‘Supply-side constraints must be removed in quick time’
Aimed at battling economic slowdown, Finance Minister P. Chidambaram, on Monday, said the government was ready with an action plan to “regain the confidence of all stakeholders”. His recipe for reversing last two years’ moderate growth includes tackling high inflation, possible cut in interest rates, a progressive tax regime and financial consolidation through modification or fine-tuning of policies.
Addressing his maiden press conference, after taking over as Finance Minister in the UPA-II regime last week, Mr. Chidambaram said the Centre would work closely with the Reserve Bank of India to moderate inflation in the medium-term. “Price stability is an important objective. There has been pressure on prices, and inflation, especially food inflation, is high. The causes are well known…some are beyond our control, such as prices of crude oil and imported commodities, but some others can be addressed by determined action. We will take steps to remove the constraints on the supply side,” he said.
The new Finance Minister pointed out that the government was conscious about high interest rates, but noted that “sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard.”
Tax Laws
Allaying fears about proposed strong tax laws, Mr. Chidambaram said: “Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors. We will take corrective measures wherever necessary.”
Stating that two committees have already been appointed to examine GAAR (General Anti Avoidance Rules) and taxation of the IT sector and Development Centres, he said: “I have also directed a review of tax provisions that have retrospective effect in order to find fair and reasonable solution to pending as well as likely dispute between the tax department and the assessees concerned.” All these moves are aimed at instilling confidence in international investors.
Mr. Chidambaram further said that the key to restart the growth engine was to attract more investment, from domestic and foreign investors. “The aim will be to remove the perceived difficulties in doing business in India, including fears about undue regulatory burden or regulatory over-reach,” he added.
Expressing concern over monsoon being below expectations that has led to drought-like conditions in several states, Mr. Chidambaram said: “MGNREGA and other schemes will be converged to meet the challenge of drought. Contingency plans are in place to supply drinking water and fodder and to help farmers replant alternative crops.”
Fiscal consolidation
Noting that the government was formulating the path of fiscal consolidation, he said: “The work will be completed in a few weeks…the burden of fiscal correction must be shared, fairly and equitably, by different classes of stakeholders. The poor must be protected and others must bear their fair share of the burden.”
Referring to challenges being faced by the global economy, Mr. Chidambaram said the Indian economy was stronger and better prepared to face the challenges. “Moderate growth in two out of eight years should not dent our confidence,” he stressed. He also sought cooperation from all political parties in getting crucial bills passed in Parliament.
Pointing towards low or negative growth in manufacturing and exports sectors, the two key drivers of the economy, Mr. Chidambaram said supply-side constraints in manufacturing and exports must be removed in double quick time.
“We intend to work with manufacturers and exporters and implement appropriate short-term and medium-term measures,” Mr. Chidambaram added.
He also noted that some sectors such as petroleum, electricity and textiles were under stress, and said the government would find practical solutions to the problems that impeded higher production or output in the coal, mining, petroleum, power, road transport, railway and port sectors.
Keywords: Indian economy, Finance Ministry, P Chidambaram, India inflation
This time he should have to work very consciously and complete awareness manner to avoid scams like 2G and others. He has to take stringent action to bring it back to the economy in normalcy and inevitable for the party to keep its present number in next general election. Hope his and PM relationship is good and can do some magic in the warth of slow economy by infusing courage to banks by taking customer friendly policies for timebeing till situation improves to maintain growth oriented to ensure invester to pupm in the market to boost economy.If his decision gets results certainly becomes hero in UPA government and his relationship with Sonia strengthens further that will fectch furthermore position in party as well government if UPA returns power consecutive third time.
At last Congress understood that a grave problem is awaiting the Indian economy. It wants now to unwind all the mistakes that it made in a hurry on submissions of the beurocrats who have a tendency to let loose fear psycosis. Income tax department is an excellent case where each Babu is their to throttle the citizens on one point or the other even if the issues are small.
We collect 30% Income tax and now whee have added 12% service tax on it and when this income is spend you charge 12% vat and 8% excise duty and 8% cusoms duty leaving 20% surplus in the hands of the people.
The simple theory is this that if more surpluses are left in the hands of people, it will create a multiplier effect on the economic growth.
But here in India, I remember during Indira's rule, we had to pay 95% income tax, 25% estate duty, 5% wealth tax and what not.
Thus you want people either hide income to exist or take arms to rebell.
Let Mr Chidamabaram show his guts to unwind.
welcome back Mr Chidambaram to the hot seat. WE hope that you would keep the seat warm if not hot.
Besides the points mentioned by you it is important that taxes for nri's are not tampered on a year to year basis. for eg from 1/4/2012 for Nro the tax is more than 30% from 10 to 15% depending on the country of residence. This needs to be looked into.
His michro econonic thought may be good but how about starting from
bottom to top instead of top to bottom perculation. Consumerism has to
be promoted to improve distribution instead of present concentration of
wealth. Empower poor with buying power encourage buying consumer
products. That will boost our economy, employment opportunities and well
being of the people..
Mr.Chidambaram is brilliant and is capable of putting the economy back
on track. He has the best experience and knowledge to shake the system
and push through the needed reforms quickly.P.M. has made the right
choice.
Instead of all talks, committees and sub committees if each ministry especially Finance ministry announces " THE ACTION Taken by them to rectify the situation " on a daily basis or at least on a weekly basis should be the first step to strengthen the confidence of the people of this country deserves
Every one wants RESULT and not the stereo type talk.
If shri Chidambaram wants really to do good for the poor and lower middle class and make available resources for their betterment &reduce the revenue budget deficits, he has to undo some of the budgetary measures done in the previous years' budgets of 2011 &2012 namely, the huge benefits given to the upper strata,i.e Senior Govt officers retiring at 60 years and other rich political class of MPS and MLAs and other similarly placed wealthy class by way of tax exemptions to those aged between 60 and 65 years of age by reducing the age limit for IT from 65 to 60 years. This was done never before as due to improving medical benefits more and more people live beyond 70 years !
What a wonderful ambitions and beautiful coining of words. Again to
fool poor people of India. where he this magician(assurances not real
but April 1st) Where was he so long?. We are again fools to believe
that he is just new and honest and he will change everything. He has
sacrificed his life for us.!!!
Alas this is a day late dollar short, the western world has written off India, it is a basket case. These are hardly confidence building measures. Given India's track record, they can only attract the shady types.
Add insult to injury, what does the country do to someone responsible for the deficit, debt, slumped growth? Make him the titular head of the nation. He can live like a king while the rest of us are picking the pieces of his inept handling of the finance portfolio.
It is good that new Finance Minister, Mr. P Chidambaram, has initiated some steps to stimulate the economy. But, as usual, his corrective policies centre around appeasing the corporate sector and investors. Of course, "clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution and an independent judiciary will provide great assurance to investors," which will stimulate investment. But he has not stated anything about the measures to create income earning opportunities to the unemployed youth,particularly the educated youth.Unemployment is a social dynamite and unless effective steps are taken to generate more employment opportunities it is difficult to ensure harmony and stimulate growth. Moreover, corruption and inefficiency have become pervasive limiting factors for rapid and sustained development of the economy. So Mr.Chidambaram should have to initiate definite steps to weed out corruption and inefficiency.
Mr P. Chidambaram is an icon of Indian Economy and his return to the most wanted seat and of course preferable by him will give the confidence to the stakeholders and the entire global is watching us how we are standing up to the world expectations very soon and we all hope he will deliver with utmost caution. Good Luck Finance Minister in the next innings.
Please Email the Editor