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Reform overdrive

In the aftermath of United States President Barack Obama’s visit, Government of India has taken its reform process into overdrive. The Centre notified stock exchanges that it would sell up to 10 per cent stake in Coal India on Friday, a transaction that could fetch as much as Rs 24,000 crore. This amount is more than half the sell-off target of Rs 43,425 crore for the 2015 Financial Year. Until now, the government has raised only Rs 1,700 crore. 

Also, the Union Cabinet decided to not challenge a Bombay High Court ruling that said Vodafone was not liable to pay a tax demand of Rs 3,200 crore in a transfer pricing case. Speaking to reporters after the cabinet meet, Union Telecommunications Minister Ravi Shankar Prasad said that the move was aimed at improving the investment climate in the country.

Finally, the Union Cabinet also decided to adopt the Telecom Commission’s recommendations, which set the base price for 3G spectrum auction at Rs 3,705 crore. Many in the industry, however, balked at the price, stating that it was significantly higher than the amount suggested by the telecom regulator. Various reports also suggest that the government is guaranteed to fetch at least Rs 17,555 crore from the 3G auction, a third of which will be transferred to the exchequer in the current fiscal.

These decisions are particularly relevant for two key reasons, namely reducing fiscal deficit and improving the business climate in India. In his maiden Union Budget speech, Finance Minister Arun Jaitely said that his government was determined to balance its books by reducing the fiscal deficit to 4.1 per cent of the gross domestic product in the current fiscal year, from 4.5 per cent in the previous year. Although, the Centre is struggling to meet its targets, Jaitely is pulling all the stops to balance the books. Whether the Centre’s efforts bear fruit is yet to be seen.
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