Encouraged by marked improvement in the Gross domestic product (GDP) numbers, Finance Minister Arun Jaitley on Saturday said growth rate would accelerate further on back of improvement in investor confidence and moderation in inflation.
With government taking quick decisions to relax Foreign direct investment (FDI) norms and push infrastructure investment, he said the manufacturing curve has turned and services sector is looking up.
“All I can say is the government is very clear whether it is social sector schemes, or other significant decisions, surely we will be moving in right direction. I am optimistic that as more and more decisions in this direction comes, we will be able to help the economy to grow a little faster,” Jaitley said, while addressing his first press conference to mark 100 days of the NDA government in office.
Reflecting improvement in the economy, the GDP growth rate in the April-June quarter of 2014-15 improved to 5.7 per cent, the highest in nearly two-and-half years. The GDP growth rate remained sub-five per cent in the last two consecutive fiscals.
“In the first quarter (April-June), a 5.7 per cent growth rate is encouraging. With the long-term impact of all the new initiatives setting in, I am sure the impact in the coming quarters will be much larger,” he said.
Listing decisions taken in first three months in office, Jaitley said FDI restrictions in defence and railways have been eased, decision making hastened, special mechanism created to resolve tax dispute and steps taken to increase investment in manufacturing and infrastructure.
“The new government was clear about the direction in which it was to move. We wanted to expand economic activity, hasten decision making, easing doing business in country, open up significant sectors, expedite decision making, while maintaining the social sector expenditures in most areas,” he added.
On future agenda, the Minister said the government would soon roll out disinvestment plan, push Goods and Services Tax (GST) and try to get the insurance bill through in the ensuing Winter Session of Parliament.
Jaitley said he was “more confident” now of achieving the fiscal deficit target of 4.1 per cent of Gross domestic product (GDP) in the current fiscal, even as the deficit in July end had crossed 61 per cent of Budget estimates.
The Minister said that soon after the National Democratic Alliance (NDA) took over, he had outlined government’s priorities which included containing inflation, restarting the growth cycle, rebuilding the investment cycle and keeping fiscal deficit at acceptable levels.
Observing that the Lok Sabha election results itself changed the mood, Jaitley said, it was “after 30 years you had a single party majority in Parliament and therefore decision making, including economic decision making, became easier.”
Unlike the previous UPA government, he said there were no internal issues and all steps taken by the Finance Ministry had the support of the Prime Minister and his office.
The NDA government, Jaitley said, tried to address the grievance of the investors with regard to taxation issues and clarified that there would be no space for retrospective legislations on taxes.
“We created a new mechanism for an advance ruling (by making it) available even to domestic investors above a threshold. We created a special mechanism for resolution of tax disputes. The scope for discretions in transfer pricing was narrowed down,” he said.
In order to boost economy, he said, the government further opened the defence and railways for foreign investment and eased the norms for real estate.
As regards raising Foreign direct investment (FDI) limit in insurance from 26 per cent to 49 per cent, he said, “we took a firm decision on insurance. I do hope, that the insurance amendments will be passed in the next session of Parliament. A significant amount of investment is just waiting in that sector to come in.”
On the impact of government’s initiatives to boost growth, he said, “I think the long term impact of all these decisions would gradually be felt. And if you look at the impact today, in investment mood there is sea change. The international investors are looking at us with great curiosity and I am sure we will see the impact of this.”