Laid foundation for USD 5 trn economy in budget: FM

Kolkata: Finance Minister Nirmala Sitharaman on Sunday said that the foundation for achieving the goal of USD 5 trillion economies by 2024-25 has been laid in the union budget which stressed 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 here.

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 economies,” she said.

Asked about the rationalization 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 rationalization is done once a year and not every three months?. I have proposed the GST Council to consider it,” she said.

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

“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 percent 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 percent, 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 the 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 percent. The government will have the remaining shareholding.”