In what may provide a further boost to investor sentiments at home and abroad, the Central Government, on Monday, maintained that there was no reason why addressing issues pertaining to retrospective amendment of income-tax laws should wait till the budget session in February next year.
To a query at the Economic Editors’ Conference here on whether a decision on the retrospective tax issue would have to wait till the budget for the next fiscal, Finance Minister P. Chidambaram said: “Once we take a view [on the Shome Committee report], I see no reason why we should wait for the budget session. We should move whatever changes have to be brought about in Parliament as early as possible”.
The Parthasarathi Shome committee was asked to recommend measures to deal with retrospective amendment of income-tax laws and suggest ways of treating taxation cases which involve indirect transfer of Indian assets, of the likes of the Vodafone-Hutchison deal in 2007.
Among other things, the Shome panel was also told to examine taxation of non-resident transfer of assets — where the underlying asset is located within the country — in the context of FIIs (foreign institutional investors) operating in India purely for portfolio investment and all non-resident investors. The committee submitted its final report to the Finance Minister last week.
“The Shome Committee report on retrospective legislation is under examination, and we would have to complete that examination quickly and take a view,” Mr. Chidambaram said while pointing out that the Finance Ministry, after taking the stakeholders’ comments on the report, would decide whether an amendment to I-T Act was necessary or if there were any other ways to resolve the matter.
“Resolution of the tax disputes, both pending and anticipated, is good for the country, good for the economy and good for investments. So, we must find ways to resolve the issue,” he said.
'FDI will benefit economy, country'
Cautioning that absence of economic reforms will slow down growth, the Finance Minister said political parties may oppose but should not obstruct decision-making.
“Every government is entitled to lay down policies. Opposition to policies is legitimate, obstructionism is not,” Mr. Chidambaram said while addressing the annual Economic Editors’ Conference.
“The government of the day must be allowed to lay down policies, pass legislations wherever necessary, and get on with the job of implementing those policies,” he added.
Noting that these were challenging times, the Minister said, “Without reforms, we risk a sharp and continuing slowdown of the economy, which we cannot afford given the imperative need to generate jobs and incomes for a large population, most of whom are young.”
India’s economic growth during 2011-12 slipped to nine-year low of 6.5 per cent and during the first quarter of the current fiscal it was 5.5 per cent.
Expressing confidence that with requisite savings and investments India’s economic growth rate will recover to 8 per cent and more, and perhaps touch 9 per cent, the Minister said, “We should keep that rate of growth as our objective and progress towards achieving that objective.”
“Long standing structural reforms required to achieve high investment and high growth rates have been held back because of many reasons.
“Among them are the needs to forge a consensus on reforms, the practical necessity to garner support across the political spectrum to pass legislation... Nevertheless we are now addressing the difficult areas of reforms”, he added.
Referring to the government decision to allow FDI in multi-brand retail, Mr. Chidambaram said, “We must not fear foreign investments in India. We have the sovereign right to decide where and how foreign investments would be allowed into India.”
The decisions to allow foreign investment should not be tested on the basis of undefined ideology or theory, but on a clear-headed assessment of the advantages that would accrue to India, he said.
“I have no doubt...FDI in retail, aviation and FM radio broadcasting is decisions that will benefit the economy and the country,” he added.
Chidambaram also underlined the need for containing inflation and said that appreciating value of the rupee would help in brining down the cost of imported crude, petroleum products and fertilisers.
“The value of rupee is an important factor that affects the value of imports. A depreciating rupee will also impact trade and investment. Hence, the need to stabilise the exchange rate. I believe that we have met with moderate success,” the Minister said.The other important task before the government was to contain fiscal deficit, he said, adding, “No one will have confidence in the Indian economy if there is uncertainty about the fiscal stability of the country.”