President’s address promises a conducive tax regime, investment push and inflation battle

The Modi Government’s promise of encouraging investments, including through FDI, and a reform of the tax regime struck a chord on Dalal Street, with the benchmark Sensex surging to a new high of 25,580.21.

Even while rolling out a slew of reforms to put the economy back on track, containing food inflation will be the Government’s topmost priority, said President Pranab Mukherjee, addressing a joint session of Parliament here on Monday.

The President spelt out the Government’s agenda, ranging from reining in inflation and reigniting the investment cycle to restoring the confidence of the domestic as well as international community in the economy.

The new regime’s recipe includes rationalisation and simplification of the tax regime, allowing more foreign direct investment in sectors that help create jobs and assets, and an ambitious infrastructure development programme to be implemented in the next 10 years.

The promise of pursuing reforms in the coal sector with urgency to attract private investment, a liberalised FDI regime in defence production, and a larger role for the private sector in design and production of defence equipment spread cheer in the market; as many as 902 stocks soared to their fresh 52-week highs on the Bombay Stock Exchange.

Taming food inflation

The new Government’s strategy for taming food inflation will essentially hinge on improving the supply of various agro and agro-based products.

Simultaneously, steps will be taken to prevent hoarding and black marketing, as also overhauling the public distribution system, incorporating the best practices from the States.

The President said the Government was very much aware of the possibility of a sub-normal monsoon this year and was drawing up contingency plans.

On the agriculture sector, the Government will hike investments in agri-infrastructure, launch a Prime Minister’s farm irrigation scheme, and give high priority to water security. The Government will also incentivise the setting up of food processing industries, Mukherjee said.

All cooperative sector laws will be reviewed to remove anomalies and lacunae. The Government will adopt a national land use policy that will facilitate scientific identification of non-cultivable land and its strategic development.

Mukherjee said the Government would formulate clear and transparent policies on allocation of critical natural resources such as coal, minerals and spectrum. This follows serious concerns being expressed over the use of discretionary powers in the allocation of the country’s precious natural resources.

Reacting to the Government’s agenda, senior Congress leader Kamal Nath said the President’s speech is an “enunciation of dreams and hopes which we have seen in the market place for the last three months… The next couple of months will determine how much on course the government is to make these dreams and hopes into a reality”

(This article was published on June 9, 2014)
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