New Delhi: Concerned over the current "gloom and doom" scenario, a Parliamentary Committee on Thursday asked the government to come out with a "well thought-out revival policy" for growth and to speed up enactment of financial reforms Bills.
Significantly, the Standing Committee on Finance headed by BJP MP Yashwant Sinha, in its report tabled in Parliament, said it looked forward to clarity and consistency in policies and regulations so that investors, especially foreign, do not shy away from investing in the country.
The Committee's call for speeding up enactment of pending financial reforms bills include those relating to pension fund, insurance, banking and Direct Taxes Code and the companies law. The Committee has already given its reports on these Bills.
The report on 'Current Economic Situation And Policy Options' said the need of the hour was to put the economy on growth track through a "well thought out revival policy" of more effective decision making, time bound clearance of projects, transparent tax regime and enhanced domestic investment.
Noting that investor confidence has been hit by retrospective amendment to tax laws and the new General Anti- Avoidance Rules (GAAR), the Committee said that the government needed to create conducive climate to promote investments.
"To bring back the country on growth track, investments needs to be pepped up and for investments to pick up a conducive investment climate needs to be created. Hence, the Committee recommends speeding up of policy reforms and removing investment hurdles," the report said.
Concerned over lack of sync between fiscal and monetary policies, a Parliamentary panel today asked the government to take urgent steps to supplement RBI's initiatives to contain inflation and trigger sustainable growth.
"There is a visible lack of sync between the fiscal and monetary policy being followed by the government and the RBI... The Committee strongly feel that monetary policy alone cannot bring down inflation or spur growth in the absence of commensurate fiscal measures," the Standing Committee report said.
The Committee urged the government to "take urgent steps" to supplement and complement initiatives of RBI with fiscal measures to rein in inflation and trigger sustainable growth.
In order to contain inflation, RBI had hiked the repo rate (lending rate) 13 times between March 2010 and October 2011.
RBI, the Committee noted, had told its members that fiscal part of the obligation was not being fulfilled by the government.
"The Committee... Urge upon the government to take clear cut measures in this direction and implement them speedily and without fail," the report said.
The Committee also wanted the government to review FDI policy to make India an increasingly attractive and investor friendly destination for foreign investors.
The government, it said, should come out with new guidelines to revamp Special Economic Zones (SEZs) and Export Oriented Unit (EIU) schemes, to boost exports.
In order to contain imports, the Committee suggested that government should explore options like promoting austerity in oil consumption, maintaining a strategic storage pool of oil to offset crude price fluctuations in international market and discourage import of gold and silver.
Referring to the issue of high fiscal deficit and rising subsidy bill, the Committee said that better targeting of subsidies is needed to ensure the benefits are not enjoyed by the affluent sections of the society.
It has also suggested that government should come out with specific action plan to improve expenditure management and achieve 10 per cent mandatory reduction in non-plan expenditure.
The Parliamentary Committee has recommended that government and the RBI should promote domestic savings and investments through calibrated adjustments in policies to achieve and sustain growth at high levels.
The growth in 2011-12 slipped to a nine-year low of 6.5 percent and the prospects do not seem bright in the current fiscal. The overall inflation in July stood at 6.87 percent.
On the agriculture sector, the Committee suggested the government should make large public investment in post harvest technologies and irrigation facilities to achieve four per cent farm sector growth target.
The RBI, it added, also needed to review its existing guidelines to ensure availability of additional resources for productive sectors of the economy.
As regards the services sector, the Committee wanted the government to set up a study group to identify the maladies and suggest action plan to cure them.
In order to contain the rising current account deficit (CAD) the Committee recommended that the government should try to bring it down "in letter and spirit and financing it with relatively stable inflows".
The CAD, which is the difference between inflow and outflow of foreign exchange, rose to four percent of GDP in 2011-12 fiscal, from two per cent in earlier years.
The Committee suggested host of measures to contain CAD. These include efforts to curtail import of petroleum goods, discourage unproductive imports like gold and silver, and boost domestic production.
It also wanted the RBI to intervene in the foreign currency market to check undue volatility in exchange rate. The Committee said, "Our policy should attract more long term capital inflows and push investments through reforms".
The report of the Committee also contained dissent notes by CPI Member Gurudas Dasgupta and CPM member P Rajeeve.
First Published: Thursday, August 30, 2012, 20:02