New levies not to burden middle class: Jaitley

RSTV Bureau

Finance Minister Arun Jaitley in Rajya Sabha TV programme ‘Spotlight’.

Finance minister Arun Jaitley says new levies in the Union Budget will not have a huge impact on middle class incomes. He said the middle income groups will be net gainers when fresh tax-saving measures on offer are taken into account. Speaking at Rajya Sabha Telvision’s flagship show Spotlight, he said he was not apologetic about promoting Make in India by removing concessions on imports. Edited excerpts:

Q: If you are playing a game of cricket and padded up to bat, how will you describe the conditions?

A: It is quite obvious that we are facing tough conditions. The global environment is totally unsupportive. The global economy has shrunk, the trade has shrunk and the headwinds are totally against us. All that impact demand, prices of commodities, oil. It changed the fundamental way world would think. Who would have imagined two years ago that the world would start arguing that you need higher oil prices in order to grow. But these are impossible areas that we have gone into. Our exports have shrunk, markets have become volatile, currencies are fluctuating due to global factors. The one advantage that we have is oil prices. Because we are consumers, we are benefitting from low prices. I think we quite intelligently used the opportunity.

Now where does the growth come from? Obviously it is coming predominantly from three areas. Public spending, investments and an increase in urban demand. Where it is not coming from? Exports, agrarian sector and rural demand.

The banks have to be strong to support growth. We need to see the impact of private sector balance sheets on the balance sheets of public sector banks. These are challenging areas to addresses. And I said globally the playing conditions weren’t good. The challenge is to build firewalls around your system in response to global situation.

Q: Are you batting on the front foot or back foot?

A: You have to bat with a straight bat, irrespective of the foot. You had to choose priority areas. There’s no point claiming that you could do extremely well when conditions are hostile. Therefore you had to address the rural sector, social sector, infrastructure, and partly banking.

Q: Was there a change in strategy?

It is argued that the government must spend more, but it must maintain fiscal discipline. The government must spend more, but must not raise taxes. These kind of contradictions appear in newspaper columns. So there are a lot of things that you have to do. And thereafter challenge really is to address issues without being unnecessarily harsh on citizens or taxpayers and also maintain certain amount of fiscal discipline.

And one reason while spending more we have to maintain fiscal discipline was that you can’t claim to be the fastest growing large economy in the world. You simultaneously say that the oil price situation is favourable and turn around to say that the situation is so terrible that I can’t stick to fiscal targets.

Q: How is this forming a longer term strategy?

A: Service sector is doing well, given the global situation. Manufacturing is picking up in some areas. You can give them some tax relief. We tried to do it, but then bulk of your resources have to go to sectors more distressed. And priory wasn’t distributing the money, but main objective was how we can use it for asset creation in rural areas.

On MNREGA, there’s no point following the UPA system of accounting. That you get a clap by sanctioning huge amounts and end up spending a fraction of it in most of the UPA rule. The revised estimates for development was much lower than the budgeted ones.

Last year, we not only met the fiscal deficit target, it was also the quality of fiscal deficit. We spent more than the budgeted figure, yet maintained the deficit target because by spending more you can also get growth. So in rural areas, our focus is on asset creation.

You need both physical infrastructure and social infrastructure. If I concentrate on rural areas… that’s where the demand will come from. Eastern parts of the country has potential to grow faster.

We have come up with new schemes. You’ll have a third of India’s population carrying medical cards entitling them to free medical treatment in any notified hospital. Last year, we passed a law transferring unclaimed moneys to the consolidated fund of India. So this facility for BPL category come from the interest on this amount.

Then the crop insurance by paying money with minimal state support so that if there’s a drought or a hail strom, farmers will not commit suicide. He still get his cost and more from insurance.

And the whole idea of getting benefit from rationalising LPG subsidy and by Give It Up campaign. We are transferring these resources to 5 crore families.

Then it is equally important to concentrate on infrastructure. So, between rural roads, highways and railways, you sanction a large amount of money. You concentrate more on regional airports and more ports.

And then you finally have a series of large reform steps. Then the Adhaar legislation. I hope to see it through this session. It is an important law that can rationalise subsidiaries. The whole dispute about privacy set aside, it’s a certification that nobody claims money twice.

This whole reform in state transport. You can’t have a country which has a third of world population and cities without transport network. Therefore private sector is allowed to put in buses.

You see the states get 42% of the total pool. Additionally the states also get funds for panchayats and municipalities plus for central schemes. The 14th Finance Commission said the states will run schemes now. States said we won’t do it, fund us additionally. So some schemes, we fund entirely and some 60%.

The Centre is left with a limited pool, out of the limited pool, all the wise men in the media say spend more, but maintain fiscal deficit. I don’t know the magic. I have to raise revenues and where do that revenues come from?

Q: It is criticised that you treat the middle class and the rich at par.

How much new revenue from all these new levies? The total revenue raised from all these is less than 1 per cent of the total revenues of Rs 20,00,000 crore — just Rs 19,000 crore.

Which are the segments I targeted for collecting these revenues? Environmentally hazardous products, largest came from coal. And the rich must pay a little more. Now if you look at this, bulk of this came from these products. There was a logical rationale.

On the contrary, what the smaller tax payer or the middle taxpayer pays? If you count the advantages, he is getting from presumptive taxation and all new kind of deductions we give him, he stands to gain immensely.

The government is trying to encourage domestic manufacturing under its flagship program – Make in Inda.

Q: You spoke about a disease vertical. There is a little dichotomy, government recently increased the custom duty on health products.

Let me remove this confusion. There is a point of time when India did not manufacture them enough. We used to import a lot of them, because you wanted cheaper healthcare. You had granted exemptions. When corresponding areas the domestic industry has come up, then my priority is Make in India. I am not apologetic about it. I am not going to finish Indian industry. In this case, the health ministry advised us that when domestic production has started, do away with exemptions.

We consult the relevant people and after we remove exemptions … on foreign products they must pay duties.. In the process there were three products on which the assessment was not very accurate so the moment it came up, we revisited the decision and continued the exemption because the identical product was not available in India, so we continued it.

When this debate went on, the most vocal comments came from those who had companies outside India. If somebody wants to fault me for supporting Make in India, I am willing to be blamed for that.

Q: You touched upon two products nps and ppf..there are two other… insurance products and mutual fund products. What about bringing all of them under one pedestal.

A: You have a valid point. At the end of the day, giving equal treatment to these products, you have to slowly keep nudging in the direction of insurance cover, healthcare and certainly towards pension funds. Some of the trade unions have said that we don’t want this. I would actually love to discuss with them. It’s a question the unions will also have to introspect.

Q:Given the howl of protest seen on EPF, despite the objectives being explained, are reforms like Direct Tax Code possible?

We are implementing the suggestions on DTC one by one. Many would require a relook. I am reasonably satisfied with the way tax simplification is taking place.
I said in a function in the morning that returns of 99% of the tax payers are accepted as they are. You get to file your return online and there is no harassment.

Q: Will the rich farmers be taxed?

We should not be unmindful of the extent of distress in agriculture. Along with the Punjab chief minister, I visited a school in Punjab. While interacting with them, I asked them what they wanted to do. Most of them wanted to join the army, some wanted to become doctors, teachers, engineers. Not one raised his hand when I asked if they wanted to be a farmer. And Punjab is a predominantly agricultural state. Therefore, let’s not think that farmers are so happy and we must start taxing them.

The subsidies must be targeted, but we are still living in an age where people commit suicide because they are in debt trap. And therefore lets start taxing them and reduce subsidies. Any sensitive government won’t move on that line

Q: What is your unfinished agenda

In an adverse global condition, you must maintain your growth rate and if the political atmosphere was a little more supportive and the rain gods are kinder than they have been in the last two years, faster growth would happen.