Finance Minister Arun Jaitley today hinted at not raising tax rates and providing incentives for manufacturing in the coming Budget while asserting that “structural changes” will have to be made to get the economy to 8-9 per cent growth.
Hard selling India to global investors at the World Economic Forum here, he also promised a stable tax regime that will not come up with unreasonable demand and change taxes retrospectively.
“In terms of incentivising manufacturing, it is very much on our agenda. Even though we had few days during the last Budget we did give to Ministry of Micro Small and Medium Enterprises (MSME), National Investment and Manufacturing zone(NIMZ) and so on because we wanted the sector to pick up and that priority is fairly high on our agenda,” he said speaking at a session on ‘India’s Next Decade’.
While referring to various revenue sources for the government including divestment, dividend and spectrum sale, the Finance Minister said as economic activity picks up, the government’s capacity to raise revenue will also increase.
“I am not in favour of raising the rates of taxation as that could become counter-productive,” he told reporters late last night.
Jaitley expressed confidence that India was close to the point when investment will pick up as there are a large number of investors who are waiting to come in.
“They only want to be doubly sure about the credibility of the decision making process and the stability of the policies,” he said.
Speaking at today’s session, Jaitley said there was need to take a series of reforms as the last 10 years got lost out because of unnecessary debates.
“Now that opportunity has come back to us. Slowly we (BJP) are moving in the direction of having a good figure in the Upper House (Rajya Sabha). The pro-reforms (groups) have won everywhere,” he said.
The slumping oil prices was another factor that was going in India’s favour. Also many economies in the world, which were competing with India, were not doing well.
“It is really possible for us to go back to the original capacity of high growth rate. As far as taxation is concerned, the global community and Indian tax payers want to be convinced that there will be a stable tax regime.
“I cannot come up with unreasonable demand and change taxes retrospectively. Such tax demands as such do not earn us any revenue and give us only bad name,” he said. “The message I am giving is that we will have a stable tax regime.”
To a question on whether it will be a ‘Big Bang’ Budget next month, he said he would not be swayed by such phrases used in television studios. If the sum total of all the steps the government has taken is taken into account, it would be much more than the big bang.
“The Budget will be a very important occasion for the government but then the next 364 days are equally important.
“I am not tempering down the expectations. Look what happened in the last Budget that we presented. We announced a particular direction in the Budget and that was followed up with a lot of activity and action over the next six months,” he said.
Talking about subsidies, Jaitley said a scheme has now been started from January 1 under which leakages will be plugged in the first place.
In the last 10 years, the government added to the expenditure based on rights-based approach, which was not the most logical approach.
“To have an erroneous impression that increasing subsidised cylinders from 6 to 12 (per year) will win you elections… that just did not happen. Now consumers of gas cylinders are not the poorest in India,” he said.
The Finance Minister said if the money on additional gas cylinders went into India’s health and eduction sector, that would have had far more deserving priorities.
“Now we have to unravel this entire process. That is a long journey. The government is here for the full term and we have just about started,” he said.
Replying to questions on policy paralysis, he said one of the great set backs of the previous decades had been that the credibility of the government took a hit and therefore other structures became more powerful.
“CAG, CBI and courts all became more powerful. The general presumption was that government was doing things for collateral consideration. This was the biggest setback for the government,” he said.
Jaitley said several decisions got held up for environmental and other reasons. Added to this was the Prevention of Corruption Act which had a pre-1991 economic reform era provision under every decision including honest decision can be brought under the ambit of the law.
“I know for certain for three extremely honest secretaries of Government of India are being investigated, prosecuted by CBI for decisions taken during 10-12 years for purely commercial considerations.
“I believe time has come for us to review that law. Even section 31 needs a relook under which every honest decision can also go under the ambit of CBI. We need to empower civil servants and public sector banks. We have to make structural changes if we want to achieve 8-9 per cent growth,” he said.
With regard to laterally inducting talent in the government and into the system, Jaitley said, “I think governments in India have been increasingly open to it. Last government also in some way tried to do it. After all, they got the Governor of Reserve Bank as the Chief Economic Advisor at that time.”
This government also got the new Chief Economic Advisor, he said, adding, “we have got the Vice Chairman of the Niti Aayog and I am quite certain that before the factories move to India, the best minds also would be available to the Government of India irrespective of where they are.”
Talking about falling oil prices, the Finance Minister said, it is another factor that is going in the country’s favour.
“As far as petrol and oil prices are concerned, the prices are coming down. I can’t say what will happen in the future, but then there is of course a lot of benefit that we have passed on to the people. There have been reduction on nine occasions and therefore the reduction was passed on by the oil companies on those nine occasions,” he said.
Some benefits, the oil companies have subsumed themselves but not for profit but because they had also suffered serious losses in the past, he said.
“We inherited a manufacturing sector that was either flat or in bad shape, the economy was not in the best of its time, and I have expenditure to meet, which includes social sector expenditure. Now I cannot cut down the social sector expenditure and I need money to meet those obligations,” he said.
So, he said, some revenue raising has taken place what the government has collected from taxes on oil.