Steadfast commitment to reforms and concrete steps taken over the last 18 months have revived confidence of international and domestic investors in the Indian economy, said Arun Jaitley, Minister of Finance, Corporate Affairs and Information and Broadcasting of India, at the opening session of the World Economic Forum’s National Strategy Day on India. The government is set to announce reforms in the power and railways sectors in the coming days, and is determined to see a key land acquisition legislation through Parliament in its forthcoming session, he said.
India has jumped 16 places to a 55th rank in the World Economic Forum’s recently released Global Competitiveness Report 2015-2016. In conversation with Jaitley, the Forum’s Founder and Executive Chairman Klaus Schwab said that this is a “significant and unprecedented jump”.
“I have a reasonable sense of satisfaction,” Jaitley said, adding that investor confidence in India has returned even though the global economy is passing through challenging times. “We have set a direction and are not allowing any policy change that is of a contrarian direction,” he said, expressing confidence that there is consensus not only within the government, but also in popular opinion, where those opposed to reforms are reduced to a tiny minority.
Jaitley said that major reforms are imminent in the power sector, where the poor financial health of state distribution companies has led to a situation where more power is being produced than can be consumed – due to lack of last-mile connectivity – even as large parts of the country are without access to electricity. Another sector where large public investment and reforms are in store is the railways, where the government has opened up infrastructure building to the private sector.
Regarding taxation reform, Jaitley said that, when he took over the reins of the Finance Ministry 18 months ago, businesses were jittery over retrospective taxation, exaggerated tax demands and complicated processes. Now, he said, retrospective taxation and exaggerated tax demands are firmly in the past, and the government is working to make processes simple and transparent through enabling online filing of tax returns, among other things. He said a roadmap for bringing corporate tax down while phasing out tax exemptions is ready, and its first phase to bring tax down to 25% will be announced within days.
Jaitley highlighted the healthy competition that has been engendered among state governments to attract investment. He said the federal government, faced with opposition in amending the land acquisition legislation to make it more industry-friendly, has in fact changed its strategy and allowed state governments to take steps to ensure that land is available for urbanization, suburbanization and infrastructure such as rural electrification and housing schemes.
Acknowledging that private-sector investment has fallen over the recent past, Jaitley said part of the reason is that the Indian corporate sector has over-borrowed and over-extended itself, so more investment has become impossible. Now, with falling commodity and oil prices, the government is making a large public investment – mostly in infrastructure such as the railways – which is already bearing results in the form of a revival in the investment cycle.