Centre to soon bring fresh taxation measures to encourage investment: PM
Prime Minister Dr Manmohan Singh has said that the Central Government will soon announce steps to stave off investors' fears ensuing from taxations measures like anti-tax avoidance rule and retrospective tax amendments.
Speaking at a function to present Economic Times Corporate Excellence Awards in Mumbai yesterday, Dr. Singh said the government has dispelled the atmosphere of gloom and doom.
"We have "dispelled gloom and doom", improved the "climate for foreign investment", improved "ministry coordination", and are working hard to "restore investor confidence and the growth environment". We have taken significant steps in resolving "energy and power" problems and tackling "urbanisation" issues and improving the "PDS". I hope we will get some editorial approval for this!," he added.
Admitting that certain tax measures like GAAR and retrospective tax amendments in the Budget have led to a very negative reaction from investors, Dr. Singh hoped to announce decisions on all these issues within the next few weeks.
"Certain tax measures in the Budget led to a very negative reaction from investors. We addressed investor concerns by appointing the Partho Shome committee to look into the implementation of GAAR and the tax treatment of certain investments. We also appointed the Rangachary committee to examine tax related issues for the IT sector. The recommendations of both committees have been received and are being examined by the Finance Ministry. We hope to announce decisions on all these issues within the next few weeks," he added.
On Foreign direct investments (FDI), Dr. Singh said: "It is difficult to reduce the deficit in the short run because our exports may not grow very rapidly whereas our efforts to raise the investment rate will mean higher imports. FDI is perhaps the best source of external financing to finance the deficit."
"It is more stable than other forms of inflows and it brings in many externalities such as know-how and access to global supply and marketing chains. We recently liberalized FDI in retail, aviation, insurance, power exchanges and broadcasting," he said.
"Some people still try to make FDI into a bogey even invoking fears of the East India Company. In democratic politics any action of the government should be open for scrutiny and criticism. But our experience should teach us not to be fooled by naysayers and Cassandras of doom. Indian industry has responded to the opening of the economy in ways which were not easily foreseen," he added.
Referring to the recent government action to raise price of petroleum products and capping supply of subsidised cooking gas cylinders, Dr. Singh said the government is conscious of their effects on poor people.
"Bringing the fiscal deficit under control is an essential element in restoring investor confidence. The Finance Minister has announced a roadmap to reduce the fiscal deficit from a projected 5.3 percent this year to 3 oercent by 2016-17. The action taken recently to reduce fuel subsidies must be seen in this perspective. These were politically difficult decisions but we did what was right. We are also mindful of the effects such steps have on the poor and vulnerable and we will take all possible measures to protect their "lifeline" needs.