As Arun Jaitley takes charge of the finance ministry, economists and trade experts offer him tips to bring the economy back on its growth path by curbing inflation and strengthening the plummeting rupee.
Must look at balancing inflation and interest rates
Balancing inflation and interest rates to deliver real growth is one of the biggest focus areas for any finance minister and Jaitley has highlighted that in one of his early sound bytes as FM. The swift move away from a complex array of duties and taxes to implementation of the much awaited Goods and Services Tax (GST), as recommended by the 13th finance commission headed by Vijay Kelkar, is much expected. This would require reforms of Service Tax and Union Excise duties so as to integrate them into one single rate i.e. GST. A well designed GST can boost the GDP growth rate by 1-2%. It will make conducting business a lot easier for domestic players as well as encourage investor sentiments. The ministry should leverage Information Technology in every possible way including establishing data warehousing and data mining for even better tax administration. Mandating PAN/UID in all financial transactions would also be lot easier when you leverage IT. Next is to retain Raghuram Rajan, who commands respect in industry and academia both nationally and internationally, as the RBI chief.
—Prashant Girbane, Head, Group Strategy, Bharat Vikas Group
Restore growth of economy, create new job opportunities
First and foremost the new finance minister should look at stimulating and restoring the growth of the Indian economy and work towards bringing it back to 8-9% so that new job opportunities get created. Secondly, there is a need to control or tame inflation which is affecting every individual and more so the poor and the finance minster should look into the same. The government needs to also control subsidies so that the fiscal deficit comes under control and last but not the least I think the finance minister should rethink of the stance of foreign direct investments into our country and amend laws to boost cash inflow into our country.
—Narendra Barhate, Managing Director & CEO, SEED Infotech
Bring back GDP to 8-9%, reverse Land Acquisition Act
The big names of the Indian industry have welcomed the new government with hope that it would bring the economy back on track and raise the currently plummeting GDP to 8-9% in the coming fiscal. FDI in the Indian real estate sector is expected to get a lift, resulting in amplification of fund flows and strengthening of the battered Indian rupee. Global investors are now markedly optimistic about the Indian economy, which is expected to witness over 100% increase in foreign investment inflows, both via FDIs and FIIs, to above $60 billion in the current financial year as compared to $29 billion during FY 2013-14.
In terms of real estate, some of the urgent steps that the NDA government needs to take with immediate effect are reversal of the Land Acquisition Act, provision of fiscal stimuli to improve industrial growth and creation of an investment-friendly real estate market via lowered interest rates. Further, the real estate market expects the government and the RBI to be on the same page with respect to checking inflation and curtailing of interest rates so as to revive the tumbling demand for property in India.
Meanwhile, consumers are optimistic about the impact the new government will have on real estate pricing and expect a reduction in home loans, the implementation of the proposed GST framework and the implied tax benefits to buyers.
—Santhosh Kumar, CEO – Operations, JLL India
Manage fiscal deficit to curb inflation and rationalise taxes
Finally, we have a government with a strong mandate and stated commitment to good governance. Given the state of the economy the FM has a lot to work on and deliver. Inflation is the key problem and the first priority will be managing fiscal deficit, rationalising expenditures and taxes in the budget. On the external front there is some comfort already with our trade balance improving over the last two quarters and the rise in forex reserves and a stronger rupee. Along with a credible fiscal roadmap an assurance against retrospective taxation will go a long way in reviving investors’ confidence in our country.
—Sumita Kale, Chief Economist, Indicus Analytics
Implementing GST on priority basis need of the hour
First and foremost Arun Jaitley should immediately start rolling out the much awaited Goods and Services Tax (GST), which definitely would test the negotiation skills of him as the new finance minister. GST would rationalize, simplify and bring much required uniformity in the commercial tax system of the country. The minister should implement tax administration reforms. The new finance minister would also need to take a fresh look at subsuming taxes like LBT (Octroi) in GST. Along with this is the roll out of the Direct Tax Code, which will eliminate the complexity in the current tax system. To spur growth and motivate investment reducing interest rates is very essential, which also includes reducing the interest rates on consumer loans. That would bring back the much desired demand for industrial products to the market. To control inflation he has to concentrate on putting curbs on governmental non-productive expenditure. At the same time increase in government expenditure on infrastructure projects such as power, roads, airports, ports, etc, which will improve business sentiments and generate confidence for business expansion, is important. This too will involve apt handling of the state governments where the opposition is in power.
—Anant Sardeshmukh, Director General, MCCIA