He said the economy had “weathered the storm” created by the global downturn and exuded confidence that it would grow at around 6%-plus in the current financial year. Mr Mukherjee was addressing the assembled audience of more than 100 CEOs at ET’s Power Breakfast with the FM in the Capital on Tuesday.
“Despite the global economic crisis, we grew by 6.7% last year. This year, we are getting mixed signals,” Mr Mukherjee said. The finance minister, however, noted that the government was not in a position to lower its guard, given the uncertainties over revival of the global economy.
India’s growth rate had dipped in 2008-09 from 9% in recent years, as the global economic meltdown cast it shadow. The FM said industry had begun to show signs of revival in the first quarter.
He said the key challenge now was to mitigate the impact of drought, which has hit many parts of the economy. The government is working to ensure availability of food. Developmental programmes are being geared to meet this challenge, and the focus is on making growth more inclusive.
Asserting that the intent of reforms was not in doubt, he said it had now been accepted that a calibrated approach to reforms worked better. “Economic reform is a continuous process and not a flurry of an-announcements,” he said.
Mr Mukherjee said the government was moving ahead with the proposal to set up an autonomous debt management office, which will handle the government’s debt and fresh borrowings from the Reserve Bank of India. It would remove the conflicts of interest inherent in the RBI’s role as investment banker to the government, monetary policy manager and the banking regulator.
Continuing with its efforts to deepen the corporate bond market in the country, the government would soon introduce repos—repurchase agreements—in the corporate debt market. Repos allow a holder to sell a bond for a short period to another investor with an agreement to buy it back at a higher price, the difference between sale and repurchase prices constituting the interest for the intervening period.
He said all efforts were being made to implement the goods & services tax (GST) from April 1, 2010. The tax is meant to replace all indirect taxes at state and central level such as excise duty, service tax and value-added tax, and create a unified internal market for India.
The FM’s assurance comes even as states such as Tamil Nadu and Chhattisgarh have expressed reservations on the GST deadline. The new direct tax code, said the FM, would be presented to Parliament after public debate. The thrust of the code is to simplify and improve the tax regime and the rates presented in the draft code are only illustrative, not final. The government had unveiled a draft tax code on August 12 to replace the four-decade-old income tax law.
On disinvestment, Mr Mukherjee said the government’s intention was not just to raise money by offloading shares of state-owned enterprises, but also to make them more productive and efficient. The finance minister had, in his budget speech, spelt out the government’s approach to disinvestment. Ruling out strategic sale of public sector enterprises, he had said: “While retaining at least 51% government equity in our enterprises, I propose to encourage people’s participation in our disinvestment programme.”
Emphasising that fiscal consolidation was high on his agenda, he sought to assure Indian industry that the Centre’s large borrowing would neither crowd out private investment nor nudge interest rates up. The government’s total borrowing for the current financial year is pegged at over Rs 4 lakh crore. The 13th Finance Commission, which is expected to submit its report soon, is drawing out a new road map for fiscal consolidation for both the Centre and states, he said.
Source : The Economic Times