NEW DELHI:Finance Minister Arun Jaitley on Saturday has expressed optimism that he would be able push through key reform Bills in the three days before the Winter session of Parliament ends.
These Bills include the Arbitration and Conciliation (Amendment) Bill, Amendments in Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Bill and the Insolvency and the Bankruptcy Bill.
In his inaugural address at the 88th Annual general meeting of FICCI, Jaitley said that accepting the conditions posed by the Opposition for the passage of GST Bill in toto would result in a flawed GST and “I believe that a delayed GST would be better than a flawed GST.” He, however, said that he would still try to persuade the Opposition not to have constitutionally prescribed tariffs for GST.
He said, “India’s fiscal figures were comfortable and have never been as good. GDP is growing at 7.5 per cent, Current Account Deficit is under control and we have high foreign exchange reserves. The services sector remains strong as always.” He added that inflation, barring a couple of commodities, was in check and this augurs well for considering a further reduction in interest rates.
The growth signs in manufacturing and IIP are significant and if this continues, along with thrust on public investment, incentivising of FDI, increased spend on physical, social infrastructure, and irrigation, a 1-1.5% point jump from 7.5 per cent GDP growth is not only possible but achievable, he added.
The question, Jaitley said is whether Indian politics is going to support this extra point increase in GDP growth; whether they are going to support or obstruct was the moot question and added that the challenge faced by the government is to continue the pace of reforms, even if there is obstruction.
Comparing the economic situation in 1971 and 1991 with the present scenario, Mr. Jaitley said that 2015 is a different era altogether. One of India’s greatest strengths is that it has become significantly aspirational. The size and width of those who want reform is much bigger than those who resist them, he added. Furthermore, states have realized that they need to do things themselves and be less dependent on the Centre which is why they are vying for investment.
Jaitley highlighted the key difficulties and challenges that India is going through currently. First, since the global growth has slowed down, it has impacted India through a contraction in exports, if not in volume, but in terms of value.
Second, India has faced is the two consecutive years of less than normal rainfall. As a result, India has not benefited from the marginal increase in GDP that could have come from agriculture growth and the significant impact that it could have had on the purchasing power of the rural India. Third, relates to the lack of pick-up in private investments in a big way due to challenges being faced by industry because of weak demand.
India, he said needs investments for growth and in a scenario when private investments are not picking up, the government has had to stimulate public investment and incentivise foreign direct investments.
Dr. Jyotsna Suri, President, FICCI, in her welcome remarks noted that a sound economic vision was set by Prime Minister for India’s progress after the NDA Government came to power. The launch of ‘Make in India’ and the continuous efforts to improve the ease of doing business have yielded results.
“You took cognisance of the distressed industrial sector and have laid emphasis on infrastructure development. An additional Rs. 70,000 crore was committed in the last budget and an additional 20,000 crore will be infused in the National Infrastructure and Investment Fund,” she said
Key economic bills and much-needed reforms have been introduced. Amendments have ushered in competition, efficiency and transparency. Efforts to reform stringent labour rules are being made. Undoubtedly industry and trade are eagerly awaiting the implementation of GST which will be the biggest tax reform in India’s history.
She said that because of these rigorous efforts that we have recorded growth of 7.3 per cent in GDP in 2014-15 and are expected to grow at more than 7.5 per cent in the current fiscal year. “However, you have stated at numerous platforms that we need to grow at a much higher level perhaps 9 to 10 percent. We agree with you and to achieve that FICCI has some specific suggestions.”
A detailed study by FICCI on the theme on the theme of the AGM, viz., ‘Translating Aspirations into Reality: India at 2022” highlights the importance of total factor productivity (TFP) in supporting growth. Results show that there is a direct relationship between the two in case of India. The key drivers of TFP are: appropriate physical infrastructure; strong financial system; ease of doing business; sound governance; robust innovation eco-system; education and education to employment.
The study further indicates that if we want a Prospering India by 2022, the investment to GDP ratio must increase to 38 per cent from the current 33.7 per cent. The government spending needs to move up to 30 per cent of GDP (from the current 24 percent) with a greater focus on social and physical infrastructure.