Burying the ghost of the earlier version of the General Anti-Avoidance Rules (GAAR), Finance Minister P Chidambaram today wooed foreign investors to put their money in India, promising a conducive environment, besides a stable tax regime, lower fiscal deficit and high economic growth. He sought to allay concerns over the country's economy, saying it did not face the risk of a downgrade of sovereign ratings.
His assertions came a few days after the government modified GAAR and deferred it by two years to April 1, 2016.
"There is universal acknowledgement that we have handled the GAAR situation fairly effectively and buried the notion that GAAR would be some kind of a monster," news agency PTI quoted Chidambaram as saying.
Chidambaram's efforts to present India as an investor-friendly country has come a little over a month before the Union Budget and a few days after Moody's Investors Service reaffirmed a stable outlook on India's sovereign ratings.
Speaking at the Global Investors Meet in Hong Kong, the finance minister indicated before an audience of about 200 people that tax rates might not be raised and the coming Budget would offer a lot to investors, despite government policy being biased in favour of the poor.
Chidambaram said fiscal prudence would be a key part of his Budget next month, the last full one of the United Progressive Alliance (UPA) government in its second term.
Besides, Chidambaram for the first time gave a clear deadline for the Goods & Services Tax (GST). The Constitution has yet to be amended to enable the GST rollout but he said the government was planning to introduce the GST legislation in the monsoon session of Parliament and get it passed by December. He said all states were on board and a report on the GST design was expected to be launched this Friday.
The minister also said the government was considering raising the ceiling on foreign investors' investment in government bonds from $10 billion to $15 billion and in corporate bonds from $20 billion to $25 billion. The lock-in period of one year for infrastructure bonds might also be removed, he indicated. Business Standard could not independently verify the comments attributed to the finance minister by some investors present at the meet.
Chidambaram also said the economy could grow by 6.5-7 per cent in 2013-14 and eight per cent the next year. "In the current (financial) year, we will not do better than 5.7 per cent," he was quoted as saying by a news agency.
For this, Chidambaram urged the Reserve Bank of India (RBI), a week ahead of the central bank's monetary review, to strike a balance between the needs of pushing growth and controlling inflation.
He highlighted infrastructure building as a priority of the government and said the Cabinet Committee on Investments, which would hold its first meeting in January, would clear all hurdles for large infrastructure projects.
The finance minister also tried to give a glimpse of the road map in the medium to long term for improvement of the Centre's finances. In the long term, the government would aim at increasing revenues by simplifying tax processes and widening tax base.
To rein in its fiscal deficit at 5.3 per cent of the gross domestic product (GDP) this year, the government would primarily curtail expenditure. It aims to bring the fiscal deficit down to to 4.8 per cent next financial year and to three per cent in 2016-17.
He admitted the current account deficit, at a record 5.4 per cent of GDP in July-September, was likely to remain high next year, too, but foreign capital flows would be sufficient to fill the gap.
Allaying fears on political logjam on many critical issues, he said most political parties were on board and there was a support of invisible politics' to implement reforms.