Even while describing the high current account deficit (CAD) — at four per cent — as a “matter of concern,” Finance Minister Pranab Mukherjee on Tuesday expressed confidence that the government would be able to overcome the situation, provided all the political parties and State governments got together and helped the Centre see the key tax reforms Bills through Parliament.

In a fervent appeal for support from all parties in Parliament and consensus on hard measures that need to be taken to tide over the difficult situation, Mr. Mukherjee said, replying to the debate on the Finance Bill in the Lok Sabha: “Yes, it is matter of concern — the Current Account Deficit. Yes, it is a difficult situation but we can overcome the situation — as in the past we have overcome.”

The Finance Minister's obvious indication was to the passage of the two major Bills pertaining to the Goods and Services Tax (GST) and the Direct Taxes Code (DTC) and he asserted that these two reforms would bring in a sea change in tax administration.

“If these two things we can do, I believe that there will be a sea change, a major reform in the Indian tax system which will be transparent; which will be non-discriminatory; which will be viable; and which will provide tax buoyancy, as it has been established with the introduction of VAT [value added tax]… please help us to have the necessary reforms in the introduction of the GST,” Mr. Mukherjee said.

The other major problem is the high prices of oil and the need for a collective decision on how to tackle it. In view of the impact that rising prices of oil — which may even go up to $150 a barrel — would have on the economy, Mr. Mukherjee noted that the Centre, the State governments and political parties would have to collectively develop a mechanism to deal with the difficult situation.

“I am suggesting that if we can work out a mechanism through which we can do it, it will be good...But if the political wisdom of the country as a whole, collectively, can decide that every one of us will have to have a haircut, perhaps, we can find out a solution,” he said.

Pointing to a sharing of the impact following a hike in domestic oil prices, Mr. Mukherjee said: “Partly, it [hike in prices] will be passed on to the consumers, partly, it will be absorbed by the State governments and partly it will be absorbed by the Union government. But please do not expect that the Centre would be in a position to compensate it,” he said.

Even though petrol pricing stands freed from government control since 2010, yet the oil marketing companies have to await the official nod to hike prices in line with the global trend.

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