NEW DELHI, Dec 29:
Government today pledged to remove entry barriers to business and ensure a competitive tax regime to push manufacturing growth under its ‘Make in India’ programme, even as it blamed high interest rate for slowdown.
The programme aims at manufacturing low-cost quality products both for domestic as well as export market, Finance Minister Arun Jaitley said here.
Criticising the monetary policy of RBI Governor Raghuram Rajan, he said high interest rate is the “singular factor” which responsible the slowdown in manufacturing sector.
“The entry point into the manufacturing sector itself has to be eased. Our initial barriers have to be lowered and perhaps even removed. If we keep the doors closed, investments won’t come in,” he said at a “Make in India’ event.
He further said there is a need to ensure liquidity in the markets. “We need to ensure capital is available, we need to ensure that those sectors which are starving we are in a position to provide adequate capital to those industries.”
The success of bankers’ retreat with Prime Minister Narendra Modi later this week and the ‘Make In India’ campaign will give a fillip to manufacturing, he added.
Jaitley also rejected Rajan’s criticism of Modi’s pet programme ‘Make in India’, saying that it is about manufacturing of quality products at low costs and it was not relevant whether they are sold in India or abroad.
“Whether Make in India is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and are of good quality. They hire services which are cheaper and good quality,” Jaitley said.
Earlier this month, Rajan had sounded a word of caution about the new government’s ‘Make in India’ campaign, saying it assumes an export-led growth path of China and it should rather be ‘Make for India’ with a focus on manufacturing products for the domestic market.
The Governor had said he was “cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China.
“India is different, and developing at a different time, and we should be agnostic about what will work”.
Stressing on the importance of domestic manufacturing, Jaitley said: “… If we lose out on cost, quality then we would be threatened with a situation where in we would become nation of of traders rather than nation of manufacturers”.
Stressing on the need for stability in tax laws, Jaitley said India cannot afford to have polices which “rotationally change and half way through our business we find that there is a different policy from what we had planned.
“And that is why the retrospective taxation became the absence of stability of policy, became a defining moment against India globally”.
Talking about high interest rate regime, he said: “In recent months or years, this (cost of capital) is one singular factor which has contributed to the slowdown in manufacturing growth. The credit offtake is slow, the infrastructure creation…Slower.”
He also said that the project implementation “across ministries, across states, across regulatory mechanisms requires to be expedited”.
Calling for a shared national vision to boost growth, Jaitley said “it is not merely between political parties. It is not merely between Centre and state governments, it is also between various other institutions, which have become altars of governance”.
He regretted that today “judicial institutions, besides administering justice, in some areas have also become (organ) of governance itself”.
The Finance Minister, who would be presenting the first full fledged budget of the new government in February, also said India’s economic growth is expected to pick up in the current fiscal and will be “much better” in 2015-16.
“The last two years witnessed an economic slowdown. This year may be somewhat better, and next year will be much better,” he said here.
The Government expects the GDP growth to be 5.5 per cent in 2014-15, up from 4.7 per cent recorded last year.
On ease of doing business, Jaitley said: “What is it that has happened in the last few years that added to complication of doing business (in India). Was it the uncertainty over the tax administration (that) has scared investors away? Has it not resulted in close down of plants which were comparable to global competitors?” Referring to the tough Land Acquisition Act, he said the law itself is going to add to the complications for investors.
“Danger would be if we lost out on cost, if we lose out on quality then we will be faced with a situation, where we become a nation of trader rather than a nation of manufacturer,” Jaitley said. (PTI)
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