Finance Minister Arun Jaitley has promised several steps aside from those in his Union Budget to aid economic revival and growth.
Saying recent macroeconomic data suggested signs of revival, he assured investors of a stable tax regime, while highlighting the importance of targeting subsidies to identified sections.
“We have to take a series of steps to make these (early) signs (of growth) form a pattern. The Budget was only one of those. Many steps lie outside the Budget,” he said on Friday, in reply to the debate in the Lok Sabha on the Budget for 2014-15. Later, the Lok Sabha passed the Appropriation Bill. The Finance Bill is expected to come up in the House later this month.
Jaitley announced only a couple of more measures, such as setting up a fund of Rs 2,000 crore in the National Bank for Agriculture and Rural Development for food parks and Rs 50 crore for de-addiction centres in Punjab and other border states.
“Various requests with regard to taxation proposals have come to me. I am noting each one of them. I will give my response during the course of my reply to the Finance Bill debate next week or thereafter,” he said.
One of the major tax requests made is on the issue of retrospectivity in doubling of the long-term capital gains tax on debt mutual funds to 20 per cent from the present 10 per cent.
Jaitley also corrected an anomaly between the content of the English and Hindi versions of his Budget speech, in relation to accelerated deduction (AD) in the wind energy sector, a tax benefit scheme for those who set up or invest in a wind energy farm.
It was there till 2012 and the Hindi version of the FM’s speech said it would be restored. The English version did not say so.
“I will restore accelerated depreciation in the wind energy sector. Necessary amendments will be made in the Finance Bill,” he said.
Jaitley noted industrial production grew four per cent in the first two months of the current financial year; it was 4.7 per cent in May.
He said a revival in automobile sales had taken place due to excise duty concessions given by his predecessor, P Chidambaram, and extended by him. Jaitley also pointed to an improvement in exports and capital inflows.
Merchandise exports rose in double digits (10.2 per cent) for a consecutive month in June. It rose 9.3 per cent in the first three months of the current financial year. Foreign direct investment (FDI) inflows rose 34 per cent to nearly $4 billion in the first two months of the financial year.
“It is too early to assume it is a trend. It is only an early sign,” he said.
Jaitley said his Budget hadn't increased tax rates because the government believed reasonable rates of taxes on products were bound to encourage economic activity.
On the other hand, he said, the Budget had raised the threshold for income tax exemption by Rs 50,000 and increased the tax deduction limit by another Rs 50,000 for savings, which would help in raising the latter rate, now down to 30 per cent.
“So, lower taxes will increase economic activities. Yes, we are pro-business. There is no contradiction between being pro-business and pro-poor. We have tried to boost the infrastructure sector, the manufacturing sector, did not cut allocations of any of the social sector schemes.”
Saying many foreign investors had told him they were taking their businesses out of India due to tax problems, he said the Budget had tried to solve the problem of retrospectivity in indirect acquisition of shares and settle tax disputes, amounting to Rs 4 lakh crore in various courts and appellate authorities.
The government is trying to restore the confidence of domestic and foreign investors by bringing “civility” in the taxation system and removing the perception of “tax terrorism”, he said.
- ”On private investments: These are necessary to boost the industry and manufacturing within the country that would lead to job creation
- On taxes: If you put higher taxes on products, people will buy products from outside. Lower taxes will increase economic activities
- On interest rates: Interest rates have gone up because inflation is high. I hope interest rate comes down (with decline in inflation)
- On subsidy policy: It is lopsided as even well-off people avail of it through schemes like education scholarship and oil, putting more burden on the exchequer”