PC aims to cut deficit,clarify taxes

Crisis management: As big a course correction as in 2008; Kelkar will draw up fiscal roadmap

Short of presenting another budget,Finance Minister P Chidambaram today spelt out a huge mid-year course correction for the economy,at par with that taken in crisis years like 2008.

Less than a week after stepping into the ministry,he said that on his agenda was an aggressive road map for revamp of fiscal policy,including a rollback of the retrospective tax laws and removal of policy impediments for key sectors,both of which have crippled investment. To show that he meant business,the minister has again asked Vijay Kelkar,the author of Indias GST road map,to redraw the fiscal consolidation plan for the new team at North Block.

Just hours after he met RBI Governor D Subbarao,Chidambaram indicated rate cuts were on way. Interest rates inhibit the investor and are a burden on every class of borrowers. Sometimes it is necessary to take carefully calibrated risks in order to stimulate investment and to ease the burden on consumers. We will take appropriate steps in this regard, he said.

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In a prepared statement,the Finance Minister described investment as an act of faith in the economy. He promised a reassurance on that score and set a target of raising investment to 38 per cent and savings to 36 per cent levels that were last achieved by the economy before the global meltdown of 2008.

He said foreign investors would soon see clarity in tax laws,a stable tax regime and a non-adversarial tax administration through corrective measures to be taken by his ministry. Accordingly he has directed a review of tax provisions which have a retrospective effect to find a fair and reasonable solutions to pending as well as likely disputes (like Vodafone).

The minister also said there will be a slew of measures to tune policies and procedures that will facilitate capital flow into India.

In the next few weeks,we will announce a number of decisions to attract more people to invest in mutual funds,insurance policies and other well-designed instruments, he said.

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Identifying nine sectors that are under stress,Chidambaram said the Cabinet Committee on Economic Affairs will come out with practical solutions for petroleum,electricity,coal,mining,power,road transport,railway,textiles and ports.

The Chidambaram gameplan will be to bring about a turnaround in investment by domestic and foreign entities,to make his disinvestment targets go through and to keep the fiscal target for 2012-13 within reach. Along with softening of interest rates,this will ensure revival of the economy that grew at a mere 6.5 per cent in 2011-12.

Uppermost in my mind is the duty to re-gain the confidence of all stakeholders. Obviously,where necessary,our policies have to be modified or fine-tuned in order to meet the expectations of different stakeholders, he said.