Time for hard decisions, says FM

Allays US business leaders? concerns on retrospective amendments

After Chief Economic Advisor Kaushik Basu’s remarks on reforms created a flutter in political circles and were later denied by him, Finance Minister Pranab Mukherjee on Saturday said it was time for the government to take some hard decisions.

Mukherjee, however, acknowledged that some reforms had slowed down due to the compulsions of a coalition democracy.

Speaking at a Washington-based think-tank, he also tried to allay the concerns of US business leaders over retrospective amendments to the Income Tax Act. “India is ready to address the concerns of American businesses within its legal framework,” he said.

The finance minister, however, rejected the perception that there was a policy paralysis in the country and said the government had, in fact, initiated the process of legislative and administrative changes on a number of issues that would benefit the economy.

He expressed confidence that three key legislation — on pension, banking and insurance — would be passed this year.

“We are now at a juncture where it is inevitable to take some hard decisions. And, this has been our approach, in line with my proposals in the Union Budget 2012-13 recently,” he said.

He was responding to questions at the Peter G Peterson Institute for International Economics, which had organised an event in association with the Confederation of Indian Industry (CII).

“On the legislative front, we have already committed the preliminary legislative process for the Pension Fund Regulatory Act, the Insurance Act and the Banking Amendment Act. These three, I do hope, would get legislated this calendar year — if not in this Parliamentary session, in the next,” Mukherjee said. The Budget session is slated to resume on April 24.

He, at the same time, acknowledged that there were certain reforms that could face difficulties, given the challenges of the coalition government.

“Of course, we have to persuade various stakeholders, including state governments. If we could do so, GST and the amendment necessary to implement it would possibly get through in this or the next session of Parliament. Thereafter, those would be ratified by a minimum of 15 state Assemblies before the end of the year,” he said.

“So far as the Direct Taxes Code is concerned, I am quite confident it would be implemented from the next financial year, after the laws are passed by the next session of Parliament. On tax reforms, it will be operationalised from the next financial year,” Mukherjee said.

“In respect of indirect taxes, the most important decision to be taken to implement GST, (for which) constitutional amendment is required, may be possible within this calendar year,” he said in response to a question.

A few days back, the chief economic advisor had been quoted as saying that major economic reforms in India would have to wait till 2014 parliamentary elections. Later, he denied these remarks and said the reporter concerned had juxtaposed his comments on repayment liabilities of European banks by 2014 with reforms in India.

The Opposition took a cue from his remarks and charged the government with policy paralysis, but those in the government did not see much in those words.

On retrospective amendments, the finance minister said: "Our policies are transparent... whenever there is any misapprehension, we are ready to listen and readjust when necessary."

"Therefore, we do not have a fixed mind with respect to a particular issue, but what is to be done has to be done within the legal system and legal framework," he said while responding to the concerns of the US industry.

"They (US businesses) have some doubts whether the tax regime in India is stable or not. It is stable. Even the current amendment, which is being debated, I have explained that the nature of the amendment I have introduced is of clarificative nature and not substantive amendments in the contents of the law," he said.

He said there was no uncertainty and attempt was being made to give certainty. "Secondly, the investment decision is not taken merely on whether or not there is tax concession," he added.