'Liberalisation will prevail over protectionism in global debate'
Finance Minister Arun Jaitley on Monday played down fears over protectionism saying the need for greater liberalisation will prevail once the debate on the issue settles down.
Speaking at a seminar at Institute of International Finance (IIF) here, he said he did not see the idea of protectionism spreading globally and weighing on economies including that of India.
India, he said, will continue to grow at over 7 per cent despite weak global environment and temporary negative impact on private consumption from the government's demonetisation of high-value currency.
"Even though we hear transient voices of protectionism in the world, at the end of the (day) it is the companies, consumers who are going to decide that they will need products or services which are cost competitive. They cannot be pushed into inefficiencies," he said.
"Therefore, hopefully I think the debate (on protectionism) would sooner than later settle down and the need for greater global integration and greater trade itself would prevail," he added.
He said India's experience has been that integration and greater liberalisation has seen the economy and trade grow.
"Our own experience has been that global integration, greater domestic liberalisation, greater integration and more trade has certainly helped us.
"And the entire momentum and impact of more trade itself is going to benefit the global economy," he added.
Finance Minister Arun Jaitley also said that remonetisation, following the world's largest note ban, has been substantially completed and the move will result in expansion of the tax base in the country. In November 2016, the government junked 500 and 1,000 rupee notes, which made up 86.4 per cent of the country's circulating currency. As demonetised currency was allowed to be deposited in bank accounts or exchanged for new currency, the government introduced new 2,000 and 500 rupee notes.
As demonetised currency was allowed to be deposited in bank accounts or exchanged for new currency, the government introduced new 2,000 and 500 rupee notes.
"India was not a tax compliant society. A very large part of the economy was cash-centric. This problem needed to be addressed. It requires a lot of political courage to resolve the problem," he said at an Interactive Session on 'India's Business Environment: Reforms and Opportunities' organised by CII, Indian Embassy and Japan Chamber of Commerce here.
He said that Prime Minister Narendra Modi on November 8 last year took the unprecedented decision to demonetise the high denomination currency, which was the largest currency replacement anywhere in the world.
"Eighty six per cent of India's currency was replaced within a matter of few months. The remonetisation got substantially completed," he said.
The finance minister said that the move brought about a far greater movement towards digitisation.
"It ended the anonymity related to cash operated in the system and hopefully, in the days to come, the taxation base of India would expand," he said.
The finance minister also said that India clocked between 7 and 7.5 per cent economic growth rate even in an adverse global environment. With a series of reforms and growth increasingly returning to the world, "I am sure that over the next few years this growth itself will increase," he said.
He said that over the next decade or two, the avenues for investment in India for long-term safe investments are going to be plentiful.
"I am sure in this changed environment where India promises to maintain its position as fastest growing major economy in the world, all of you are welcome to India. It is a far easier place to invest and far profitable place to invest," he told the investors present at the meeting.
Jaitley said that the government has systematically addressed the challenges facing ease of doing business in the country including getting environmental clearances.
In this year's budget, the foreign investment promotion board (FIPB) has been decided to be abolished "so that investors, who require permission to get into the country, don't have to go through multiple permissions."
"We are now in the process of working out an alternative model as to the system where permission of foreign investment are still required, as to what would be the easiest methodology to effect those permissions," he said.
Govt to dilute stake in PSBs once their health improves: FM
The Indian government will dilute its stake in state-run banks to 52 per cent once the health of the lenders improve and the money will be used to inject capital in them, Finance Minister Arun Jaitley said on Monday.
He hoped for a resolution to the burgeoning bad loan problem following the government empowering the Reserve Bank of India (RBI) to order lenders initiate insolvency proceedings against defaulters and create committees to advise banks on recovering non-performing loans.
"We already have a programme under which we have been supporting recapitalisation of banks. Where more funds are required from the government, we will be quite willing to look at that.
"But once the health of the banks themselves improve, we have also announced that the government will be willing to bring down its own equity in the banks to 52 per cent and that can be used for banks' recapitalisation," he said at a CII-Kotak investor roundtable here.
This fiscal, the government has budgeted Rs 10,000 crore of capital infusion in public sector banks. The amount is lower than Rs 25,000 crore set aside in the previous budget but will be insufficient to help state-run banks raise about Rs 80,000 crore of equity capital that they will require over the next two years to comply with the Basel III norms and support credit growth.
Jaitley said the non-performing assets (NPA) problem is limited to "a certain set of accounts and these numerically are not very large in number but the quantums are high and therefore, they impact the balance sheet of banks".
"Now, we will wait for the result over the next few months of what we decided (through the ordinance) and ensure that under the empowerment that is being given to the RBI, the banking industry itself goes in for resolution," he said.
He also said that with the new empowerment of RBI, a resolution to the stressed asset problem will be reached.