Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Specials / Union Budget 2014/  Some doors which were closed, we have opened: Arun Jaitley
BackBack

Some doors which were closed, we have opened: Arun Jaitley

Finance minister Arun Jaitley speaks on the budget's primary emphasis in an interview

On retrospective taxation, Jaitley said India needed to give the message that it has a civilized jurisprudence, or a civilized tax policy, and, therefore, he just could not go about criticizing the previous government. Photo: Hindustan TimesPremium
On retrospective taxation, Jaitley said India needed to give the message that it has a civilized jurisprudence, or a civilized tax policy, and, therefore, he just could not go about criticizing the previous government. Photo: Hindustan Times

New Delhi: In an interview to DD News, shortly after presenting the budget on Thursday, finance minister Arun Jaitley spoke about the budget’s primary emphasis, and how he wishes he could have done more for the common man in terms of tax cuts.

Edited excerpts:

Let’s start by looking at the microeconomic underpinning to your budget because it is a difficult year with the monsoon and yet the Economic Survey has pitched the fairly upbeat picture of growth with an upper limit of 5.9%; your tax revenue assumptions assume a great deal of buoyancy at 18% growth. Is there an act of faith in assuming that the economy will do well this year and some of your budget arithmetic may come under stress if the economy doesn’t do that well?

See, I’ve also based it on three-four considerations outside the budget document. The Indian economy had acquired a lot of buoyancy, for three-four years in a row, we were (growing) around 9%; and suddenly in the last three-four years, people started losing faith in us. People lost faith because we couldn’t decide, we couldn’t clear projects expeditiously, our tax policy had gone haywire, we were taxing people retrospectively. If policy paralysis was a phrase which had come into the economic idiom, tax terrorism was a new phrase; so you had to actually rescue the economy.

But then we had two sudden advantages; unexpectedly, we were hoping to win the election but only in an extreme situation would we have thought that a single-party majority would be there. We got it, our allies are supportive and, therefore, along with certain other regional parties, we even have an ability to reach two-thirds (majority) in the lower House. So decision-making has become easier, for instance. I’m not disclosing a secret if I can tell you, the Prime Minister has had a series of sittings with me, or I have had it with him on this budget, he has gone through every proposal and I couldn’t have done much if I didn’t have his support.

So you need a Prime Minister, you need a party which fully backs the finance minister. Having said this, the global investing community, which had lost faith in the Indian economy, has shown a revival; they are not investing but they’re looking at us, we have to respond to that signal. The domestic investors who were looking for better pastures outside are willing to look here, provided you create a conducive environment. We have to provide them with the ease of doing business in India. So what is it that I’ve done? As far as large investment is concerned, some doors which were closed, we have opened—let’s say insurance, defence.

Are you sure you’ll be able to carry it through in the case of insurance?

Well, I’m reasonably certain. Insurance has gone through a strange kind of journey, but I’m quite hopeful that we’ll be able to carry it through and I’m sure the Congress party—having pressed for it for the last so many years—itself can’t alter its position.

Well, if you change your position, they might change their position.

But I think people watch very closely now. We didn’t rule out 49% (foreign investment in insurance) at any stage; even when Mr. Chidambaram (former finance minister P. Chidambaram) was speaking to us, different formulations were being discussed. I’m still willing to settle for a formulation... Then we looked at townships, we looked at real estate, we looked at encouraging the housing sector...so the housing loan incentive, which is a little incentive that I’ve given. It’s all intended in that direction. REITs (real estate investment trusts) couldn’t come about because there were no pass-through tax facility available, I’ve given it to them.

(For the) manufacturing sector, two weeks ago, I had announced a certain set of measures extending Mr. Chidambaram’s measures (a lower excise duty) by six more months; I have announced further measures. I have no hesitation in saying that we are not a government which believes that if you raise taxation rates, you will collect more. Nobody will come, so you probably will collect nothing; so you reduce the slabs, expand the base, expand economic activity. Simultaneously, with regard to the common citizen, incentivize him to spend more and save more, so (in) my tax proposals, with regard to an average taxpayer, I’ve kept this in mind, and we have also kept the inflation in mind. I had a very important challenge: how do you clean up the issues which were pending during the United Progressive Alliance (term). They had some internal issues, they had issues of coalition and also of not having a majority.

There was a lot of comment in the run-up to the budget that the previous year’s accounts have a lot of unspent money, which has not been accounted for, and the spillovers would affect this year’s numbers. Would you have kept the deficit under control had this happened?

You see, I have kept the deficit under control.

Was there more spillover? Is there a spillover that you absorbed?

There is some spillover, which will always be there.

It is not abnormal?

Some will always be there. For instance, a large part of the expenditure of the fourth quarter is always reflected in the next year’s budget.

That’s what Chidambaram said, but the general assessment was there was more than that at work. So you don’t think that is a stress point?

If I’m confronted with unpaid bills, then I certainly have a greater challenge. Ever since I have assumed office, I have not made any negative remarks about my predecessor. I’m glad that Mr. Chidambaram himself had said that the Economic Survey is an appropriate economic document rather than a political document and, therefore, my job now is not to look back, it is to look ahead.

Correct. You have announced an overall increase in expenditure, you have even, I think, put in an increase in subsidy payments and the general expectation was that your government would attack subsidies.

I have provided for the constitution of an expenditure management commission and that will go into this question. Now how do you rationalize the subsidies? That’s the real issue. Last week, the Prime Minister held a detailed meeting on how to do it with regard to the various proposals under Nandan Nilekeni (former head of the Unique Identification Authority of India) and others that the UPA was working on, whether you could link it with that. Now, we had certain problems in the past, but I’m glad the Prime Minister and the government are looking at each one of these proposals with an open mind. As far as subsidy bills are concerned, the food bill for instance, most of the states have not even got their list (of people to be covered) ready as yet.

One of the biggest issues in the run-up to the budget was this whole business of retrospective taxation. Now, you haven’t actually done anything about the existing cases. You have said let them run their course. And you haven’t said the government won’t ever do something like this again.

See, I can’t, in my budget speech, take away the jurisdiction of the Indian Parliament. The Indian Parliament has an authority to legislate, even retrospectively. So the best I could do as a government was (to say that) our government does not really believe in this and ordinarily we are not going to have retrospective taxation, which creates a fresh liability. The word is fresh liability. Assuming a tax has been collected for the last 30 years and some tribunal or court takes a view that there’s a flaw in it, so I strike it down; do I refund the thousands of crores (collected)? Or do I have a retrospective legislation and legitimize payments already collected, which is permissible?

So I have done two things. I have said for the future we don’t believe in this, so we will not be doing it. If under the old law of 2012 fresh notices are being issued, they won’t be issued. We don’t want any new problems in this front. As far as the old problems are concerned, they are pending in courts or tribunals. They’ll probably run their course.

And you think this will set at rest people’s concerns?

You see, India needed to give the message that we have a civilized jurisprudence, or a civilized tax policy, and, therefore, I just could not go about criticizing the previous government, and do nothing about it.

So I have left one part of the problem to be settled by a judicial mechanism. (On) the other two parts I have given (some) comfort and I hope people have faith in the Indian economy and its decision making.

You have also increased your assumption on revenue from disinvestment and you are already into the fourth month, and I think this is an all-time high. What gives you the confidence that you‘ll be able to do it?

I have always believed that any form of reform is an art of the possible. So if you enter into confrontations on Day One, you won’t be able to do so. So disinvestment was not a part of my speech. People were not getting many issues to disturb my speech. But the moment I said disinvestment, some disturbance would have started.

So I decided to just put in as part of the budget documents. Now you have a large number of public sector companies where you have a flexibility of divesting 4-5% or 7-8% and those transactions have reached a fairly advanced stage. The market is at an-all time high, and if there was a great time to divest, it’s today.

Apart from hitting products which seem to have a negative impact on health (with higher taxes), you have hit (debt) mutual funds.

I have not hit mutual funds. You see, these figures disclosed...that most of the investors were large corporates and this route was being used for hedging purposes. Now this was not the purpose. The idea was to give a tax release to a small investor. So park the money in mutual funds and use it for hedging purposes. The Central Board of Direct Taxes was very particular that this provision is being just misused by a few corporates.

You wanted to give a feel-good feeling to everybody in this budget.

I have always said that you can’t create a hostile environment and then say reforms must go on.

You have announced a huge increase in transfers to states. Is this the transfer of centrally-sponsored schemes?

The central ministry in that event will be dealing with the states.

The budget then goes to the states. It doesn’t go to the central ministry.

No, the budget goes to the central ministry which, in turn, passes it to the states. It’s a pass-through.

Any final comment to viewers?

I hope we are able to get back our growth rates, and I hope, as far as the common taxpayer is concerned, that we could do much more for him. But I didn’t have enough money to do it...this time.

So you’ll do it next year?

I don’t know, I hope I have more money next year.

Interview courtesy DD News

Transcribed by Khyati Behl, Vanshika Agarwal and Shaily Sharma.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 11 Jul 2014, 12:32 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App