A “whole set of second generation reforms” will be unveiled in the next Union Budget, Finance Minister Arun Jaitely said on Sunday, promising “a lot of exciting time ahead”.
The country needs “a larger opening out in more sectors,” it requires stability of policy and tax regime besides a “reasonable” cost of capital, he told PTI journalists at an interaction at the agency’s headquarters in New Delhi.
Looking ahead, the Minister envisages the GDP growth to cross 6 per cent in 2015-16 once the effect of all the steps proposed kicks in. From thereon, “we are going to take off,” he said.
Asked about the broad contours of the direction the Budget for 2015-16 will take, Mr. Jaitley said, “There is a whole set of second generation reforms.
“And there is a whole set of reforms which have arisen because some undoing is required. The coal ordinance is one undoing thing. Allocation of natural resources by non-discretion is undoing thing. A rational and reasonable tax regime is undoing thing. Some procedure changes in the land (acquisition) law is an undoing.”
Enumerating the steps taken by the NDA government, he said that a series of measures taken in the last six months had “corrected the (depressing) sentiment”.
Answering a question about the state of the economy that he had inherited, Mr. Jaitley said the economy had “dipped quite low and there was a sense of disillusion” but in the past six months domestic as well as global investors were taking a huge interest although their faith in the Indian economy had been shaken badly.
“It will still take some time before results start surfacing. On the ground some green shoots are visible,” the Minister said.
“I think we have a lot of exciting time ahead of us and I do see investments coming into India. I do see domestic investors taking a lot of interest,” he emphasised.
However, he acknowledged that several more steps are required to create even more positive environment not only by the Central government but also by the state governments and several other institutions, which include the Opposition parties in Parliament.
Asked about the steps he intended to take, the Finance Minister replied: “You see you need a larger opening out which is what we are doing. There I think we are on track. One by one more sectors (will be opened up), there are avenues.
“You will require to give another comfort to investors. You have given them the comfort of stability of politics but (they require) stability of policy, stability of tax regime (and) correcting whatever major aberrations have taken place,” he said.
Mr. Jaitley said infusing liquidity into various sectors was necessary along with providing reasonable cost of capital.
“It is one thing saying we must concentrate on infrastructure. But for companies building highways... power plants, who even if coal is made available to them, but access to capital (as well as) money locked up in disputes will have to be resolved,” he said.
Mr. Jaitley said if the government was not able to infuse that liquidity or unable to provide cheaper capital, then opening out alone would not help. “So, it is a chain of events which has to take place.”
He pitched for an interest rate cut by RBI at its next monetary policy review due next week.
On the importance of his next Budget, the Finance Minister said the Budget is really an accounting statement.
“Reforms have to take place all 365 days in a year. But then Budget is an important occasion to highlight that. Therefore it is important in those terms. It is also an important occasion to signal the direction.
“Because so far our government has followed one clear direction and I do hope governments are never forced to take any moves which are in contrarian direction. That can difficulty for the economy,” he said.
Making it clear that reforms is a continuing exercise, Mr. Jaitley said the process of second generation reforms would be done and continued both before, during and after the Budget process. “Budget is not the only opportunity but is an important opportunity.”
Asked what are the sectors the government was targeting, he said his immediate target was insurance amendment bill, coal ordinance and the GST bill.
“I am simultaneously looking at the other big mineral allocation, introducing a non-discretionary basis... Then I have indicated to you that the land laws. Some dilution is required because this law can actually make development stagnant. I have no difficulty in higher compensation. I welcome it. But no access to land means what happens to infrastructure, townships, housing, industry and jobs,” he said.
On banking sector reforms, Mr. Jaitley said under Basel-III norms, government stake in all PSU banks will have to be brought down to 52 per cent and the rest is to be used for financial inclusion.
To a question on the growth rate set for 2015-16, Mr. Jaitley said first the economy has to make a turnaround from the sub-5 per cent - 4.5 per cent and 4.7 per cent.
“Move up this year. Manufacturing is still a challenge. Infrastructure expedition and manufacturing are two prime areas we have to get into so that the expedition takes place. Once the effect of all these steps is visible, our ability to cross the 6 per cent mark then increases.”
Asked whether he would be able to do it in the next fiscal, the Minister said, “Hopefully, we will cross that figure. Then we are going to take off.”
