India’s economic growth is expected to improve despite unfavourable global winds as the government continues with several reform programmes, Finance Minister Arun Jaitley said on Monday.
Emphasising that India has the potential to be the bright spot in the gloomy global economic scenario, Jaitley said fiscal deficit is coming down and inflation is very much under control.
“I see the road ahead with regard to several reform programmes of the government continuing. Economic reforms will be an ongoing activity. There is no finishing line for that,” Jaitley said while addressing global investors.
A significant change that is taking place is that the reforms are moving in the forward direction consistently and states have also realised that they have a great role in this growth story, he added.
Jaitley said the Goods and Services Tax (GST) is one of the most important taxation reforms and the government has also opened many sectors, including defence manufacturing.
“Bankruptcy law is ready to be taken up in Parliament, laws for resolution of contracts, allocation of public contracts and public procurement, are being pursued.”
Assuring foreign investors, he said putting tax issues to rest is certainly a “high priority” for the government.
About growth prospects, the Finance Minister said he thinks India has the potential to be the bright spot even in somewhat gloomier situation. “We grew by 7.3 per cent last year and I am sure we will improve on that front this year.”
“I am conscious of adversities that come our way. India ended last year with 7.3 per cent. We had good fiscal figures. Fiscal deficit is gradually coming down and we are now aiming to bring it down in the next 2-3 years to 3 per cent.
“Current account deficit is down to 1.2 per cent, foreign exchange reserves are very high, inflation is very much under control and therefore macroeconomic indications seem to be positive,” the Finance Minister said.
Observing that these numbers have come in the midst of a global slowdown, Jaitley said, “Global headwinds are not helping us and at times are creating adversities, particularly the external factors have impacted our exports and in favourable global conditions we can improve on the growth rate of 7.3 per cent in a significant way.”
The GDP growth slowed to 7 per cent in the April-June quarter, from 7.5 per cent in the previous quarter. The government expects a growth rate of 8-8.5 per cent for full 2015-16 fiscal.
Expressing hope that agriculture growth would revive despite deficit rains in monsoon season, Jaitley said, “I am told the monsoon has returned in the past few days.”
“GST is stuck in Upper House, but not because of any ambiguity, but due to one political party. The numbers in Parliament are in favour of the bill and I am sure in the next session it would be passed,” Jaitley said.
He said a strong sense of competitive federalism is driving the Indian growth story and the states are aggressively seeking investment.
“Changes in the land rules for smart cities and roads etc ... the progressive states have shown willingness to change the rules and they have said the Centre should allow them and we have agreed,” he said.
Jaitley said most Chief Ministers are going abroad to attract investors and many of them are organising investment summits in their own states.
The Finance Minister said that ease of doing business is a continuous process. “A lot of improvement has been done and more needs to be done... Resolution of long-pending tax disputes is a high priority,” he noted.
He said that to make things easier, states’ rankings have come out which would help investors understand which is a better place.
“India’s overall ranking has been low, but I am sure that when the next set of data comes, our ranking will improve significantly,” Jaitley said referring to the country’s place in the World Bank’s rankings based on ease of doing business.
Jaitley said a cause of concern has been that domestic private investments have been slow.
“I know domestic companies are working with constraints in the wake of global demand slowdown. The GST is one of the most important taxation reforms,” he said.
India always had large amounts of natural resources, but it remained bogged down by controversies, including in coal, spectrum and minerals, he added.
Stating that there has always been a cautious optimism in investors’ mind about India, Jaitley said on one hand they see a huge market, but also a country which at certain times has not availed the opportunities. “Therefore the cautiousness in optimism always remains there,” he added.
“I want to say today that India is now changing. It has a government which has got majority which is willing to take even difficult decisions. We have a Prime Minister who is a strong leader with a track record of development-oriented governance and who is capable of taking decisions which are critical to the country’s development,” Jaitley said.