November 24, 2014 – India’s Finance Minister Arun Jaitley promised to unveil a whole series of “second-generation” reforms to try to kickstart the stuttering economy.
In an interview with the Press Trust of India (PTI) news agency, Jaitley said the reforms that would be unveiled in the budget early next year would help the country cross the six percent growth mark in 2015-16.
“The country needs a larger opening out in more sectors… I think we have a lot of exciting times ahead of us and I do see investments coming into India,” he told the agency.
Asked about the broad contours of the budget, Jaitley said there was “a whole set of second-generation reforms”. The first generation in 1991 opened up India’s economy to foreign investment while introducing major trade liberalisation and tax reforms.
The economy grew by 5.7 per cent in the first financial quarter, its best pace since early 2012, spurred by growing business confidence following the landslide election victory of Prime Minister Narendra Modi’s Bharatiya Janata Party. Although the right-wing government has introduced some reforms, it has so far steered clear of “big bang” initiatives that economists say are needed to boost investment and manufacturing.
Jaitley also hinted that the government might reconsider its subsidy policy. “Subsidy must be a quantified amount given to an identifiable section… you cannot have such sections enjoying the benefit who are not entitled to,” he said.
India’s subsidy bill increased fivefold under the previous left-leaning Congress government, which implemented policies to buy agricultural produce at guaranteed prices and distribute cheap grain to the poor.
Modi’s government has held back from dismantling many populist schemes. But it did recently lift diesel price controls in a move to reduce India’s energy bill.
The new government’s resolve to further open up the economy will be tested during the winter session of the parliament which begins on Monday, with contentious tax and land bills on the agenda.