Finance minister Arun Jaitley on Friday indicated that the budget could likely contain more reforms aimed at faster economic growth, while reassuring that the government would build a stable tax regime to address concerns of the Indian industry, and foreign investors rattled by previous tax litigations.
Jaitley said the Union Budget 2015-16 — scheduled on February 28 — is likely to contain measures focussing on reforms in power, energy, railways and ports.
He also hinted at more spending cuts to contain fiscal deficit. “We’re trying to rationalise expenditure as far as the government is concerned because we do not want the government to live on borrowed money.”
“The concept of spending beyond your means and leaving the next generation in debt to repay what we are overspending today, is never a prudent fiscal policy,” he added.
The extra spending cuts would be over and above the 10% that the Centre has already announced to meet the fiscal deficit target of 4.1% of GDP, which was crossed in November itself — four months ahead of the end of 2014-15.
Fiscal deficit is the measure of the amount of money the government borrows to fund its expenses.
Jaitley was speaking to a gathering of industrialists and planners in Mumbai through video conferencing. The event was attended by Maharashtra chief minister Devendra Fadnavis and industrialists including Reliance Industries chairman Mukesh Ambani, Tata Sons chairman Cyrus Mistry, Reliance Group chairman Anil Ambani and Axis Bank CEO Shikha Sharma among others.
The data on fiscal deficit is vital for the monetary policy as Reserve Bank of India governor Raghuram Rajan recently mentioned it to be one of the crucial factors, apart from inflation, that the central bank was closely monitoring, which would form the basis of its next monetary policy review scheduled after the budget. RBI left key lending rates unchanged on February 3, disappointing the industry that was expecting a cut in interest rates.
The finance minister also assured the industry of a stable tax regime that will not resort to unfair means to mop up revenue. “Our taxation policy was not exactly investor-friendly. In the last few months, we’ve made an effort to smoothen disputes.
“I’ve always believed that where taxes are to be paid, taxes will be collected, but no unfair effort will be made by the state so that investors are not harassed,” Jaitley said.
The government recently decided not to appeal against the Bombay High Court’s verdict in favour of Vodafone in a R3,000-crore transfer pricing case.
“Infrastructure creation in the last few years has slowed down,” said Jaitley. “If we are in the new environment where people are looking at us with a positive vision, if we want to see the effect on the ground, it is quite obvious that in the first instance the structure of financing has to be put in place.”