In the wake of Citibank fraud and other scams, Finance Minister Pranab Mukherjee today cautioned against "window dressing" by accounting firms and called for stricter disclosure guidelines.
"Accountants have a critical role in guarding against window dressing of balance sheets that encourage entities to take more and more risk until they are dangerously leveraged," the Minister said.
Mukherjee was addressing a conference on sustained economic growth organised by accounting body ICAI.
The estimated Rs 300 crore Citibank fraud at Gurgaon branch, involving diversion of depositors money to the stock markets, was uncovered last week.
"We must encourage stronger disclosure standards for systemically important financial institutions as well as complex and sophisticated financial products", Mukherjee said.
On sustaining growth, he said the challenge before the country was to sustain high rate of economic expansion and cross the double-digit growth barrier.
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"The challenge now is to sustain this high GDP growth over the extended period of time and find the means to cross the double digit growth barrier in the coming years."
The economic recovery witnessed in the recent times, the minister said, has been broad based, with agriculture, industry and services contributing to the growth momentum.
The economy recorded a growth of 8.9 per cent in the first half of the current fiscal, after registering a growth of 7.4 per cent in 2009-10.
"The Indian economy has recovered robustly in 2010-11, recording one of the fastest growth rates in the world," he said.
According to estimates, the growth rate may cross 9 per cent in the current fiscal and revert to the pre global financial crisis levels.
The economic growth rate slipped from over 9 per cent to 6.7 per cent in 2008-09.
The government, the minister said, will continue to address weakness in the system and institutions at different levels of governance.
"We need to reflect upon possible flaws in our system and address them to withstand adversity. We need to make our financial sector more competitive by enhancing efficiency and transparency," he added.
Stressing that prudential norms should be followed, he said, "apparent risk taken should not encourage everyone to take more risks and thereby increase risk for the entire system or at the global level.
Regretting that scams occur despite laws requiring business entities to keep money trail transparent, Mukherjee said, "Governments and regulators can lay rules and frameworks, but cannot mandate integrity and ethical conduct."
Talking about the Direct Taxes Code (DTC), the Minister said, it would make the tax legislation progressive in line with the global norms and best practices.
"The thrust of the Direct Taxes Code (DTC) is to improve efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base", Mukherjee said.
The government proposed to introduce the DTC, which will replace the Income Tax 1961, from 2012.
"The new Code is designed to provide stability in the tax regime as it is based on well accepted principles of taxation and best international practices.
" ...Together with GST (Goods and Services Tax), this will streamline the tax administration of the country by making it efficient and equitable", the Minister added.
The Centre is trying to work out a consensus with the states on implementation of the GST which would require amendments to the constitution.
The state finance ministers have been discussing the GST constitution amendment in their last few meetings but failed to build consensus, as states and Centre stuck to divergent views. Even states had disagreements on the issue.
The GST will subsume indirect taxes like excise duty and service tax at the central level and VAT on the states front, besides local levies.