With the Opposition targeting the Government on its handling of the economy, Finance Minister Arun Jaitley on Wednesday countered it saying the NDA dispensation inherited an economic situation of negative sentiment, where no one was willing to invest but the Modi regime’s initiatives in the works will attract large foreign investments. He said he was hopeful of an over 6 per cent growth in 2014-15.
Pointing that the Government is working on a “civilised” tax regime to attract investments from overseas and raising the foreign investment cap in insurance sector soon, Jaitley lashed out at the erstwhile UPA Government for its ‘ultra-aggressive tax policy’. “There was reduced economic activity. The negative sentiment was further accelerated by ultra-aggressive tax policy,” he said. He did not name the Vodafone case but said the retrospective tax brought during UPA rule had only brought “bad name” to India rather than garner any additional revenue.
He talked about cooperative federalism and announced the release of `11,000 crore to States in the current fiscal as part payment towards CST compensation to facilitate roll-out of the Goods and Services Tax (GST). He will be meeting the State Finance Ministers on the issue on Thursday.
Jaitley was replying to the debate in the lok Sabha on Supplementary Demands for Grants for an additional expenditure of over `12,500 crore. However, the actual cash outgo would be `500 crore and remaining expenditure would be matched by saving or enhanced receipts and recoveries.
Advocating greater powers for States, Jaitley said a principle of ‘cooperative federalism’ is being followed in setting up the new body in place of Planning Commission. “Our Government stands by the principle of cooperative federalism, empowering States, least number of Central schemes and more State schemes,” he said.
Referring to the Select Committee report on further opening of insurance sector, Jaitley said, “large investments are waiting to come in. We have to open the doors.” The committee has suggested a composite foreign investment cap of 49 per cent in the insurance sector, as against 26 per cent FDI cap currently.
On attracting overseas investments, he said, FDI regime has already been relaxed in defence sector and has generated lot of interest from top global manufacturers. On the growth prospects, Jaitley said there are challenges but hoped that it would be within the projected range of 5.4-5.9 per cent in 2014-15 and cross 6 per cent in the next financial year. Economic growth fell to sub-5 per cent in two consecutive fiscals in 2012-13 and 2013-14, he said, adding it had an impact on revenue collection, fiscal deficit and Government’s expenditure on developmental works.
Referring to the petroleum price issue, Jaitley said his Government has reduced prices seven times and “if the trend continues, we will reduce it further”. The Government, he added, did increase the excise duty on petrol and diesel to raise some revenue to meet its development expenditure. The hike in excise in diesel and petrol is expected to yield the exchequer `10,500 crore in the current financial year.
On certain issues raised by the opposition parties during the debate, Jaitley said it was a “myth” that prices of essential drugs have gone up. The other myth was that the Government is amending the patent law, he said, adding there was a proposal of the previous Government which has been dropped.
The Minister also clarified that the NDA Government has not reduced the allocation for MGNREGA scheme. As regards the subsidies, he said, the Government would continue it for the poor but would curtail it for those who do not need it.