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Economic reforms in 1991: Narasimha Rao was not a big liberaliser, says Arun Jaitley

The Finance Minister blamed the now much maligned Hindu rate of growth to the Nehruvian economics.

By: ENS Economic Bureau | Mumbai |
August 21, 2016 2:15:59 am
SAARC meet, Arun JAITLEY, Islamabad SAARC meet, Saarc Arun JAITLEY, SAARC, SAARC meet, SAARC islamabad, Arun Jaitley, Finance Minister Arun Jaitley, Pakistan, Pakistan Saarc Arun Jaitley in New Delhi. (Express Photo: Tashi Tobgyal/file)

Finance Minister Arun Jaitley on Saturday said former Prime Minister PV Narasimha Rao was not a “big liberaliser” as he initiated reforms out of “compulsion” due to the failure of Nehruvian economics.

Jaitley said that Rao — who initiated economic reforms in 1991 — was forced to come out of the Nehruvian mindset to help avoid a sovereign credit default. Challenging the assertion that Rao was the force behind the liberalisation drive, he said, “it was not that former prime minister Narasimha Rao was a big liberaliser.”

Jaitley blamed the now much maligned Hindu rate of growth to the Nehruvian economics. “While in the 1950s and the 60s we had limited resources,the 70s and 80s were wasted decades, which contained our growth rates at 1-2 per cent per annum,” he said while addressing the party workers here.

“When Japan, Korea and Taiwan were on the path of economic success, we’re impacted by the Nehruvian thought as there was a thinking that there were some work that only the government can do,” Jaitley said

Jaitley said, “when Rao was the law minister of Andhra, his first decision was that all private colleges should be abolished and only government should run the colleges. But when he became the prime minister, he found that there was no foreign reserves left in its kitty, and that the country was heading towards bankruptcy. So, the reforms were brought in due to that compulsion, due to failure of that system.”

“In the first two-three decades after the Independence, our growth was around 1-2 per cent, or maximum 2.5 per cent. Compared to world economic growth, we were nowhere. At that time the mindset was that all the responsibilities were of the government… impacted by the Nehruvian thoughts,” Jaitley said.

Meanwhile, Jaitley said the country will be able to bring down tax rates if the taxpayer base increases and evasions and exemptions come down. “If all taxpayers pay their taxes, it will help bring in tax rates further low. The more the evasions and exemptions, the higher will be the tax rate. So, moderate tax rates and evasions cannot co-exist,” Jaitley said. Replying to a demand for bringing down the proposed GST rate at 17 per cent, Jaitley said, when more people evade taxes, it brings in an aberration in tax structures. The proposed uniform taxation regime, GST will integrate the country into one single market by ensuring a free flow of goods and services across the country, Jaitley said, adding that in order to enable this, we should have a uniform tax rate throughout the country.

The GST will ensure that taxation rates are moderate, which in turn will bring down the cost of doing business, thereby bringing down the cost for end consumers. “You have to have one person being assessed once and not by different tax authorities in different states. This makes doing business easier,” he said.

He also said that a large section of the people who file income tax returns don’t actually pay the taxes.

Claiming that barring Dubai and Singapore, our tax rates are now becoming more reasonable, he said for indirect tax rates to come down further, there is a need to increase its base and to achieve that “everyone should pay their taxes”. Stating that GST implementation was his immediate challenge, the minister said the next challenge will be strengthening the banks.

(With PTI inputs)

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