Attacking Congress, Finance Minister Arun Jaitley on Thursday said the previous UPA government had indulged in discretionary allocation of national resources causing damage to the economy and the Modi dispensation did away with the practice as it learnt from their “mistakes”. Replying to a debate on Budget in the Lok Sabha, he also said the Manmohan Singh government had focussed on redistribution of resources without enhancing growth and productivity.
Jaitley, while noting that recession had hit the global economy in 2008, said, “our problem was that the UPA government, I am not saying from point of criticism but introspection if you look back, suffered on domestic policy on two fronts…” “You (the UPA) did not realise time had come to end discretion and switch over to non-arbitrary mechanism for resources allocation. It was a fundamental mistake and we learnt from your mistake and corrected this,” he said.
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Jaitley said the UPA government’s measures had scared away investors and adversely impacted several macro-economic parametres. In this regard, the Minister referred to 2G spectrum and coal block allocations which were shrouded in allegations of corruption during the UPA government. Because of the policies of the UPA, fiscal deficit, current account deficit and inflation had gone up significantly, he said, adding these were contained by the present government.
Jaitley said the fiscal deficit has been proposed at 3.2 per cent of the GDP for 2017-18 and will be further brought down to 3 per cent in the subsequent year. Moreover, Jaitley said the quality of fiscal deficit too has improved during NDA regime as it is not on account of compressing expendititure but due to additional resource mobilisation.
“Our effort is to have as much public expenditure as possible while managing fiscal deficit,” he said. As regards to the inflation, Jaitley said it is at 3.6 per cent as against the target of 4 per cent (+/- 2 per cent) given to the RBI and the current account deficit has been brought down to 0.3 per cent from a high of 4.5 per cent during UPA regime.
Referring to demonetisation, he said it has not impacted the economy as apprehended by experts and added that even during the stress period (of November and December), the size of the formal economy was increasing.
Jaitley said the demonetisation, coupled with the implementation of GST, will make India a single market instead of 30 different markets in the states, facilitaing free flow goods and services throughout the country. GST, he said, will also check tax evasion and help in increasing the revenue of Centre as well as states. Defending government’s decision on demonetise Rs 500 and Rs 1000 notes, he said, “cash is the biggest facilitator of crime” even though he agreed that there will be crime even if there is less cash.
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Jaitley said cash gives birth to black economy and that the government cannot allow that to continue. “We had cash rich economy having 86.5 per cent of high denomination currency notes. More cash leads to parallel economy, tax evasion and black money,” he said. The Finance Minister said the cash-to-GDP ratio in India is 12.2 per cent as against 2 to 5 per cent in developed and emerging economies.
Answering questions as to why the RBI has not yet come out with the amount of scrapped notes deposited with the banks, Jaitley said they were computing and will not hurriedly give the numbers as it concerns their reputation. Jaitley further said the collection figures with regard to income tax, excise tax and realisation of VAT by states, with the exception of two states, have gone up post demonetisation. Responding to criticism of government on demonetisation by Trinmool Congress MP Saugata Roy, Jaitley said cash is root cause of many problems including the chit fund fraud which was witnessed in West Bengal.
To a jibe by CPI(M) member Mohammad Salim, he said “nowhere in the world will a Marxist say that there are virtues of cash. Only here it is said.” On questions over merger of Rail Budget with General Budget from this year, he said he agreed that there should be separate discussion in Parliament on railways and it will be done. Jaitley said the practice of presenting separate Railway budget was started by the Britishers in 1924 as its size was more than the General Budget and rail was the major mode of transport.
Now the size of allocation for other important ministries like defence and transport exceeds that of railway and also other modes of transport have started competing with railways, he said, citing this as the reason for the merger.
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