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Modi government's initiatives like Swachh Bharat, Goods and Services Tax (GST) and demonetisation are having the desired impact, with the latter two resulting in increasing tax compliance and squeezing quantum of cash in the economy, Indian Finance Minister Arun Jaitley has said.
In his keynote address via video conference — to the Berkel India Conference, Jaitley said that there is public support to the reforms being undertaken by the governments of the day both at the centre and state levels.
"I do hope that India is able to retain its growth rate once again and live up to the aspirations of its people because we must not forget that we not only have a large population to service, we have a very young population to service," he said.
The union finance minister is scheduled to arrive on nearly a week-long visit to the US tomorrow to interact with the US corporate world in New York and Boston and attend the annual meeting of International Monetary Fund and World Bank in Washington DC.
With young population there is not only a perception that they are being 'under-serviced', but also, they are becoming more and more aspirational.
"Time, therefore, is running against us," Jaitley said.
In the next one or two decades, if India has to take a challenge for moving into a higher economic group country, "we have to grow at a much faster pace," he said.
"Would you say there are long-term benefits and the country would have to wait for those? Or is there any way to mitigate the problem being faced by the country," the Union Finance Minister was asked.
A more serious analysis, he argued, would show that even within a matter of months there is a short-term positive impact of all these projects.
While demonetisation and GST are having the desired impact in terms of tax compliances and squeezing the quantum of cash in the economy, the minister said for the first time, Swachh Bharat campaign has brought to fore the importance of sanitation and cleanliness.
Observing that sizable progress is being made in terms of sanitation and cleanliness, he said for the first time in Indian history this has become a centre stage agenda and is moving forward.
The campaign is having both short-term and long-term impact.
"It's a movement that has become far beyond a governmental program. It a mass movement," Jaitley said.
Before demonetisation, Indian normal was to live with a high cash economy, not paying taxes, "you buy a property, you transact partly in cash, and in business, you maintain two sets of accounts," he said.
"How can a country, which aims to be the fastest growing major economy in the world, which aspires to grow from a developing to a developed economy, continue with the normal of this type," he asked.
Cash itself involves several challenges.
It leads to corruption and several other problems.
"Has the digitisation transaction increased from Rs 70 crores to Rs 130 crores today, it almost doubled," the finance minister said.
In the immediate aftermath of demonetisation, Jaitley said there has been a sharp reduction in insurgent and terror activities in states like Jammu & Kashmir and Chhattisgarh.
The funding of the terror itself has gotten squeezed, he told the Berkeley students.
"You are having terrorist incidents (now), but the fact that you were finding 5,000-10,000 stone throwers being provided with money by the terrorist organisations, why is it that in the last eight-10 months it has not happened?" he asked.
Moving on to GST, the minister said this has resulted in the creation of a national tax structure.
"In the three months, you have all the checkpoints in states disappeared, you have a clear flow of goods and services which has started all over the country," he said, adding that companies are sharing information about the distributors and retailers.
Slowly the whole chain is becoming, he said, adding that today many more people have registered themselves.
"But in terms of cash collection, the whole process going online, the process of coming down, one thing I can tell you the tendency of some to have the whole chain operate in cash will suffer a setback," Jaitley said.
GST, he said has been a "reasonable smooth transformation," but there is scope for improvement.
"I think in GST Council we have succeeded in creating India's first federal institution," he said.
The transition, he said, would be a far more successful experience which will plug the holes into India's taxation system.
"The obvious challenge to the country is to grow and grow fast. It has to grow at a much higher rate than we have been growing in recent history," he said adding that the benefits of the growth must also reach that section of the population which till date has been the least serviced one.
For this, more resources are required.
India, he told the Berkeley students has transformed out of a more conservative mindset and is not tuned to getting integrated globally much more than it was in the past.
Therefore, policies with regard to technologies and getting investment into India are much broader than they have been in the past, he said.
Observing that conventionally India was a far more difficult place to do business, he said that situation has substantially improved for the better.
Identifying corruption as one of the two stigmas for India, Jaitley said the institutional mechanism to fight corruption has become much stronger.
Asserting that direct taxes have to become "more rational and more reasonable" the Union Finance Minister said he has already announced a roadmap to bring down the corporate tax to about 25 per cent and is trying to ensure that India becomes a far more compliance society and also tax assessment is more technology driven rather than human interaction.