“I don’t think we will have to live in a high-inflation environment,” the country’s highest-ranked bureaucrat said in a rare interaction with the media. He said a part of the reason for the high inflation numbers was the base effect, while high food prices had contributed to the increase, too. “With good monsoon and better (food) production, inflation should be under control,” Chandrasekhar told reporters after a CII event, where key secretaries discussed the challenges to achieving 10 per cent growth.
The cabinet secretary’s inflation estimate compares with Chief Economic Advisor Kaushik Basu’s estimate of 5-6 per cent for the end of December. The Reserve Bank of India (RBI), which will present its first-quarter review of the Annual Policy Statement, had earlier said inflation, based on the wholesale price index, would be 5.5 per cent at the end of March 2011.
Chandrasekhar did not comment on possible RBI action to rein in inflation, but he said it would have to take a call on whether inflation was on account of high money supply or sectoral supply constraints.
“If it is on account of liquidity being much greater, obviously, there is a call for more monetary measures. How RBI will react, I don’t know. But it will be watching and will take measures as it goes along,” he said.
He, however, said the Indian economy was on course to achieve double-digit growth in the next few years.
He listed the government’s reform agenda, which included key changes in tax laws through the introduction of the Goods and Services Tax and said the Direct Taxes Code would be introduced in Parliament. In both cases, Chandrasekhar said, the new rules would come into effect from next April. During the closed-door meeting with CII members, government officials said consensus on the introduction of GST was emerging, while DTC would be introduced during the monsoon session of Parliament, which starts next week.
Besides, the cabinet secretary said the government was looking to restructure the subsidy mechanism. “We are looking at subsidies, how the subsidy system can be rejigged, to ensure it reaches the poorest of the poor on the one hand, and incentivises production on the other,” Chandrasekhar said.
Asked about the impact of licence fee from the sale of spectrum for third generation mobile telephony and wireless broadband, Chandrasekhar said the fiscal situation looked better.
The government has budgeted for a fiscal deficit of 5.5 per cent of the gross domestic product during the current financial year.
Patent Office to be split
The government said it was readying to split the office of the patents and trademarks controller.
Department of Industrial Policy and Promotion Secretary RP Singh told Business Standard the government was examining the proposal which would require legal amendments.
During a closed-door meeting with members of CII, the government disclosed the plan to outsource examination of patent applications in the Council of Scientific and Industrial Research, a person present during the meeting said.
In case of trademarks, retired judges are proposed to be roped in to put in place a set up with 60-70 functionaries to fasttrack the process.
The changes are expected to be finalised over the next six months or so.
Bill to replace Ulip ordinance
Finance Secretary Ashok Chawla today said the government would disclose its future course of action on the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010, only when a Bill to replace it would be tabled in the coming monsoon session of Parliament.
“Regulators have raised their points of view. The finance minister has taken note of those issues. The Ordinance, in whatever form, has to be placed before Parliament. It is matter of a few days when this (Bill) will be tabled and everybody would know what the future course of action on this particular piece of regulation is,” Finance Secretary Ashok Chawla told reporters at an event organised by industry body CII.
The Reserve Bank of India has raised concerns over the Ordinance that was promulgated to end the dispute between the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority over the jurisdiction to regulate unit-linked insurance plans, which are hybrid products offering insurance and investment.
The Ordinance had provided for setting up a committee headed by the finance minister to resolve such disputes in the future.