Pranab Mukherjee Assured the Capitalist World that Government of India is all set to Wipe out the Subsidies to execute an unprecedented Damage control!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.India is working towards elimination of subsidies in all areas except for food and is also taking concrete steps to reduce massive leakages in subsidy.Seeking to allay apprehensions on the proposed retrospective tax amendment, Mukherjee said India is ready to address the concerns of American businesses within its legal framework.
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Pranab Mukherjee Assured the Capitalist World that Government of India is all set to Wipe out the Subsidies to execute an unprecedented Damage control!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.India is working towards elimination of subsidies in all areas except for food and is also taking concrete steps to reduce massive leakages in subsidy.Observing that the global economy appears to be strengthening gradually after suffering a setback, Finance Minister Pranab Mukherjee has said developing countries and emerging economies are expected to continue as growth drivers.Finance Minister Pranab Mukherjee has said the country remains an attractive place to invest, despite controversial plans to make foreign companies retroactively liable for taxes
The statement by the Prime Minister's Economic Advisor Kaushik Basu that economic reforms are not possible till the 2014 general election has provided fresh fodder to the ruling combine and the Opposition to take a dig at each other.While the Opposition maintained that it was the United Progressive Alliance government which was responsible for the slowdown in economic reforms, the Congress argued that the Opposition should rise above partisan politics and help the government push through important bills on economic reforms.
Rejecting criticism that the UPA is not serious on reforms, the Finance Minister, Pranab Mukherjee on Saturday said it is now time for the Government to take some hard decisions and expressed confidence that three key legislations on pension, banking and insurance will be passed this year.
Mind you,International Monetary Fund (IMF) said India would need to accelerate economic reforms to achieve its "potential" growth rate even as it expressed concern over high inflation.In a statement issued after its Article IV Consultation with India, the IMF said that Reserve Bank of India (RBI) should be ready to increase rates to check any further rise in inflation.
The statement comes a day after RBI reduced interest rates by 0.50 per cent to arrest declining growth.
Allaying fears of US business community over proposed controversial amendment to the I-T Act to bring into tax net Vodafone-type deals, Finance Minister Pranab Mukherjee has said changes were only clarificatory in nature and India was ready to listen to concerns.
"There is some sense of despondency amongst a section of USA businessmen, particularly because of their apprehension-- and I would say misapprehension -- about certain legislative amendments which we have proposed...Our policies are transparent ... Whenever there is any misapprehension, we are ready to listen to them and readjust it when it is necessary," Mukherjee said.
The issue pertains to the proposed amendment to the Income Tax Act with retrospective effect, which would bring Vodafone-type deals under tax net and the UK-based telecom firm would be liable to pay Rs 11,000 crore tax for its acquisition of Hutchison's stake in Hutchison Essar Ltd in May 2007.
Mukherjee said the amendments proposed are mainly clarificatory in nature and not a substantial change and the tax regime in India is stable.
"We are not having any 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 questions from the US industry at a function here.
Several global bodies have written letters to Prime Minister Manmohan Singh and other ministers saying that the government's proposal to amend the Income Tax Act to bring into tax net Vodafone-type overseas deals involving domestic assets would hurt foreign investment.
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.
"My strategy would be two-pronged, first to prevent the leakage of subsidy by taking technological advantage by ensuring that subsidy reaches the targeted beneficiary. I have already started taking some measures in that direction," Finance Minister Pranab Mukherjee has said.
He was responding to a question at the Peter G. Peterson Institute for International Economics – a Washington-based think tank, which had organised the event in association with the Confederation of Indian Industry (CII).
"For instance all consumers of LPG are receiving at the market rate but targeted beneficiaries are receiving the subsidies in their bank accounts. This is operationalised in pilot project and after some time it would be applied universally," he said.
Similarly, the government is trying to address another area of fertiliser and kerosene where there is misuse of subsidy.
"Third area is of course of quantum ceiling ... currently is 2 per cent of the GDP, target is to reach 1.75 per cent in three years. I am quite confident that it is possible to do so," he noted.
Reeling under the impact of high oil prices, India has pressed for improving information mechanism and transparency in global commodity markets to contain volatility in rates.
"We feel that improving information and transparency in commodity markets, including futures and over-the-counter markets, would help alleviate the problem," Finance Minister Mr Pranab Mukherjee said in his address to G-20 Ministerial meeting here.
"We therefore welcome the G-20 initiatives in this direction. There is an urgent need for countries to put in place a mechanism for gathering commodity market information and creating a publicly accessible comprehensive data base on production, price, inventories, demand and supply forecasts, etc," he said.
An unfettered access to vital information on the commodity markets would discourage excessive speculation and exaggerated price movements, he said.
Crude oil prices touched $ 125 per barrel in March. Future price of crude oil for June is still $ 118 a barrel.
As a major commodity importer, he said, India is very concerned about the increase and volatility of commodity, and especially oil prices, in recent times that seem to be not aligned with underlying economic fundamentals.
"These distortions are, inter alia, adding to inflationary pressures in a number of developing countries, including India," he said.
As global economy moves ahead on the path of recovery, Finance Minister Pranab Mukherjee has asked G-20 countries to push for policies that create jobs and step up efforts to support investment in real sector.
On the sidelines of the Spring meeting of the IMF and the World Bank, Mr. Pranab said credible action for both short and medium-term policies to create jobs and employment needs to be a cornerstone of the G20 Framework.
Mr. Mukherjee said there is general concern over the global employment scenario, especially the falling labour participation rate and growing youth unemployment.
"Leaders had consequently tasked us to mainstream jobs and employment issues into the framework exercise. Persistent high unemployment tends to have significant long-lasting detrimental impacts on the economy, holding back economic recovery further, adding to social tensions and adversely affecting productivity and growth in the medium to long-term."
The Finance Minister said the world has been pre-occupied with dealing with the problems in the financial sector, which was need of the hour.
"However, keeping in view the emergent situation, some members have been stressing the need to step up efforts to support investment in the real sector, and especially in infrastructure, at a global level to help revive global growth and support demand and job creation," he argued.
"This route to reviving global growth has not received the attention that it merits. To the extent that much of this investment, including in infrastructure, will occur in developing countries, it would also help rebalance global demand, as also, redirect savings," he said.
Some developed countries also need to increase investment and upgrade their infrastructure, he added.
"While construction works would stimulate local growth and job creation, the large demand for capital goods created for modern infrastructure would also stimulate private investment and job creation globally," he said.
G-20 countries, he said, will need to develop a framework to assess the progress made on G20 commitments.
"Since the time between the Cannes and Los Cabos Summits is quite short, this would be an important component of our Action Plan. It is also critical for our own credibility in the eyes of the world," he said.
The Framework Working Group has indicated that assessment in some areas is complicated by the lack of a common framework to assess progress, he said.
Making his presence felt at during a round of rapid-fire meetings here in Washington with the G-20, G-24 and Bretton Woods institutions, Finance Minister Pranab Mukherjee kept up the pressure on what he described as the "disappointing" pace of reform on quota and governance issues at the International Monetary Fund and also went to lengths to clarify India's position on certain tax amendments in the 2012-13 budget.
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.
Seeking to pin down the timeline for the next steps in the quota and governance reform Mr. Mukherjee said at the G-20 that India would continue to contribute towards a comprehensive review of the IMF quota formula by January 2013 and the completion of the next general review of quotas by January 2014.
Reflecting their growing heft in the outcome of reform negotiations the G20 nations in their final communiqué commented on their contributions towards the effort to boost the resources of the IMF.
"Together with the International Monetary and Financial Committee we have reached agreement to enhance IMF resources for crisis prevention and resolution," the G20 noted, adding that there were now "firm commitments to increase resources made available to the IMF by over $430 billion in addition to the quota increase under the 2010 reform."
Mr. Mukherjee bluntly said that India was "disappointed at the pace of the reform on quota and governance issues," adding that a dynamic process of reform was necessary to ensure the legitimacy and effectiveness of the IMF and the best possible means to improve governance and legitimacy is by ensuring that there is no slippage on crucial reforms.
On the tax measures introduced in India's latest budget the Finance Minister admitted that he was aware of a "sense of despondency among U.S. businessmen," alluding specifically to "their misapprehensions about certain legislative amendments that we have proposed."
The U.S. India Business Council and other industry organisations here have recently focused attention upon a tax amendment in the most recent Indian budget which, they allege, would retroactively tax business deals in which a non-resident transferred shares into a non-Indian company that derives its value "substantially" from Indian assets.
Commenting on this concern, which U.S. Treasury Secretary Tim Geithner was said to have brought up with Mr. Mukherjee, the Minister said, "Would the income tax cases be reopened from 1962? The answer is 'no.'"
In comments made during a talk at the Peterson Institute for International Economics he added, "No case can be reopened which is more than six years old... [On the question of whether India's tax regime is stable or not] My answer is it is clear, it is stable."
Speaking at a Washington-based think-tank, he said Government is committed to economic reforms and has, in fact, initiated the process of legislative and administrative changes on a number of issues that would benefit the economy.
"We are now at a juncture when it is inevitable to take some hard decisions. And this has been our approach, as I outlined in the proposals for 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).
"In fact, 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 Acts, I do hope, would get legislated in this calendar year. If not in this Parliamentary session, then the next session," Mukherjee said.
At the same time, he acknowledged that there were certain reforms which could face difficulties given the challenges of the coalition era.
"Of course, we have to persuade various stakeholders, including State Governments,… if we could do so perhaps GST and the Constitution Amendment necessary to implement GST would be possible to get it through this or the next session of Parliament and thereafter be ratified by a minimum of 15 State Assemblies before the end of the year," he said.
"So far as direct taxes are concerned, I am quite confident that it would be implemented after the laws are passed by the next session of Parliament, from the next financial year. On tax reforms, direct tax would be operationalised from the next financial year," Mukherjee said.
"In respect of indirect taxes, the most important decision to be taken to implement the GST (for which) Constitutional Amendment may be possible within this calendar year," he said in response to a question.
Earlier, in his opening remarks, Mukherjee said the Indian economy is in some ways better placed than many other nations to withstand this fresh round of global economic turmoil.
"India's resilience results from the fact that the bulk of India's GDP is domestic demand driven. India's External Commercial Borrowings Policy has been successful in maintaining external debt at sustainable levels," he said.
"India's banking sector is robust and our regulatory architecture is mostly in place. There is an unwavering commitment to reforms to further consolidate our economic strengths. The GDP growth in 2012-13 is expected to be 7.6 per cent, which in the normal course should rise by another percentage point in fiscal 2013-14. The downside risks of sticky global commodity prices, especially fuel oil, remains and could undermine the anticipated growth recovery," he said.
"We have shown in the recent past that we have the capacity to grow fast. At the same time, we are stepping up our efforts to create more inclusive outcomes for our developing society," he said.
"Favourable demographics, a resilient economic structure, high savings and investment rates with potential for further growth, stable democratic institutions and continued policy emphasis on improving social and physical infrastructure are factors that can help us in moving forward and even shouldering some of the global responsibilities. Indian enterprise has matured and shown that it has the capacity to compete with the best," he said.
Smelling something dangerous for the Indian economy in the statement of the Union government's chief economic adviser Kaushik Basu, Murli Manohar Joshi said he (Basu) was trying to mislead the citizens of India by saying that India won't pursue any major economic reform until after 2014 parliamentary polls.Times of India Reports.
"In fact, Basu is advocating economic reforms in India on the dictates of International Monetary Fund and the World Bank," he said while talking to media persons on Saturday. It was the exclusive right of the elected representatives of people and not the IMF and WB to determine the policies of Indian economy, he said. He added that Basu wanted to give a message to elect such a government in 2014 that could follow the economic policies of IMF and WB. It would be fatal for the Indian economy, he said adding "the fact is that the policies of IMF and WB have failed across the world." It was proved that the GDP was the scale of growth of the nation, he said and added that the growth in GDP did not mean the growth of the common people.
"India should determine its own scale to measure the economic growth," said Joshi and added that the UPA government should create its stand on this issue. "We would want a discussion in the Parliament on the issue of economic growth and Western model, which has failed," he said and added that India should develop its own economic model for the benefit of people.
Replying to a query regarding the row between the government and the Army chief, Joshi said both parties should had resolved the issue, instead of making it a matter of controversy in public. "We are also probing the defense related matters, but we never make it public," he said and added that the episode showed that the government had no guts to resolve serious issues.
Joshi said he had urged the Finance Minister to withdraw the excise duty on gold and jewelry in retail and small sector. The Finance Minister said the matter would be discussed in the coming session of the Parliament during tabling of the finance bill, Joshi claimed.
Govt not in position to bring economic reforms: Poll
Hindustantimes.com
New Delhi, April 20, 2012
First Published: 22:55 IST(20/4/2012)
Last Updated: 00:51 IST(21/4/2012)
Finance ministry chief economic advisor Kaushik Basu during a press conference. (Reuters Photo)
A political debate began on Friday on government's chief economic adviser Kaushik Basu's reported remarks that major reforms were unlikely before the next general elections in 2014.
Kaushik Basu reportedly said this week at the Carnegie Endowment for International Peace think
tank in Washington, DC, that key reforms "including opening up its retail sector" would probably be put on hold as the government deals with resistance within its coalition, persistent corruption and infrastructure upgrades. Basu said recent scandals over the past year had made government officials unwilling to take risks, but that less important bills might make it through Parliament.
"We are going through a difficult year," he said, according to Press Trust of India.
Later in the day, Basu clarified that his comments on economic reforms getting a push after 2014 was not linked to India's general election but to a "possible European crisis". "At the Carnegie lecture, the gist of my argument was that 2014 was an important year because numerous European banks would have to begin to repay $1.3 trillion worth of loans that they had received from the European Central Bank," Basu said in a statement.
"Some of this was reported on poorly, juxtaposing my comments on Europe in 2014 with the Indian election of 2014. This is unfortunate, because the central message of my talk was the possible European crisis of 2014 and India's major rise thereafter, likely overtaking China," he said.
Reacting to the reports, the opposition Bharatiya Janata Party (BJP) said the government seems to have decided against any more reforms as Prime Minister Manmohan Singh's chief economic advisor Kaushik Basu had said reforms were not possible till the 2014 Lok Sabha polls. The party accused the the government of "policy paralysis".
BJP leader Rajiv Pratap Rudy said: "It is an indication that the government has conclusively taken a call that no more reforms can take place in the UPA II."
Rudy said allies were no more supporting the government on anything, whether it was on bills or the "burden" of charges against the United Progressive Alliance (UPA) like graft and price rise.
"Major alliance partners will not like to go with the Congress any more, the burden of charges on the UPA government, be it graft or price rise, allies are no more with them," Rudy said.
"The trust in alliance partner has waned. It sounds of impending elections," he added.
The Communist Party of India-Marxist (CPI-M) cautioned the government against going on the path of financial reforms while Bharatiya Janata Party's (BJP) ally Janata Dal-United (JD-U) said the economy needed fiscal corrective measures.
BJP spokesperson Nirmala Sitharaman said: "The will to govern is being lost. Executive decisions are being referred to court. Different and varied views are coming from the government."
She said there "was no commitment to reforms by the government in spite of the opposition's willingness to engage".
She also accused the government of "lack of preparation" on key bills.
JD-U leader NK Singh said macro-economic situation of the country was far from happy.
In defence of the accusations, UPA party members said that the bills were pending and denied the chief economic advisor was talking about "policy paralysis".
Information and broadcasting minister Ambika Soni said Basu spoke in the context of "what happened in the last two sessions" of parliament and of the opposition "not cooperating in the discussion on 40-50 bills" that were pending.
Minister of state for personnel V Narayanasamy said the country had recorded nearly seven percent growth despite economic recession in some parts of the world. "There is good agricultural output. Service sector is getting better," he said.
Congress spokesperson Renuka Chowdhury said, "No reform can come about singly. The changes and orientation has already started."
The Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, played down the row over Chief Economic Adviser Kaushik Basu's comment on the slow pace of economic reforms, saying reforms are always needed to be done and the government is focussing on bringing the economy back on track.
"We are in the process of putting together the 12th plan and that will lay out a whole five-year programme. But you never finish all the reforms that are needed to be done," Ahluwalia said.
"There are always reforms that need to be done but that does not mean that you can't get the economy back on high growth path and that is what we should be focussing on at the moment," Ahluwalia said when asked by the media to comment on Basu's remarks that major reforms would not be easy till the 2014 Lok Sabha polls.
Hindustan Times conducted a poll asking viewers if the government is in a position to implement the economic reforms. 83% of our respondents said the government was not in a position of implementing economic reforms, while 15% felt that govt could bring about the reforms. Two percent of our respondents had no opinion on the issue.
Ahead of what is expected to be a stormy Parliament session that reconvenes on Monday, HT presents a status-check on the unfinished reforms.
Policy: Allowing FDI in multi-brand retail
Status: Cabinet had proposed 51% in FDI in multi-brand retail, with conditions. Decision suspended pending wider political consensus.
Policy: Raising FDI limit in insurance sector from 26% to 49%
Status: Amendment Bill introduced in Rajya Sabha in 2008; Standing Committee on finance has submitted report suggesting overhaul of the Bill.
Policy: Introduce Direct Taxes Code (DTC) to overhaul archaic income tax laws
Status: Bill introduced in Lok Sabha in 2011; Standing Committee has submitted report with a slew of amendments including raising the income tax exemption limit to Rs. 3 lakh per annum from Rs. 2 lakh at present.
Policy: Introduce a uniform Goods and Services (GST) that will dramatically the alter indirect tax structure by replacing the welter of levies with a single tax each for goods and services.
Status: Constitution Amendment Bill introduced in Lok Sabha in March 2011; Standing Committee on finance yet to submit report, consensus eludes state governments.
Policy: Legislate the Banking Laws (Amendment) Bill to empower RBI to supersede banks' boards and pave the way for granting licences to new private sector banks.
Status: Bill introduced in Lok Sabha in March 2011; Standing Committee has submitted report recommending major amendments.
Policy: Legislate the Pension Fund Regulatory and Development Authority (PFRDA) Bill to pave the way for regulated social security to millions of employees
Status: Bill introduced in Lok Sabha in March, 2011 Standing Committee on finance has submitted report, and cabinet has approved 26% FDI in pension sector, but key ally Trinamool Congress opposed to it.
Policy: Allowing foreign airlines to pick up stake in India's airlines
Status: Group of Ministers, in January 2012, has proposed allowing foreign airlines to buy up to 49%. Cabinet expected to take a decision shortly.
Policy: Unveil a clearly defined policy on land acquisition
Status: Bill introduced in Lok Sabha in 2011, standing committee yet to submit report
Policy: Legislate a Mines and Minerals (Development and Regulation) (MMDR) Bill defining the obligations of mining companies for displaced people.
Status: Bill introduced in Parliament in the winter session. Standing committee yet to submit report.
Here is what the twitterati has to say:
vande_mataram@Vande_MataramLooks like there is only one honest person in CONgi UPA who has guts to speak the truth- that is Chief Economic Advisor Mr.Kaushik Basu
20 Apr 12
Kaushik basu's statement has indeed cast a pall of gloom; this is the same man who after Union Budget 2012 had promised big ticket reforms
20 Apr 12
PM's Chief Economy Advisor Kaushik Basu stated END of Economy Reforms till 2014 Poll. Let Polls be advanced to 2012 END to restart Reforms.
20 Apr 12
Bit rich for the BJP to slam Kaushik Basu's #reformsprediction, having done their best to jam legislation for years
http://www.hindustantimes.com/business-news/WorldEconomy/Govt-not-in-position-to-bring-economic-reforms-Poll/Article1-843707.aspx
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