Pro-business is not anti-poor, no contradiction: Arun Jaitley.

​NEW DELHI: Finance Minister Arun Jaitley asserted that the Narendra Modi government was pro-business but also pro-poor and roundly criticised the previous UPA administration for indulging in "tax terrorism" and being beset by "policy paralysis" that discouraged investors, while promising further steps to revive India's economy and get it out of a prolonged slump.

Jaitley also said he had kept a lid on taxes in his budget and hoped that a moderation in inflation would bring interest rates down, besides pointing to what he said were early signs of recovery.

"Someone said we are pro-business. We are pro-business. There is no contradiction in being pro-business and being pro-poor," he said, replying to the debate on the new government's first budget in the Lok Sabha on Friday. "In fact, if you stop business activity, then you would not have enough resources to service the poor as far as this country is concerned." The Union Budget was later approved by the House, marking the completion of the first stage of consideration by Parliament.

The second stage consideration will involve a discussion on the demand for grants followed by the approval of the Finance Bill.

The finance minister said the new government is trying to restore the confidence of domestic and foreign investors by bringing "civility" to the taxation system. He said investors had developed "doubts" over the India story in the past few years in the backdrop of an unpredictable tax regime, thanks to retrospective changes in the law.

Any relaxation on tax changes for investors in short-term debt mutual funds is only expected in Jaitley's reply to the discussion on the Finance Bill.

Jaitley said the government would take several measures to revive growth apart from those announced in the July 10 budget, suggesting that the disappointment in some quarters with the latter wasn't justified.

"There are a series of steps that we have to take. The budget was only some of those steps. It was directional. It only shows direction.

There will be many steps which will be taken outside the budget. It is not necessary that everything is announced in the budget," he said. The minister justified measures unveiled in the budget to attract private investments, including allowing foreign direct investment up to 49% in defence and insurance, saying this was necessary to boost industry and manufacturing, which in turn would lead to job creation.

"There are those who oppose the idea of FDI in defence at 49%. I cannot understand the contradiction... Today, the situation is that we are buying from foreign companies and foreign governments... Our 'defence' is in their hands. They can stop supplies. We have to build capacities," he said. Similarly, investments are needed in the fund-starved insurance sector, particularly health insurance, he said.

Defending the budget, he said the approach was radically different from that of the previous government in many ways.

"The difference in the approach is that consistently across the board, this is a budget where we have not increased taxes," he said. "If you put higher taxes on products, people will buy products from outside. Lower taxes will increase economic activities," he said.

Jaitley also expressed the hope that interest rates will soften with the moderation in inflation. "Interest rates have gone up because inflation is high. I hope the interest rate comes down," he added. Inflation declined in June, but that may not be enough for the Reserve Bank of India to ease up on interest rates at its August 5 monetary policy announcement.

The finance minister pointed to signs of optimism — a marginal improvement in various economic parameters such as exports, capital inflows and the industrial sector as per recent data. This, he said, could not be termed as a "trend" but early signs of recovery.

A modest improvement in the growth rate is likely in the current fiscal, he said, adding that an acceleration in economic expansion to 7-8% and subsequent buoyancy in tax collections would help him allocate more resources for social sector schemes. Growth slowed to decade-low sub-5% levels in the past two financial years.

During the course of his reply, Jaitley announced a Rs 2,000 crore special fund under the National Bank for Agriculture and Rural Development (Nabard) for food parks, Rs 50 crore for setting up drug de-addiction centres in Punjab and restoring accelerated depreciation to encourage the wind energy sector. There had been some uncertainty over the latter as it wasn't included in the English version of the budget speech.

He also promised more funds for resettlement of Kashmiri Pandits over and above the Rs 500 crore earmarked in the budget.

Referring to the housing sector, the minister said he would endeavour to bring about a situation in which buying a house would be cheaper than renting it.

In the budget, Jaitley had raised the annual tax exemption on home loan repayments to Rs 2 lakh from Rs 1.5 lakh. Following the initiatives taken by the government, RBI provided incentives to banks to extend loans for affordable housing at cheaper rates.

On the subsidy policy, the minister felt it was lopsided as even welloff people avail of it through schemes such as education scholarships and fuel subsidies, burdening the exchequer.

"We have reached a situation where subsidy burden is too high... subsidies at times can become an unquantifiable amount given to unidentified people. It is this situation which we need to correct," he said.

Source : economictimes.indiatimes.com