Ongoing Indian Economic Reforms Much More Than 'Big Bang': FM Arun Jaitley At WEF
DAVOS:As expectations continue to build up on the first full budget of the Narendra Modi government, Finance Minister Arun Jaitley said the sum-total of the reform measures and other policy initiatives already taken would be much more than “the big bang”.
“I am not going to be swayed by these phrases that are used in television studios. If you take the sum total of all the steps we have already taken, it will be much more than the big bang. Even big bang looks small in comparison,” Jaitley said here on the sidelines of WEF Annual Meeting.
He was replying to a question on whether the global investors present here at Davos were also expecting a ‘big bang’ budget from him next month.
When asked whether he was tempering down the expectations, the Minister said, “I am not tempering down the expectations. Opening up sacrosanct sectors like Railways, Defence, is that not big bang? GST, which everyone thought will never see the light of the day, is that not big bang?
“In the mining sector, in allocation of natural resources, what we have done, is it not big bang? After all these are the steps that we take in management of the economy of the country. These are steps which our predecessors had failed to take.
“The budget will be a very important occasion for this government, but then the next 364 days are equally important.”
“I’ll again say that I’m not tempering down the expectations. If you look at what happened in the last budget that we presented, we announced a particular direction in the Budget and that was followed up with a lot of activity and action over the next six months,” he said.
When asked about the government spending programmes, Jaitley said, “You should wait for the budget for exact numbers, but I think the government spending is important and fiscal prudence is equally important and therefore it is an onerous responsibility to maintain the balance.”
On the road ahead of raising tax revenues from oil when prices were falling, Jaitley said, “As far as petrol and oil prices are concerned, the prices are coming down. I can’t say what will happen in future, but then there is of course a lot of benefit that we have passed on to the people.
“There have been reduction on nine occasions and therefore the reduction was passed on by the oil companies on those nine occasions.
“Some benefits, the oil companies have subsumed themselves but not for profit but because they had also suffered serious losses on account of…. They cannot suffer the losses and pass on the benefits”, Jaitley said.
“They buy at a particular price and by the time they sell, the price might have gone down and they lose in the process.”
Jaitley said that the government inherited a manufacturing sector that was either flat or in bad shape and the economy was not in the best of its time.
“We have expenditure to meet, which includes social sector expenditure. Now I cannot cut down the social sector expenditure and I need money to meet those obligations. So some revenue raising has taken place what we have collected from taxes on oil,” he said.
Asked about the quantum of such tax revenues, he said this began towards the end of the year in December and in just about four months “this cannot be phenomenally high, but still it will give us some breathing space”.
On the longer term tax policy of the government and possible tax benefits for businesses, Jaitley said, “If manufacturing growth goes up, if GDP moves up to 8-9 per cent, there will be far more flexibility.
“But if my revenue position remains tight then I cannot borrow to give benefits. At the same time, I have repeatedly said we are not a high tax government. That’s not our belief, we want to increase volumes, we want to expand economic activities. I cannot share more before budget.”
On infrastructure spending, he said, “We will have to have some public spending because the public-private model, at least in the transient phase, has setbacks. There are highways, railways ports, we want to start activity on each of these.
“There will be public spending and there will be private spending that will be encouraged. Of course, the infrastructure financing from international sources is also important, because that is the investment where capital is available at much cheaper rates and we will encourage people to do that. That is what we are doing here at Davos too.”
Jaitley had said yesterday that his target was to bring down fiscal deficit to below 3 per cent over next few years.
When asked whether the government would look at additional revenue sources to meet these targets, he said, “There are various revenue sources for the government, including divestment, taxation, dividend, spectrum sale etc.
“As the economic activity picks up, the government’s capacity to raise revenue will also increase. I am not in favour of raising the rates of taxation, as that could become counter productive,” he added.