Showing willingness to bite the bullet on the subsidy front, the Finance Ministry has unveiled a five-point action plan to spur the growth.
At the same time, Economic Affairs Secretary Arvind Mayaram asked industry not to seek tax cuts or exemptions while requesting for sector specific policies. “When we talk about tax exemption or tax foregone, it is also a subsidy,” he pointed out. He was addressing FICCI’s Executive Committee meeting in the Capital.
The action plan will include fiscal correction, removing impediments in various projects, asking PSUs to invest more using their cash reserves, harmonisation of list of infrastructure and promoting investment through public-private partnership for foodgrain storage.
Emphasising that fiscal correction was at the core of the action plan, he said, “We intend to take steps. But one thing is very clear that these will not happen in one day and hardship will be across the board. I repeat what the Finance Minister said and that is the pain of correction will be felt by everyone.”
Deficit target
Talking about the fiscal deficit, he admitted that he is not very sure of meeting the fiscal deficit target of 5.1 per cent as mentioned in the Budget. However, the Government aims to come closer to this target. With slower than required growth in tax collections, the Government Finance has already exhausted more than half of the targeted deficit in just first four months of the current fiscal.
The Economic Affairs Secretary assured the captains of industry that the fiscal steps taken on inflation may have some impact.
“Food inflation is a major concern and it needs to be tackled in a manner to give comfort to the Reserve Bank of India which could be reflected in the monetary policy,” Mayaram added. The RBI is scheduled to review the monetary policy on September 17.
Talking about the economy, he hoped the economy will grow at 6-6.5 per cent.
“We must move towards a higher growth trajectory. If there are blips, we must try to address them,” he said. Since last year, GDP growth had fallen consistently except in the first quarter when the economy was estimated to have grown at 5.5 per cent as compared with 5.3 per cent in the last quarter of 2011-12.
Mayaram summed up by saying, “Do not underestimate the bad news but at the same time, do not discount the good news.”