Back insurance, pension reforms: FM

The taxation and financial sector reforms were imperative to impart fresh momentum to put the economy on high trajectory of growth, the Union finance minister told captains of Indian industry, urging them to help the Centre forge broad consensus among political parties and the states.

“We have to build up consensus for pushing forward reforms in the key area of taxation like introduction of Goods and Service Tax (GST) to boost growth,” he told captains of industry at the customary post-Budget interactive session with trade and industry. Many enthusiastic industry representatives urged Mukherjee to expedite the process of GST.

Pointing out that implementation of GST would herald the much-needed reforms in the indirect tax regime, the  minister sought the help of industry in building up consensus for putting in place the new tax regime.

“We are planning to introduce the constitutional amendment bill for GST in the current Budget session. The bill has to be ratified by a majority of the states. We are trying to bring them on board. The industry can play a role in making states understand the benefit of the new tax regime,” he said.

Assuring the industry that government is keen to unveil reforms in other key areas of economy like financial services, the minister said: “We have lined up several important Bills in financial sector like insurance and pension. Again, we need to build consensus for these important legislation.

“I am aware that we can send a strong signal to foreign investors through reform measures like enhancing the foreign direct investment in insurance from the current cap of 26 per cent to 49 per cent. But we need consensus for getting it done. We are trying to build up consensus for this,” he said.

In response to a query as to whether the government would be able to bring down the fiscal deficit to 4.6 per cent of the GDP in 2011-12 as proposed in the Budget, Mukherjee said he was confident of keeping the expenditure under control and push forward the process of fiscal consolidation.

Admitting that there have been some apprehensions about the expenditure proposals in the Budget, he explained that as compared to the revised estimates for 2010-11, the growth in total expenditure for 2011-12 is about 3.5 per cent. The increased expenditure in 2010-11 was a one-off event resulting from a better than anticipated non-tax revenues, he added.

“We made a deliberate decision to expand the expenditure by about Rs 50,000 in 2010-11 on critical infrastructure and social sectors and also to meet the expenditure on subsidies. We are now making an equally deliberate decision on fiscal consolidation,” the minister said.

At another interactive session with industry at the Federation of Indian Chambers of Commerce and Industry annual meet earlier during the day, Mukherjee admitted that the increasing prices of crude and other commodities in global markets could add to inflationary pressure.

In face of spiralling rise in overall inflation, there was growing expectation that Mukherjee would reduce duties on auto fuels-petrol and diesel, as part of a strategy to cool down inflationary pressure.  Mukherjee defended his decision not to reduce duty on auto fuels for the time being on the plea that knee-jerk reactions should be avoided.

“There is a high- level of volatility in oil market. There should not be knee jerk reaction,” he said. But the government was keeping a watch on the fuel price front.

But he did not hint about possible future reduction in duties on petroleum products.