Continuing reforms to push growth higher, says FM

Source: PTI

Wooing foreign investors with the promise of easier conditions for doing business, Finance Minister Arun Jaitley on Monday said continuing reforms will push India's economic growth higher than last year's 7.3% despite adverse global winds. India has the potential to be the bright spot in the gloomy world economic scenario, he said, adding fiscal deficit is coming down and inflation is very much under control. Showcasing the India growth story to international investors with collective asset under management of $10 trillion, Jaitley asked them to invest in infrastructure, manufacturing and other sectors that have funding needs. On the last day of his four-day visit to Singapore and Hong Kong, Jaitley said he thinks India has the potential to be the bright spot even in somewhat gloomier situation. “We grew by 7.3% last year and I hope that we are able to outperform our last year's growth numbers,” Jaitley said in Hong Kong at the inaugural APIC-India Capital Markets and Institutional Investors Summit. Underlining that international investment is going to be a great source of resource for the country, the Finance Minister said the government is working on a slew of reforms, including a new law to ensure disputes get settled through arbitration within six months. “Ease of doing business is still work in progress. Significant advancement has been made, a lot will have to be done of course on a continuous basis,” he noted. “I am conscious of adversities that come our way. India ended last year with 7.3%. We had good fiscal figures. Fiscal deficit is gradually coming down and we are now aiming to bring it down in the next 2-3 years to 3%,” he said. Current account deficit is down to 1.2%, foreign exchange reserves are very high, inflation is very much under control and therefore, macroeconomic indications seem to be positive, he added. “Global headwinds are not helping us and at times are creating adversities, particularly the external factors have impacted our exports. And in favourable global conditions, we can improve on the growth rate of 7.3% in a significant way,” Jaitley said. Jaitley also promised a simple and globally competitive tax regime while asserting that the government is confident of rolling out the new Goods and Services Tax (GST) regime from the next fiscal. “I see the road ahead with regard to several reforms programmes of the government continuing. Economic reforms will be an ongoing activity. There is no finishing line for that,” the Finance Minister said. According to him, Goods and Services Tax (GST) is one of the most important taxation reforms and the government has also opened many sectors, including defence manufacturing. “Bankruptcy law is ready to be taken up in Parliament. Laws for resolution of contracts, allocation of public contracts and public procurement are being pursued.” Assuring foreign investors, he said putting tax issues to rest is certainly a "high priority" for the government. He also acknowledged that growth rate is low in the agriculture sector, which is posing a challenge. “We have 55% of our population dependent on agriculture, and rain Gods have not been as kind to this government in the last two years as they were to the earlier governments. Therefore, the agriculture growth was flat last fiscal and this year,” Jaitley said. About 15% of the country's total GDP comes from agriculture and a lot more people would need to move to manufacturing and services sectors, he noted. Furthermore, Jaitley said domestic private sector investments have been slow and high cost of capital is also affecting several sectors. Expressing confidence in meeting the ambitious target of mopping up Rs. 69,000 crore through divestment this fiscal, he said the government has moved fast so far and all routes are open on this front, including strategic sale of hotels. “In the last two months, we have moved much faster, but markets have been in somewhat turmoil,” he said in reply to queries on whether the market conditions would impact the disinvestment drive. “Do you hit the market when it is unpredictable or do you want it to stabilise? In fact, the Indian Oil disinvestment took place on the day of the great fall after devaluation in China,” Jaitley said. Underlining the urgent need to strengthen public sector banks, the Finance Minister said the top priority is to reduce the levels of their bad loans. “The idea is to first strengthen the banks and then issue the capital. I would not issue the capital at the present level of NPAs (non-performing assets). I have indicated a 3-4 year road map. In the next three years, we would have complied with Basel III norms. Therefore, Rs.1.80 lakh crore is to be invested, including Rs.70,000 crore from the Budget. “My first tranche is to strengthen the banks. First, we need to bring down the NPAs, only then banks will issue the capital,” he said. Sending out a stern message, Jaitley also said states will have to finance their loss-making electricity distribution companies.  

September 21, 2015 | 5:25pm IST.