Reforms augur well for Indian economy in the long term: Arun Jaitley

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Singapore: India has embarked on a slew of structural reforms, which may present short-term challenges, but augur well for the Indian economy in the medium and long-term, and promise to make the country an extremely attractive place to do business in, finance minister Arun Jaitley said on Wednesday.

The changes put in place by the National Democratic Alliance (NDA) government over the past three years have resonated well with the investors’ community, Jaitley told an audience of business leaders, central bank and regulatory agencies, financial technology companies, private equity and venture capital firms, at the Singapore FinTech Conference.

“We have been conscious about the fact that there were adverse comments about India not being an easy place to do business in… therefore, a considerable effort has gone into that during the past three years, and we’ve moved up significantly in the World Bank rankings,” he said.

The World Bank’s Doing Business 2018 report, released recently, saw India’s ranking move up 30 places to the 100th spot. It was the highest jump in the ease of doing business rankings by any country this year. India was also ranked among the World Bank’s top 10 most improved countries.

“Big picture—we now have a fairly stable economy growing at a reasonable pace of growth, integration of the informal (economy) with the formal taking place; structural changes are happening, the tax base is expanding, a lot of transactions that were informal and in cash are now increasingly digitalized and going through the banking system,” the finance minister added.

Jaitley spent considerable time explaining what he termed the most important measures the government has taken that had fundamentally changed the course of the Indian economy.

The measures include financial inclusion by ensuring that every household has a bank account, demonetisation of high-value banknotes, digitization of financial transactions, and implementation of the goods and services tax (GST) from 1 July this year.

“The creation of the Aadhaar (unique identity) platform that gave every Indian a unique identity number with biometric details, and its evolution has ensured that (benefits from) various government schemes and subsidies can now be transferred to the weaker sections of society directly, and only the deserving get it,” he said.

Jaitley admitted that demonetisation was shock therapy as far as the economy was concerned, but defended the move, and argued that it had led to over 1.8 million bank account holders with disproportionate assets being nudged into filing tax returns.

“This whole process of the shock in the economy will push the Indian economy more and more towards digitization,” he said.

“In the first year of demonetisation, we find that high-denomination currency in India has been squeezed by 30%. The number of taxpayers in the individual segment has increased. This brought about digitisation of the economy to the centre-stage—the consequence of this has been that in the past one year, the number of digital transactions has almost multiplied by 100%, and new kinds of technologies, applications, instruments have been emerging…banks and government and fintech companies have all been innovating and creating new payment gateways, and the mode by which India now spends its money has substantially begun to alter. This is just the beginning,” Jaitley added