Union Finance Minister Arun Jaitley addresses Gujarat BJP Working Committee Meeting in Ahmedabad. (Source: PTI)

Finance Minister Says India’s Structural Reforms Could Alter Fiscal Glide Path

Finance Minister Arun Jaitley said challenges from structural reforms may alter the “glide path” of fiscal consolidation.

India has rolled out the Goods and Services Tax, a new bankruptcy law and a Real Estate Regulation Act over the past year. The government recently announced a Rs 2.11 lakh crore fund injection to boost capital at state-run banks battling mounting bad loans.

The recapitalisation will be performance-linked, Jaitley said at the Asia Pacific Summit in Vietnam, Morgan Stanley which organised the conference said in a report.

He encouraged banks to use the funds to lend to micro, small and medium enterprises and said that a policy to direct loans towards smaller businesses will be announced in the near future.

Here’s what he said at the Summit.

On Fiscal Consolidation

“No pause but challenges arising from structural reforms which could change the glide path.”

On Recap Of State-Run Banks

“Recap will be performance linked. Announcement will be made soon. One or two instances of consolidation in SOE banks over the next 12 months. SOE banks to be encouraged to use capital to lend to micro, small and medium enterprises. Concerted policy to direct loans to MSME in the near future.”

On GST

“The committee system has helped to build consensus. Rates will continue to decline over the next two years. 40 percent (3.5 million) increase in number of assessees over the old system. Net tax revenue has exceeded pre-GST level. E-way bill to be cleared in Karnataka next quarter and other states will follow.”

On Divestments

“Power and oil companies to remain public sector companies. Mix of privatisation (AIR India and Dredging Corp) and divestments to be used to raise resources.”

On Future Policy Impetus

“Two areas of focus:

  • to build rural India (housing, roads, electrification, sanitation, education and health)
  • to build national infrastructure.”

On Ease Of Doing Business

“Two areas of immediate attention:

  • enforcement of contracts - law department to present changes in contract law in the coming session of the parliament,
  • permission of land and buildings - DIPP (Department of Industrial Policy & Promotion) working with state governments to make land and building permits on line".

On Farm Loan Waivers

"Absolutely no central support on such waivers".

On Land and Labor Reforms

"States to pursue land reforms and Centre working on consolidation of labour laws".

On Politics

"Lack of upper house majority is a poor alibi for lack of legislative reform. Most economic reforms need to legislation change".

On Interest Rates

"While every government wishes for lower interest rates, it is the central banks call".

On Private Capex

"Investments have been slow because of surplus capacity but a combination of a better global economy, bank recap and Foreign Direct Investment and public investments should help improve private capex".