Washington: Rejecting criticism that the UPA is not serious on reforms, the Finance Minister, Pranab Mukherjee on Saturday said it is now time for the Government to take some hard decisions and expressed confidence that three key legislations on pension, banking and insurance will be passed this year.
Speaking at a Washington-based think-tank, he said Government is committed to economic reforms and has, in fact, initiated the process of legislative and administrative changes on a number of issues that would benefit the economy.
“We are now at a juncture when it is inevitable to take some hard decisions. And this has been our approach, as I outlined in the proposals for the Union Budget 2012-13 recently,” he said.
He was responding to questions at the Peter G. Peterson Institute for International Economics, which had organised an event in association with the Confederation of Indian Industry (CII).
“In fact, on the legislative front, we have already committed the preliminary legislative process for the Pension Fund Regulatory Act, the Insurance Act and the Banking Amendment Act. These three Acts, I do hope, would get legislated in this calendar year. If not in this Parliamentary session, then the next session,” Mukherjee said.
At the same time, he acknowledged that there were certain reforms which could face difficulties given the challenges of the coalition era.
“Of course, we have to persuade various stakeholders, including State Governments,… if we could do so perhaps GST and the Constitution Amendment necessary to implement GST would be possible to get it through this or the next session of Parliament and thereafter be ratified by a minimum of 15 State Assemblies before the end of the year,” he said.
“So far as direct taxes are concerned, I am quite confident that it would be implemented after the laws are passed by the next session of Parliament, from the next financial year. On tax reforms, direct tax would be operationalised from the next financial year,” Mukherjee said.
“In respect of indirect taxes, the most important decision to be taken to implement the GST (for which) Constitutional Amendment may be possible within this calendar year,” he said in response to a question.
Earlier, in his opening remarks, Mukherjee said the Indian economy is in some ways better placed than many other nations to withstand this fresh round of global economic turmoil.
“India’s resilience results from the fact that the bulk of India’s GDP is domestic demand driven. India’s External Commercial Borrowings Policy has been successful in maintaining external debt at sustainable levels,” he said.
“India’s banking sector is robust and our regulatory architecture is mostly in place. There is an unwavering commitment to reforms to further consolidate our economic strengths. The GDP growth in 2012-13 is expected to be 7.6 per cent, which in the normal course should rise by another percentage point in fiscal 2013-14. The downside risks of sticky global commodity prices, especially fuel oil, remains and could undermine the anticipated growth recovery,” he said.
“We have shown in the recent past that we have the capacity to grow fast. At the same time, we are stepping up our efforts to create more inclusive outcomes for our developing society,” he said.
“Favourable demographics, a resilient economic structure, high savings and investment rates with potential for further growth, stable democratic institutions and continued policy emphasis on improving social and physical infrastructure are factors that can help us in moving forward and even shouldering some of the global responsibilities. Indian enterprise has matured and shown that it has the capacity to compete with the best,” he said.
Allays concerns on retrospective tax amendment
Seeking to allay apprehensions on the proposed retrospective tax amendment, Mukherjee said India is ready to address the concerns of American businesses within its legal framework.
“Our policies are transparent ... whenever there is any misapprehension, we are ready to listen to then and readjust it when it is necessary.
“Therefore, we do not have a fixed mind with respect to a particular issue, but what is to be done has to be done within the legal system and legal framework,” he said at the think-tank, responding to the concerns of the US industry.
“They (US businesses) have some doubt whether the tax regime in India is stable or not. It is stable. Even the current amendment, which is being debated, I have explained that the nature of the amendment I have introduced is of clarificative nature and not substantive amendments in the contents of the law,” he said.
“One question comes to mind that when you are giving retrospective effect to the law from the date of enactment of the Income-Tax Act, 1962, can the income-tax cases be opened since 1962, the answer is no.
“Because there are other provisions in the Income-Tax Act itself, according to which no case can be reopened which is more than six years old,” he said.
“Therefore, there is no uncertainty and attempt is being made to give certainty... Secondly, the investment decision is not taken merely whether there is tax concession or not.”
The proposed amendment to the IT Act to reopen the Vodafone case has dampened enthusiasm about investment in India.
But, he said, before readjusting decisions, the Government must be convinced of the necessity of such a change. Responding to a question, he said the current sense of “despondency” is mainly because of their “misapprehension”.
There are 10 legislative amendments he has proposed in his Budget, he said.
“What is the size of the market? Whether there are systems which are transparent and tested and thirdly what is the purchasing power of the people.
“From all these stand points, India is a good investment destination. So, therefore, there should not be any apprehension,” Mukherjee said.
Mukherjee said the relationship between the two countries is expanding and is very much on the right track. It is all comprehensive. Hardly is there any area where there is no interaction with the US.
“In all areas, our strategic partnership is becoming comprehensive. Therefore, I do feel that in the coming years our relationship would move from strength to strength,” he said.
“Our strategic global partnership with the US is truly transformational in nature. We are not only discussing issues such as strategic cooperation, counter-terrorism, defence, high technology, civil nuclear and space sector cooperation, but also a broad range of development issues that directly and positively impact our citizens,” he said in his remarks earlier.
Mukherjee announced that the India-US economic dialogue would be held in June this year.
During his meeting with the Treasury Secretary, Mr Timothy Geithner, he extended an invitation to the latter to come to New Delhi.