Govt can be both pro-poor and pro-business: Jaitley

"Populism should not affect the aim for stable policies. Prime Minister feels that reasonable tax rate boosts economic activity," Arun Jaitley adds

July 18, 2014 5:46 IST | India Infoline News Service
In the budget debate in the Lok Sabha, Finance Minister Arun Jaitley on Friday said, "Pro-poor, pro-business agenda not a contradiction. In face if businesses do not flourish then the government will not have revenue to help the poor."

Jaitley said, "Populism should not affect the aim for stable policies." "Prime Minister feels that reasonable tax rate boosts economic activity," Jaitley said.

"If taxes are too high then people will look at cheaper alternatives to goods. We have to ensure that our manufacturing sector remains competitive," the Finance Minister said. "Higher taxes can be a deterrent to economic growth," he added.

"Excise sops extension has started showing result. FDI in some sectors can help add to resources," Jaitley explained. "We need fiscal discipline to reverse the weak economic trend. Correct targeting of subsidies is required," Jaitley said.
Jaitley said, "India needs to build defence manufacturing capacities. 70% of defence equipments are still imported."

"It is too early to say if economy's trend can be reversed. Manufacturing growth and job creation are matters of concern," he said. "Manufacturing growth has been flat or negative for the last 2 years," he elaborated.

Jaitley announced a special Rs2,000 fund for the food processing sector under the National Bank for Agriculture and Rural Development. In addition, Jaitley announced an allocation of Rs50 crore for setting up centres to treat drug addiction in Punjab.

"The growth rate of the country is expected to increase during 2014-15, compared to 2013-14," Jaitley said in a written reply to the Lok Sabha.
Jaitley said factors such as revival of industrial growth, improved external economic situation characterised by a stable current account, benign outlook on oil prices, improved fiscal health and modest revival in global economy can be expected to contribute to the GDP growth in 2014-15.

Jaitley further said slowdown in investment has happened due to a combination of factors such as weak business sentiment, global slowdown, lower export demand, infrastructure bottlenecks and rise in interest costs owing to elevated inflation.

"The government continuously monitors macro-indicators including sectoral investment pattern in the economy," Jaitley said, adding the investment rate declined from 35.5 per cent of GDP in 2011-12 to 34.8 per cent in 2012-13.

"The turmoil in Iraq has the potential to have an impact on international prices of oil. The government closely monitors the emerging situation and calibrates appropriate policy responses to cope with it," Jaitley said in a written reply in the Lok Sabha.

"If oil prices rise significantly and remain persistent at higher levels, India's import bill of petroleum, oil and lubricants and the current account deficit may be impacted," Jaitley said.

"Business sentiments can be affected by such uncertainties," he said, adding higher global oil prices can also have implications for domestic inflation and fiscal deficit if there is a pass-through to the domestic economy.

Jaitley further said that the hardening of international oil prices and "market expectations on the same could be the main reason that led to the depreciation of the rupee in the immediate aftermath of the Iraq crisis".

"India's exchange rate policy is guided by the broad principles of careful monitoring and management of exchange rates with flexibility, while allowing the underlying demand and supply conditions to determine the exchange rate movements over a period in an orderly manner," the Minister said.

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