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Finance Minister Arun Jaitley has hinted at some big decisions in the next two months that will revive investor confidence.
Acknowledging the “challenging times” the economy is facing, Jaitley, who also holds the Corporate Affairs portfolio, said: “We have to restore the pace of growth, contain inflation, and obviously concentrate on fiscal consolidation itself.”
Like his predecessor, Jaitley is a lawyer by profession and has served in various capacities, including as Commerce Minister in the Vajpayee Government.
Deficit challenges Jaitley takes charge at a time when the fear of the fiscal deficit exceeding 5 per cent of GDP in 2014-15 looms over the economy.
The previous government rolled over fertiliser and fuel subsidies of ₹38,000 crore and ₹24,000 crore, respectively, to the current fiscal year, for which money has to be provided in the final Budget.
Simultaneously, tax collections have been affected by the slowdown in industry and the flat growth in the services sector.
On the inflation versus growth debate, Jaitley said a “balancing act” will have to done.
Meeting with Rajan Soon after taking office, the Finance Minister had an hour-long meeting with RBI Governor Raghuram Rajan. Among other things, the two discussed ways to contain inflation and revive economic growth. The meeting assumes significance as the RBI is slated to review the monetary and credit policy on June 3.
Later, Rajan said: “It (curbing inflation) is absolutely a task that the government and the RBI are engaged with.”
Reacting to Jaitley’s balancing act statement, he said, “Absolutely, the RBI has always maintained the balance between growth and inflation.” It will continue to do so, he added. While the onus of growth lies with the Government, monetary action to control inflation lies with the RBI.
Another challenge is the fate of the excise relief for the automobile and consumer durables sector announced in the interim Budget. This sop will cost the Exchequer ₹700-800 crore. Unless the new Government decides to extend it, the relief ends on June 30. However, due to the slowdown, the sector has been pitching for continuation of the excise relief.
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