FM refutes observations by US government

On India gone slow on economic reforms

PTI | June 28, 2011



Finance Minister Pranab Mukherjee on Monday strongly refuted observations by US think- tanks, the government and industry that India has gone slow on economic reforms and insisted that a series of reforms are in the process, which will lead to the next round of growth.

However, Mukherjee observed that reforms in India require political consensus, which is being worked upon by the government led by prime minister Manmohan Singh.

Reform is a continuous process and the UPA government is committed to it.

"The more you reform, there is the need for additional reform," he argued addressing a meeting of India and American corporate leaders, policy makers and think-tank members at a conference on the 'US-India Economic and Financial Partnership' jointly organised by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think-tank.

"We have taken certain steps, as I was talking of structural reforms," said Mukherjee, who arrived in Washington on Monday leading a high-powered Indian delegation for the second India-US Economic and Financial Partnership discussions being held here.

"We have recently finalised the guidelines of the debt bonds. We have also decided that... Foreign Direct Investment (FDI) to be more user-friendly (and) all prior regulation and guidelines have been consolidated into one comprehensive document which is reviewed every six months. This has been done with the specific intent of enhancing clarity and predictability of our FDI policy to foreign investors," he said.

"Ownership and control is now central to the FDI policy and the methodology in this regard has been clearly defined.

Discussions are currently underway to build consensus on further liberalisation of the FDI policy," he said.

Certain important legislations for reform of banking regulations, enhancement of FDI in the insurance sector and pension fund regulation were introduced in the last session of Parliament, he said, hoping that it would be possible to get these legislations cleared expeditiously by Parliament.

"But I was mentioning to Secretary Geithner that in our system, we ought to have the consensus from the other parties, because we do not have the simple majority to get the laws passed in our Parliament.

"The talks to develop a consensus are going on and I do hope it will be possible. With the help of the parties concerned, we would be able to get these legislations passed," Mukherjee said.

In the areas of taxations, New Delhi, he said, has undertaken two major reforms.

"In direct taxes, it is under the scrutiny of the parliamentary standing committee and I do hope that from the next financial year, we will be able to operationalise it," he noted.

"With respect of another reform, Goods and Services Tax, (on) which we are trying to evolve a consensus, because of our constitutional practice, these are areas of taxation which the Constitution has authorised the federal and provincial governments to enforce taxes on certain items. Unless the states agree and a constitutional amendment is introduced and passed, this is not possible to make it effective," he said.

And for that constitutional amendment, the central government requires a special majority and concurrence of 50 per cent of the provincial government.

"Therefore, the consensus among the major political parties is absolutely necessary. It would be a very important reform if we are able to get this legislation passed.

"We are working on that and if we are in a position to get this legislation passed, to my mind it will be a major reform," he said.

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