Jaitley hints at no cuts in fuel taxes, calls it a ‘trap’
Lid on taxes to push India into unmanageable debt: Minister
Union minister Arun Jaitley has responded to the mounting criticism from the opposition, especially the Congress, blaming the government for not reducing taxes on fuel, and said that the suggestion that these be capped at ₹25 is a “trap”: “It is intended to push India into an unmanageable debt — something which the UPA Government left as its legacy. We must remember that the economy and the markets reward structural reforms, fiscal prudence, and macro-economic stability. They punish fiscal indiscipline and irresponsibility. The transformation from UPA’s “policy paralysis” to the NDA’s “fastest growing economy” conclusively demonstrates this.”
In his latest blog, Jaitley said that India’s GDP growth of 7.7% in the January-March quarter showcases how the structural reforms undertaken by the government since 2016 have laid the foundations for long-term robust growth.
Indeed, India could end the fourth quarter of 2018-19 with double digit growth, Union minister for finance, railways and coal, Piyush Goyal said while speaking at a conference in New Delhi.
“With structural reforms like demonetisation, the implementation of the Goods and Services Tax (GST) and the enforcement of the Insolvency and Bankruptcy Code (IBC), we had two challenging quarters,” Jaitley admitted, but added that “those who predicted a 2% decline in GDP growth have been conclusively proved wrong”, alluding to
former prime minister Manmohan Singh and former finance minister P Chidambaram, respectively.
Goyal added the creation of the Real Estate Regulatory Authority, expected to revive the real estate and construction sector by protecting the interests of consumers who buy homes (thereby encouraging more to do so), to the list of reforms in his speech.
In his blog, Jaitley also addressed growing criticism that the NDA government hasn’t been able to create jobs. “An analysis of the data released clearly shows that the construction sector is expanding by double digits. It is a job creating sector. Investment is increasing. Domestic investment is also increasing. The FDI is at an unprecedented level.” These, along with growth in fixed capital formation, expenditure in infrastructure and increased rural spending would spur job creation, he added.
Gross fixed capital formation is a measure of investment and it grew at 14.4% in the last quarter of 2017-18.
Speaking about the spiraling fuel prices, which is hurting the common man, he said: “If people pay their taxes honestly the high dependence on oil products for taxation eventually comes down.”Oil prices dipped to $26 a barrel in February 2016 before climbing back; the commodity was trading at around $73.44 per barrel over the weekend. The Indian government benefited from falling crude prices since November 2014 and shored up its finances by increasing the excise duty on fuel nine times between November 2014 and January 2016. In the face of surging crude prices since December 2016, the government has slashed excise duty only once by ₹2 in October 2017.
Jaitley wrote that while India’s tax to GDP ratio, more needs to be done: “We are still far from being a tax complaint society. Salaried employees are one category of tax compliant assessees. Most other sections still have to improve their track record.”
“A very large chunk of the growth is coming from government capital expenditure. What is worrying is private investment is yet to pick up. Public services and construction are the two sectors that have catalysed growth in the fourth quarter. But both these sectors depend on public spending and as the government is committed to fiscal consolidation in 2018-19, these two sectors will not grow at the same pace. So private investment needs to recover, but no signs are visible,” said Pronab Sen, former chief statistician of India.