Laid foundation for $5 trillion economy in budget: Finance Minister Nirmala Sitharaman

PTI Kolkata, West Bengal, India Feb 09, 2020, 10.55 PM(IST)

Nirmala Sitharaman Photograph:( Reuters )

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She said that the budget has also focused on increasing consumption and investments towards building assets.

Finance Minister Nirmala Sitharaman on Sunday said that the foundation for achieving the goal of USD 5 trillion economy by 2024-25 has been laid in the union budget which stressed on increasing capital expenditure for infrastructure.

She said that the budget has also focused on increasing consumption and investments towards building assets.

"I think we have laid the foundation for increasing consumption and investments towards building assets such as infrastructure, which should have a cascading effect in the long and short term," Sitharaman told reporters.

She said this will trigger the virtuous cycle for the economy to perform and move forward.

"The majority of government investment is directed towards creating infrastructure and through various windows like health and agriculture to avoid any kind of rural distress. These will create the foundation for the USD 5 trillion economy," she said.

Asked about the rationalisation of rates of Goods and Services Tax, the finance minister said that it is being reviewed every three months by the GST Council.

"If the rates are reviewed every three months, the government cannot make an assessment of revenue collection. Can we consider a situation where rate rationalisation is done once a year and not every three months?. I have proposed the GST Council to consider it," she said.

Rationalisation of GST rates once a year will help the government and businesses, she said.

Also read: No plans to cut funds for states - Nirmala Sitharaman

"It is not that GST collection is not happening. The indirect tax administration is now getting the benefits of data analytics to prevent fraudulent activities," the finance minister said.

The GST collection has been around Rs one lakh crore per month, she said.

To a query whether GST has been revenue neutral as was envisaged, the finance minister said, "The compensation rate (for states' revenue loss) was fixed at 14 per cent on the basis of a certain level of calculation. However, collections have fallen (short of expectations) and so there will be an impact."

The compensation rate was fixed on the premise that the economy will grow by 12-13 per cent, she said,

"But in the last two months, the economy grew less than that. However, the government will pay compensation (to the states) within a timeline", Sitharaman said.

To a question about bringing petrol and diesel under GST, she said a lot of discussions had taken place when the new law was framed.

"My predecessor late Arun Kr Jaitley made a provision for making petroleum products zero-rated. When states are ready, there is no need for any amendment to bring petroleum products under GST and the Council can do that," the finance minister said.

On liquidity to industry and NBFCs, she said every possible step is being taken to ensure that availability of cash does not become an issue.

"The government is closely monitoring lending by both public and private sector banks. Secretaries are continuously engaged with the banks and every possible step is being taken so that liquidity is available," she said.

Sitharaman also dismissed the fear that the optional direct tax structure, as announced in the budget, will decrease savings and thereby investments.

Regarding partial disinvestment in LIC through an IPO, as announced in the budget, she said, "Indian people will hold shares and there is no reason to believe as to why money in the insurance company will not be secure after the shares will be offered to the public."

She said, "I do not know what will be the extent of disinvestment. May be eight, ten or 12 per cent. The government will have the remaining shareholding."

Asked about what West Bengal has received from the budget, she said, "I do not know how I answer this question of kisko keya mila (which state gets what). I am looking at the point of macroeconomic stability, building assets in the country, money directly going to hands of individuals because of reduced tax rates and so on."

Announcements were made in the budget about various projects which are happening in different states, the finance minister said.

While interacting with the members of trade and industries here earlier in the day, Sitharaman said the government wants continuous engagement with industries and businesses and will act as a facilitator for hassle-free payments of taxes.

She said the Centre has introduced some features in the budget like "faceless appeals and sorting out of problems while imparting tax administration".

Sitharaman said this will be made possible only with the help of new technology.

At one point of time during the discussion, city-based industrialist Gaurav Swarup complained that promoters of some companies are looking at selling their businesses and many others are "losing interests" as there is no incentive.

Unfazed by such remarks, Sitharaman said, "Tell me, what is the solution? The government reduces the corporate tax rate and keeps it very low for a new one. It takes steps to simplify the tax structure and make the system cleaner and reduce the rates progressively. Tell me what else you want me to do."

Indian Chamber of Commerce director general Rajeev Singh said a delegation from the industry body also expressed concerns over the implication of tax collected at source (TCS) on Indian exports and other issues like ESOP (Employee stock ownership plan).