India committed to taking ‘hard’ decisions on economy, says Manmohan

India is committed to taking “hard and difficult” decisions in the long-term interest of the economy, Prime Minister Manmohan Singh said today, while assuring Japanese industry that the long-awaited Goods and Services Tax (GST) regime facing hurdles from states will be in place in an “appropriate type” by 2014.

On a mission to woo Japanese investors, Singh told leading business honchos at the Keidanren, the premier chamber of commerce and industry, that the current bilateral trade of $18 billion does no justice to the enormous potential that exists between the two countries.

The Prime Minister faced some searching questions from the Japanese industry which sought improvement in tax regimes, further easing of priority sector lending rules to expand financial services and allowing opening of foreign bank branches in metropolitan cities.

“Our people have tasted the benefits of rapid growth and they will not settle for less. I want to assure you that our Government is committed to taking hard and difficult decisions in the long-term interest of our economy,” he said.

A top official of Mitsubishi Corporation said Japanese investors faced difficulties with different tax regimes in each Indian State, leading to complications and wanted to know the timeline by when GST regime will be implemented.

“India is a federation and there are difficulties to bring States to agree to surrender tax power but I am confident we will overcome the hurdle. We will work and we have been working to persuade more and more States to fall in line but it does require amendment of the Constitution and needs much more energetic efforts than an ordinary piece of legislation,” Singh said.

The GST has been facing opposition from several non-Congress states which have accused the Centre of trying to encroach on powers of the States and that such a move would hit their finances.

“So, I cannot say we can deliver tomorrow but if you ask me by 2014 once elections are out of the way, whichever Government is there will be a general agreement of appropriate type in place to help propel India’s growth story,” he said.

The Prime Minister said as a result of a number of steps to revive the Indian economy, Government expects the growth rate in the current fiscal (2013-14) to be much better than in the previous year, hopefully around six per cent or so.

“We will do even better in 2014-15," he said.

The Chairman of Keidanren, Hiromasa Yonekura, said Japanese investors are very keen to promote private-public partnership but were facing hurdles because of the complicated tax regimes in India, drawing an assurance from Singh that his Government was determined to overcome these hurdles to enable the country return to the growth path of eight per cent.

On easing norms for Priority Sector Lending (PSL), the economist Prime Minister said it was a “tough technical question which was the preserve of the Finance Ministry and the RBI” and then went on to add in a lighter vein, “the higher we go, the less you know about lower levels”.

Singh said while it will be easier for foreign banks to adjust to PSL norms, his Government would evolve transitional methods to provide a hospitable climate for the Japanese industry and ensure its larger presence in the country.

Describing Japan as a “major player” in the modernisation of Indian industry in the period after economic reforms, he noted that the Maruti-Suzuki partnership has become a household name in India.

Singh, who arrived here yesterday on a three-day visit, said lack of quality infrastructure was the single biggest obstacle to achieving high levels of competitiveness in India.

He said Government has targeted an investment of around one trillion USD in infrastructure over the 12th Plan period, with half of it coming from the private sector and public-private partnership.

“I hope Japanese business will pick up a large share of the investment opportunities that India offers,” he said.

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