Private investments slow because of surplus capacity: Jaitley in Singapore

FM on fiscal consolidation, GST, recapitalisation of PSBs, and more

Finance Minister (FM) Arun Jaitley on Thursday attended the Morgan Stanley 16th Asia-Pacific Summit in Singapore, where he delivered the keynote address as well. 

The FM spoke on a wide range of topics, including fiscal consolidation, the goods and services tax (GST), and measures to enhance ease of doing business in India, among others. 

Here are Jaitley’s words on some of the pressing issues raised in his address in Singapore.

On fiscal consolidation: No pause but challenges arising from structural reforms, which could change the glide path.

On recapitalisation of PSBs: Recapitalisation of state-owned banks will be performance-linked. Am announcement regarding this will be made soon. There will be one or two instances of consolidation in state-owned banks over the next twelve months, or a year. State-owned banks are to be encouraged to use capital to lend to the micro, small and medium enterprises (MSMEs). There needs to be a concerted policy to direct loans to MSMEs in the near future.

On GST: The committee system has helped to build consensus. Rates will continue to decline over the next two years. There has been a 40 per cent (3.5 million assessees) increase in the number of assessees over the old system. Net tax revenue has exceeded pre-GST levels. The E-way bill will be cleared in Karnataka next quarter and other states will follow suit.

On private capex: Investments have been slow because of surplus capacity but a better global economy, coupled with bank recapitalisation and FDI and public investments should help improve private capex.

On interest rates: While every government wishes for lower interest rates, the final call is with the central bank.

On divestments: Power and oil companies to remain public sector companies. A mix of privatisation (AIR India and Dredging Corp) and divestments to be used to raise resources.

On future policy impetus: There are two areas of focus—

i) to build rural India (housing, roads, electrification, sanitation, education and health) 

ii) to build national infrastructure.

On ease of doing business: Two areas need immediate attention—

i) Enforcement of contracts – law department to present changes in contract law in the coming session of the Parliament

ii) Permission of land and buildings – The Department of Industrial Policy & Promotion (DIPP) is working with state governments to make land and building permits available online.

On farm loan waivers: Absolutely no central support on such waivers.

On land and labour reforms: States to pursue land reforms, while the Centre will be working on the consolidation of labour laws.

On politics: Lack of majority in the upper house of the Parliament is a poor alibi for lack of legislative reform. Most economic reforms need to legislation change.

Jaitley’s two-day visit to the island country in Southeast Asia is slated to come to an end on Thursday. He will be returning to New Delhi later this evening.