A day after official data showed economic growth in the first quarter of the current financial year was better than expected, Finance Minister Arun Jaitley on Saturday assured investors that the the government was committed to taking business-friendly measures. He suggested these steps, such as increasing the cap on foreign investment in insurance and amending the land acquisition Act, besides meeting the disinvestment and fiscal deficit targets would push economic expansion in the remaining part of the year at much higher rates than the two-year-high rate of 5.7 per cent in the April-June quarter.
Listing the decisions taken by his ministry in the past 90 days, Jaitley asserted the new government had replaced the mood of pessimism with business-friendly decisions.
The finance minister indicated, albeit in a lighter vein, his preference for a cut in interest rates by the Reserve Bank of India. To a query on when he expected the RBI to cut the policy rate, he said: “Left to me, I hope very soon. But I am sure those who decide have also heard your question.”
With the government liberalising the foreign investment regime in defence and railway projects, Jaitley said, international investors were eagerly looking at India. To woo them and other investors further, he exuded confidence, a Bill to raise foreign investment in insurance would be passed in the winter session of Parliament. He also indicated a consensus on the goods and services tax (GST) would be evolved with states.
Besides, he said, a disinvestment road map would be unveiled shortly, and indicated the land acquisition Act might be changed with political parties’ support.
“International investors are looking at us with great curiosity and I am sure we will see the impact of this,” he said while addressing his first press conference to mark the 100 days of the Narendra Modi government.
Eyeing foreign investment, Jaitley said: “We took a firm decision on insurance. I do hope the insurance amendments will be passed in the next session of Parliament.” The minister hoped the select committee set up by Parliament to scrutinise the insurance Bill would soon start work.
He said he was trying hard to build a consensus on GST. However, too many products could not be kept outside the new tax regime, he said, even as states have demanded that petroleum and alcohol be excluded.
“The empowered committee has expressed an opinion that certain items be kept out. Now, too many items cannot be kept out because the larger object itself could get defeated,” he said. This was the issue on which he was in discussion with some states, the finance minister said.
On the land acquisition Bill, Jaitley said states and the Centre were both realising the challenges and he was going to discuss with major political parties, through the rural development minister, whether more flexibility would be available.
He said while he initially considered the target of reining in the fiscal deficit at 4.1 per cent of gross domestic product (GDP) set by his predecessor P Chidambaram challenging, he now thought it was achievable. The deficit has already breached 60 per cent of the target in the first four months of the current financial year and was above 10 per cent of the GDP in the first quarter.
Jaitley said he would hold discussions with the members of the Expenditure Management Commission for early recommendations on subsidy rationalisation, so that some work could be started this year itself.
Finance Secretary Arvind Mayaram exuded confidence the disinvestment target of Rs 58,425 crore would be exceeded.
Nothing from this head has so far come into the government’s kitty.
Jaitley said the manufacturing curve had turned, the services sector was looking up and inflation had, by and large, moderated. However, he cautioned uncertainty over coal allocation might have an impact on economic growth. “If resources cannot be utilised, its adverse impact is inevitable,” he said. The Supreme Court is expected to deliver a verdict on the issue on Monday.
Jaitley said it was a challenging situation as a number of tenders were lying unresponded. He said the new government had hastened decision making, created a special mechanism to resolve tax disputes and taken steps to increase investment in manufacturing and infrastructure.
Jaitley said the election results were a mood changer and the new government did not have any internal bickering, unlike the previous United Progressive Alliance regime, leading to smooth decision-making. All steps taken by the finance ministry had the support of the prime minister and his office, he said.
Meanwhile, Mayaram said the economy was moving to an upward trajectory and global rating agencies would take note of the development. He was replying to a query whether global rating agencies like Moody’s and Standard & Poor’s would upgrade India’s credit rating in the light of the first-quarter GDP data. Representatives of S&P’s had met senior finance ministry officials on August 12 and those from Fitch and Moody’s are to meet officials over the next two months.