Brushing aside criticism of not having done enough reforms in the Budget, Finance Minister Arun Jaitley has said this was the beginning of the journey and he did all he could do under the given circumstances.
“This is the beginning of our journey, not the end. Abhi hum jitna kar sakte the, humne utna kiya hai (Whatever I could do now, I have done). And all the decisions are not taken on day one,” Jaitley told PTI.
Jaitley, who presented his maiden Budget on July 10, is being criticised, especially by rating agencies, for not repealing the retrospective tax amendment and not providing enough sops for the industry.
The Minister, however, has provided relief to the salary earners by sacrificing Rs 22,200 crore in direct taxes.
Refuting the criticism, he said the government has taken important steps which were necessary but not taken in the past 10 years.
“Each one of those major issues, whether it is insurance or real estate, defence, retrospective tax, simplification of tax administration, transfer pricing (were important). So in 45 days, we have tried to address each one of them and then we have given impetus to the manufacturing sector.”
“These are important decisions. Our government is very clear in some sector you got to give more relief. Aam aadmi par aap kitna bojh denge? (How much can we burden the common man?). So, that is why we tried to rationalise individual taxation. We have also removed inverted duty structures,” Jaitley said.
The Budget has proposed increasing the income tax exemption limit to Rs 2.50 lakh from Rs 2 lakh and raised the ceiling on investment in saving instruments to Rs 1.5 lakh from Rs 1 lakh per annum.
On criticism of Budget not having a detailed road map for fiscal consolidation, Jaitley said: “I have not spelt it out in details because I have provided for Expenditure Management Commission and if anybody feels that in 45 days you can come out with the scheme of rationalisation of subsidies to which people in the last 66 years have not found an answer, we must rate the agencies then.”
He said that there were two ways of reducing fiscal deficit —either you spend less or you earn more.
“The ideal situation is that you should earn more because if you spend less then you are contracting expenditure and you may end up contracting some parts of the economy... I have looked at unresolved issues that they (UPA government) left behind or the problems they have left behind,” he said, adding in the period of 45 days he has tried to address most of these problems.
The Budget proposed restricting fiscal deficit this year to 4.1 per cent of GDP and bring it down to 3 per cent by 2016-17. This is in line with the roadmap laid out by the UPA government.
Later in an interview to Karan Thapar for Headlines Today, Jaitley said the two challenges he faces in achieving the ‘daunting’ fiscal deficit target of 4.1 per cent in 2014-15 is monsoon and global oil prices, which are outside the control of government.
“It (monsoon failure) will affect us...we are cautious about it. Therefore, when I said I accepted 4.1 per cent, I knew it's a daunting challenge, so I have not said that I will achieve it. I will take up the challenge and I will endeavour to achieve it,” he said.
“At the moment, oil prices are moderating. I can't predict what will happen 15 days from now. As far as monsoon is concerned, it's too early to write it off completely. So let's wait for a couple weeks. Even if we have weak monsoon, India has lots of food stock,” he said.
Improving investor sentiment will spur manufacturing and tax buoyancy, he said.
“My challenge for 4.1 per cent is that either I cut down my expenditure as my predecessor did or I let the growth rate go up so that economic activity expands,” he said.
“I am consciously choosing the latter and therefore I am trying to improve the investment environment in the country. I am trying to improve environment under which manufacturing can grow and if we grow in those areas and achieve a certain level of growth then tax buoyancy would take us to a situation where we can perhaps achieve 4.1 per cent,” he said.
The Finance Minister said that he is confident of going back to 8 per cent growth during his tenure.
“I have indicated that the intention is over next 2-3 year to get back to the (high growth path) road...I hope 8 per cent growth would happen in this tenure. I am reasonably confident,” he said.
The growth rate in the past two financial years have slipped to sub-5 per cent.
On reforms, he said the government would take up those issues first which are easy to be implemented.
"There is no point in solving the UPA policy on multi-brand retail....you start with a reform knowing fully well that roadblocks are likely to be created. You reform those areas which are very easy and possible....," he said.