Budget to unveil second generation reforms: Jaitley

The Finance Minsiter says country requires 'a larger opening out in more sectors, stability of policy and tax regime'

A “whole set of second generation reforms” will be unveiled in the next Budget, Finance Minister Arun Jaitely has said, promising “a lot of exciting time ahead”.

The country needs “a larger opening out in more sectors”, it requires stability of policy and tax regime besides a “reasonable” cost of capital, he told PTI journalists at an interaction at the agency’s headquarters in New Delhi.

The minister envisages the gross domestic product (GDP) growth to cross six per cent in 2015-16 once the effect of all the steps proposed kicks in. From thereon, “we are going to take off,” he said.

Asked about the broad contours of the direction the Budget for 2015-16 will take, Jaitley said, “there is a whole set of second generation reforms. And there is a whole set of reforms which have arisen because some undoing is required. The coal ordinance is one undoing thing. Allocation of natural resources by non-discretion is undoing thing. A rational and reasonable tax regime is undoing thing. Some procedure changes in the land (acquisition) law is an undoing.”

Enumerating the steps taken by the government, he said a series of measures taken in the past six months had “corrected the (depressing) sentiment”.

Jaitley said if the government was not able to infuse that liquidity or unable to provide cheaper capital, then opening out alone would not help. “So, it is a chain of events which has to take place.”

He pitched for an interest rate cut by the Reserve Bank of India at its next monetary policy review due next week.

On the importance of his next Budget,he said it is really an accounting statement. “Reforms have to take place all 365 days in a year. But then Budget is an important occasion to highlight that. Therefore it is important in those terms. It is also an important occasion to signal the direction. Because so far our government has followed one clear direction and I do hope governments are never forced to take any moves which are in contrarian direction. That can difficulty for the economy,” he said.

Making it clear that reforms is a continuing exercise, Jaitley said the process of second generation reforms would be done and continued both before, during and after the Budget process. “Budget is not the only opportunity but is an important opportunity.”

Asked what are the sectors the government was targeting, he said his immediate target was insurance amendment bill, coal ordinance and the Goods and Services Tax Bill.

“I am simultaneously looking at the other big mineral allocation, introducing a non-discretionary basis... Then I have indicated to you that the land laws. Some dilution is required because this law can actually make development stagnant. I have no difficulty in higher compensation. I welcome it. But no access to land means what happens to infrastructure, townships, housing, industry and jobs,” he said.

On banking sector reforms, Jaitley said under Basel-III norms, government stake in all PSU banks will have to be brought down to 52 per cent and the rest is to be used for financial inclusion.

To a question on the growth rate set for 2015-16, Jaitley said first the economy has to make a turnaround from the sub-five per cent — 4.5 per cent and 4.7 per cent.

“Move up this year. Manufacturing is still a challenge.

Infrastructure expedition and manufacturing are two prime areas we have to get into so that the expedition takes place. Once the effect of all these steps is visible, our ability to cross the 6 per cent mark then increases.” Asked whether he would be able to do it in the next fiscal, the minister said, “hopefully, we will cross that figure. Then we are going to take off.”

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‘Commercial mining of coal to be allowed after auction’

The government will allow commercial mining of coal by private companies after allocating mines to public sector companies and auction to specific end users, Finance Minister Arun Jaitley said.

“First you give it to the state and central PSUs. Then, you make a pool of all actual users and have an auction. Then the extra resource, while preserving the character of Coal India, without disturbing it, you then start exploring the possibility of commercial mining,” he said.

Jaitley, however, did not give a timeline for allowing commercial mining by private firms. He said, adding, because of the coal scam the nation has lost seven years and a lot of credibility that soured investment climate.