitrary changes in the taxation policy, because investors always prefers consistency and stability and don’t want to be taken by surprise by a future decision,” he said.
He said direct taxes are being brought down to 25 per cent and while “some initial baby steps have been taken”, over the next 1-2 years as exemptions get phased out, more significant steps will be taken.
Highlighting the infrastructure development that has taken place, Jaitley said 233 national highways are under construction and expenditure on rural roads now is three times than what India was spending earlier.
In railways also, the target is to develop 400 railways stations in India over the next 2-3 years and emphasis is being given on developing regional airports. In rural areas also, focus is being given to irrigation and electrification programmes.
He said the government is focussed on expanding manufacturing activity in a very large number of areas and its target of increasing the manufacturing share in the Indian economy “is reasonably realisable”.
“The process of reforms when added to these existing opportunities open up the economy for investment, allows people to invest in sectors like the railways, defence, food processing that otherwise had not been encouraged in the past provides a great opportunity,” he said.
When asked about climate change, he said India, notwithstanding its development need, is completely committed to protecting the climate.
“The level of development we have reached is far, still the hard reality is we have a lot of distance to cover. We need more housing, power, toilets, roadsÂ and factories. Therefore our requirements of fuel is certainly going to increase. Notwithstanding that our own standards of protecting the environment are very rigid. “There is a method in each one of the steps we are taking,” like taxing oil, cess on coal and emphasis on alternative renewable energy. “We are conscious of our responsibilities,” he said.