NEW YORK – India’s finance minister Arun Jaitley was his usual suave, smooth and assured self, addressing two separate meets in New York City, this week. He also had the buoyant air of a satisfied man who has accomplished a few tricky missions in a relatively short period of time; is now on a steady, confident path to achieve further long-term goals, to develop India and enhance FDI.
Jaitley’s message at both meets in New York was crisp and clear: the Indian government was leaving no stone unturned to turn the country into a modern, digitized, corruption-free state.
The endeavor was to turn India into a haven for foreign investors, with ease of doing business, especially in the manufacturing and infrastructure sectors; make the country tax compliant – increase the number of people who file individual tax returns, expand the umbrella of businesses under the Goods and Services Tax; and importantly, bring transparency in political funding – a vexatious issue, the finance minister acknowledged, which remain one of the biggest obstacles the length and breadth of India.
After speaking at a meet entitled ‘India’s Market Reforms: The Way Forward’, organized by the Confederation of Indian Industry, in association with the US Chambers of Commerce, at the New York Palace Hotel, on Monday, Jaitley reiterated some of the issues addressing a gathering at Columbia University’s School of International and Public Affairs, on Tuesday.
Jaitley was introduced by Columbia University professor and former Niti Ayog vice chairman Arvind Panagariya, who praised the minister for the implementation of the “bankruptcy act” and “Goods and Services Tax” in India, the latter further reformed last week to help small businesses, prior to Jaitley’s visit to the US. He is here primarily to attend the annual meetings of the International Monetary Fund and World Bank.
Jaitley paid kudos to Panagariya, thanked him for his stellar contribution during his stint at Niti Ayog, saying that he received one of the “warmest farewells’ when he left, from Prime Minister Narendra Modi down to all who worked with him.
Jaitley hammered home the point of erasing corruption in India and to make it easy for FDI to flow in.
“We have to create environment in India where investors find India a friendly place to invest in,” he said, pointing to the vast red tape that existed prior to the NDA government taking up the reins of governing. “Between decision of doing business in India and commencement of business, years could pass. To restore back the credibility, in sector after sector where there was scope of opening up, we opened up,” he added.
India has made big strides to rope in FDI; measures include: 95% of the investments are through automatic route; Foreign Investment Promotion Board, which was like a middleman between an investor and a ministry, was abolished by Jaitley to further ease doing business; 99% of tax queries are addressed online; and states in India are being ranked on ease of doing business.
“Corruption was a great disincentive,” he said, and then went on to talk of efforts to wipe out political corruption, and to bring in transparency in political funding, an avowed goal of the NDA government.
“The world’s largest democracy is lacking transparency in political funding – it is still there,” Jaitley admitted.
Answering questions on the effect and implementation of demonetization and GST, Jaitley said that the measures were necessary in a country like India where it was a cash-dominated economy. He pointed out, how earlier, all property deals were done partly by unaccounted for cash, and corruption was rampant.
Defending demonetization and GST, Jaitley said there was no unrest during the former which turned out to be the largest currency replacement move in the world in world, and the people of India recognized it as a good move.
“You ask people if you are feeling harassed (by demonetization), they said, yes, I’m feeling harassed, but they also said it’s a good move,” explained Jaitley, adding that post-demonetization, India has doubled digital transactions, and the number of private individuals filing taxes, have gone up substantially.
“GST has been the smoothest possible transfer from one system to the other,” he said, of the move which some critics said had slowed down the Indian economy.
“Many attempts have been made by political groups to derail the GST, but I am glad that their own state governments are not listening to them because they know 80 per cent of the money is going to come to them so they don’t have to appease an ill-informed central leader of the party and let the revenues of their own state suffer,” Jaitley said in his Monday talk, at the Palace Hotel. “So, the state governments are being wiser.”
The Monday meet also had Dan Schulman, president and CEO of Paypal and Chandrajit Banerjee of the CII, in attendance, as well as India’s Ambassador to the US Navtej Sarna, among others.
Jaitley said that the GST Council is India’s first genuine federal institution, which meets every month, reviews the monthly situation, takes the decisions, reviews the rates and changes of rates which will take place in the times to come itself, agencies reported.
“So the lowest slab in India is five per cent, which doesn’t exist anywhere in the world. That is because of the non-compliant tax character of the Indian society. You make it easy for people to enter the taxation system that you are able to expand. In the GST, for up to 10 million turnover, we now have a scheme for them,” he said.
“We are trying to bring them into the tax net because the first two months data has shown that over 40% business entities make zero GST payment. Therefore, it’s very top heavy in terms of payment. And there’s a need to continue to expand the tax base at the bottom itself,” he said, informing that 95% of GST was being paid by 400,000 assesses.
“Only the organized sector is paying, the bottom sector has to expand,” he reiterated, at Columbia University. The people of India now realize that “paying taxes is in national interest, is in personal interest,” he added.
Jaitley admitted that the FDI in infrastructure was “relatively less”, and that is why the government has been taking lead on it. At present, India has allocated funds for new 250 highways, 30-35 regional airports, and given the nod for 400 railroad stations to be developed by private companies.
In his week-long trip, Jaitley is also expected to address students of Harvard University and interact with members of the business community in Boston, and hold a bilateral meeting with US Commerce Secretary Wilbur Ross. He is also scheduled to participate in a seminar organized by FICCI and attend the G-20 Finance Ministers and Central Bank Governors’ Working Dinner on October 12.
(Sujeet Rajan is Executive Editor, Parikh Worldwide Media. Email him: email@example.com Follow him on Twitter @SujeetRajan1)