Now that Finance Minister Pranab Mukherjee has outlined the broad contours of financial reforms to jolt Asia’s third-largest economy back to prosperity, his ministry is busy preparing the ground for implementing the Budgetary proposals. While India is gearing up for fiscal restructuring to attain growth with stability and meet the challenges put forth by the integration with world economies, the ‘steel frame’ in the ministry has completed some prerequisites for the fiscal reforms. In an interview with Komal Amit Gera, Finance Secretary R S Gujral talks about the preparations being made to bring transparency in fund mobilisation and expedite the introduction of tax reforms. Edited excerpts:
The road to the Goods and Services Tax (GST) is still a bumpy one. What’s your take?
The implementation of GST would need approval by both the houses of Parliament and state assemblies. The ministry is in the process of preparing the necessary framework for it. For instance, the 2012-13 Budget took some initiatives in this regard, including the alignment of sales tax and excise tax to 12 per cent, and a negative list for service tax. Further, the central excise and sales tax have to be harmonised.
The basic element we are seeking is to decrease or eliminate the cascading effect of taxes. To facilitate this, the input tax credit on Railways, construction activities, catering and some other variables has been removed. A committee in the ministry has agreed to the GST network computerisation.
The bill of entry for imports would now mention the name of the state of the sale point to facilitate the GST rollout. This was not required earlier.
The ballooning fiscal deficit has been a bone of contention among economists. Though the finance minister has fixed an ambitious fiscal deficit target of 5.1 per cent, he has not announced any measure to achieve this. How will the government achieve this?
It (fiscal deficit) can be controlled by either increasing revenue earnings or decreasing expenditure. The Budget proposed a two per cent rise in excise duty, another two per cent increase in service tax and minor measures in customs duty. This would result in an increased revenue earning of Rs 46,000 crore. About Rs 5,000 crore would go for concessions in direct taxes. So, a net revenue increase of Rs 41,000 crore is projected.
No attempt has been made to decrease expenditure. We cannot emulate the kind of austerity measures Greece has adopted. But austerity in terms of wasteful expenditure can be checked. A computerised system of expenditure at the field level is being mulled. To ensure ineligible people don’t get food, diesel and fertiliser subsidy, a two-stage programme is being devised. This would have wholesalers, retailers and farmers in loop. Projects like Aadhaar and four to five similar programmes at the state level would help streamline the subsidy bill.
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How about decontrolling petroleum product prices?
This needs to be taken outside the Budget.
What about the Food Security Bill?
There is likely to be a lag in its implementation. The standing committee is yet to give its report on this. But the Bill would be implemented in toto.