New Delhi: Making a case for 8-9 percent growth rate, Finance Minister Arun Jaitley Saturday indicated that his upcoming Budget will not resort to “sheer populism” for good ratings and will focus on structural reforms.
He also expressed hope that the Congress will “see reason” and help the government pass the Goods and Services Tax (GST) Bill in the Budget Session of Parliament beginning next month.
“Indian economy has to be out on sounder platform. Don’t forget India is one of the few economies of the world that survived 2001, 2008 and 2015 (global crises),” he said.
Stating that fundamentals have to be strong enough, the finance minister said, “The Budget has to weigh the areas of weaknesses where investments are required. Therefore, I have to pitch in that direction. If a Budget for the cause of ratings goes in for sheer populism, it’s not necessary that the cause of economics or even sounder politics that we are aiming at (is served).”
Jaitley said the government would not pursue retrospective tax claims and added that he would like the remaining two or three disputes to get resolved “as expeditiously as possible”.
Taxes which are payable must be collected but “there must not be unfair taxes” as unfair assessments bring “bad name” and no revenue, he said at the ET Global Business Summit here.
Hoping that the Congress would support GST that aims to create a unified market across India, he said, “It (GST) is the important reform of the UPA. If I have to credit the authorship of it, I have to give credit to them. Now, If the author turns against his own script, what do I make?
“I have reached out (to the Congress), I have spoken to them. I have explained to them and I hope they will see reason… see the rationale behind passing GST.”
“The UPA allies like RJD, NCP and JD-U are openly supporting it,” Jaitley said, adding that even the Congress-ruled states are for the uniform tax regime.
“I don’t see a reason why they (the Congress) should have a rethink on the Bill. If there is a discussion on a particular idea in the Bill, I am willing to discuss with them. But anything that makes it a flawed legislation… certainly, we can’t bound future generations to a flawed legislation,” the minister clarified.
Jaitley highlighted the need for carrying on structural reforms, saying the focus should be on infrastructure, irrigation and farm productivity.
“We probably have potential to have a growth that is higher than what we have achieved. This 7-7.5 percent is not our optimum range. The Indian normal is 8-9 percent category.
And it is only when you grow at that pace, you can get rid of poverty,” he said.
He spoke of a huge human resource, trained minds as well as a very large market as positives for India.
“We have potential for increasing manufacturing. We have innovative skills. Our labour cost is not rising as they are rising in China. We are not part of factor or transitions that are taking place in China,” he said.
The finance minister said the economy the world over is doing badly because of the slump in oil and commodity prices.
The slump “suits us because we are net buyers of these”, he said, adding that given these advantages “what we have to do is to put our house in order. I think the first important thing that we have to do is to carry on structural reforms”.
Focus, he said, should be on infrastructure sector, irrigation, improving agriculture productivity and manufacturing.
“At the end of the day, what is it that you are asking for is to get that cutting edge that you must grow at 1-1.5 percent faster than what you are doing today.
“I think with all these changes, and hopefully, in future rain gods being kinder to us than in the last two years, it is not very difficult or impossible target for India to achieve. We all know that our potential is right there,” Jaitley added.
On whether he discussed GST with Congress chief Sonia Gandhi at a recent reception hosted by President Pranab Mukherjee, Jaitley replied in the negative.
GST will subsume all indirect taxes such as excise duty, service tax and sales tax into one uniform rate and the Bill is stuck in the Rajya Sabha where the Congress wants three changes.
“These are informal occasions, and it is not necessary that you get into a discussion at these forums. I certainly didn’t have any political discussions,” the minister said, adding that he had earlier talked about GST with Congress leaders on several occasions.
Jaitley made it clear that economic legislations are not about BJP versus all and it would be “very good” if the constitutional amendment Bill to roll out GST is passed by consensus.
“… it is very good to have laws passed by consensus. A law like this which impacts taxation structure of India being passed by consensus is our preference, otherwise it can be put to vote,” the minister said.
The minister said several important legislations concerning coal, mining and the like were passed by Parliament with support from several Opposition parties with the exception of the Congress.
The Congress has stalled the passage of the Constitution Amendment Bill, derailing the government’s plan to roll out GST from April 1, 2016.
Its three demands are a cap on the GST rate in the Constitution itself, removal of the proposed 1 percent additional tax on inter-state movement of goods and setting up a judicial panel to adjudicate disputes among states.
Jaitley said since coming to power, the NDA government decided not to use retrospective tax legislation to raise revenue. “We promised that no new notices will be sent,” he stressed.
A number of issues were allowed to be settled by courts and the government decided not to appeal against the rulings that went against it.
“The spiral effect of that is dozens of cases are now getting settled,” he said. “Today, 18-19 months after this government has taken over, there are about 2-3 of those issues left. Personally, I would like to see them sorted out as expeditiously as possible either through a tribunal or judicial process.”
Governments have no power to set aside an assessment order, he said, adding it could only be done by judicial procedure.
“There has to be a due process which has to be carried out. Only when assessees are able to establish (that) there is an unfair order, we will accept that verdict,” Jaitley added.