Reforms on track, inflation a problem: Mukherjee (Overall Lead)

July 27th, 2011 - 7:51 pm ICT by IANS  

Pranab Mukherjee New Delhi, July 27 (IANS) India’s ambitious economic reforms agenda, that was set exactly 20 years ago, is on track and much of it just requires legislative action, which can take time due to the process involved, Finance Minister Pranab Mukherjee has said.

However, he seemed to throw up his hands on the issue of curbing inflation that had so hurt the common man, saying the government couldnt tame the “volatility in the global commodity prices” that had set it off.

Seeking to allay widespread concerns over possible pause in the liberalisation process, that was started July 24, 1991 by Prime Minister Manmohan Singh with his famous budget speech as then finance minister, Mukherjee said the reality was diametrically opposite.

“Already, in the last session of parliament, I introduced a number of important reforms measures that are to be implemented through legislative route,” the finance minister told select reporters on the finance beat at his North Block office.

“We have also taken certain important administrative measures, finalising some important legislations,” he said, alluding that for these reform-oriented measures to take shape, the cooperation of the opposition was necessary.

In the hour-long interaction, that covered a host of subjects — from inflation that is refusing to moderate and fiscal deficit to the politically-sensitive issue of black money — Mukherjee’s message was: Things could be better, but India is better off.

He said the bills pending before parliament were in important areas such as insurance, pension, banking, goods and services tax, while administrative action had already been completed to table bills on food security and mining sector development and regulation.

“I do hope some of the recommendations will be available during the monsoon session of parliament (beginning Aug 1) and when we get these recommendations, it would be possible for us to get some of these bills passed,” he said.

“But I cannot tell exactly which bill — what would be the number. Because it depends on the availability of recommendations from the standing committee,” he said, while also admitting candidly that a new law on acquiring farmland for industry may take time.

Mukherjee’s remarks come less than a month after Manmohan Singh’s comment, accusing the principal opposition Bharatiya Janata Party (BJP) of playing politics in blocking some key legislations, particularly on a unified goods and services tax.

During the interaction, he also said fiscal deficit targets would be met, despite concerns expressed by some quarters, including the Reserve Bank of India and the Prime Minister’s Economic Advisory Council.

Mukherjee in fact began the interaction with the proverb: “When going gets tough, the tough get going”, and said the growth in direct tax mop-up in the first quarter was 26 percent and in indirect taxes it was higher at 30 percent.

“There is all-round revenue buoyancy,” Mukherjee said, adding: “An important point to be recognised is that service tax growth is encouraging and I welcome this because services have been contributing substantially to the overall gross domestic product.”

In its monetary policy update Tuesday, the Reserve Bank of India (RBI) had said the the federal government’s revenue and fiscal deficit in the first two months of 2011-12 were higher than the levels in the corresponding period of the previous year.

He also spoke about black money stashed away by Indians in tax havens abroad, estimated at between $450 billion and $1.4 trillion unofficially, and said the process to get this ill-gotten back to the country was a continuous effort of his government

“We can get information based on two legal instrumentalities,” Mukherjee said, adding one was to entering into bilateral double taxation avoidance agreements and the other was to exchange information on such matters with other countries.

“Let me say this, our effort tackle back black money is relentless.”

According to him, negotiations had been initiated with 97 countries and jurisdictions — 75 for double taxation avoidance pacts and 22 others for sharing of tax information. Of these, negotiations had concluded with 58 nations and underway with 29 others.

“We have also signed 16 agreements.”

If there was one concern, which Mukherjee was uncomfortable about, it was inflation and hoped the recent policy intervention by the central bank, which hiked key rates sharply to curb money supply and rein in inflationary expectations, will eventually work.

“The rate hikes will send a strong signal,” he said, also seeking to make a point that some issues were beyond the control of policy-makers. “I don’t know how to overcome the volatility in the global commodity prices.”

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