FM hints at bold steps to cut fiscal deficit

Jaitley also indicates industry-friendly tax policies

Finance Minister Arun Jaitley on Tuesday hinted at taking bold measures by discarding populism to curtail wasteful expenditure and making "reasonable" tax policies for reviving economic growth, barely nine days before the presentation of the Budget for 2014-15 in Parliament. His comments also came a day after official data showed a worrying fiscal deficit scenario.

Addressing a function of the Institute of Chartered Accountants of India (ICAI) here, Jaitley lambasted the previous United Progressive Alliance (UPA) government for dissuading investors by its unstable tax policies and slow decision making process, saying the legacy that he has inherited was not a cause of envy. After three-four years of pessimism, he said there is hope that bold decisions will be taken now.

"We have to make conscious choices... We have to realise that if you want services, you have to pay," Jaitley said at the function held to mark the Chartered Accountants Day.

Pointing out that in 1991, the country made a good choice, he said, "Today, we are again to make a choice between fiscal prudence and mindless populism."

"Does India need a certain amount of fiscal discipline? Do we need prudence or do we need some mindless spending and populism?" he asked.

Pointing out that tax buoyancy has come down, he flayed the previous United Progressive Alliance government for dissuading investors by its changing tax policies.

"The fact that the world suspects that we don't have a stable tax regime itself has dissuaded investors...policy paralysis was unknown to governance vocabulary... Other addition to this... is tax terrorism," he said.

The minister said high growth, which means greater tax buoyancy and generation of more jobs, requires high investment.

"To ensure attractive investment, your infrastructure should be supportive, your decision making has to be quicker, your taxation regime has to be reasonable and the prospects of profitability has to be there," he said.

If these prospects are not used, then there are other destinations for investment, he cautioned.

India's economy clocked sub-five per cent growth in the last two financial years, which has impacted its revenue generation. Pointing out that oppressive legislation can scare away investments, Jaitley promised to revisit those. "I am willing to look at legislation because as the new government we have the liberty to write afresh..."

There are a number of representations from the industry to re-work the companies Act, while the government has already shown its intention to change the retrospective amendments of the Income Tax Act.
See KPMG view on the Budget : mybs.in/9c3fa