Reform or perish: Jaitley's message to states

Finance Minister Arun Jaitley today called upon states to reform to attract investment, saying investors do not like policy paralysis and prefer destinations that offer more favourable business and political environment.
"In addition to co-operative federalism, India has also become a competitive federalism. The future would be competitive federalism because it's not Centre-state relation, but it is states and states competing with each other in order to attract investment," he said.
Addressing domestic and global investors at the 'Happening Haryana' event here, Jaitley said now more and more states are organising investor summits.
"Those who don't reform, people in those states are at a disadvantageous state and those who are in a position to offer more favourable economic, business and political environment to investors certainly... Are going to benefit," Jaitley said.

"Reform or perish could not be more true than it is today."
The finance minister, who has announced a host of steps to boost manufacturing and real estate sectors, said if there is an environment of paralysis and policies are not reforming, the investor does not feel enthused enough to invest there.

Stressing on the need for further improvement of transport infrastructure, Jaitley said he reached late by 20 minutes for the event due to heavy traffic on the National Highway.
The finance minister said stand on crucial economic
legislations should not depend on where one sits in Parliament.
"For instance, I am faced with a reversal of position when I accept some of the moves which the Congress party itself started," he said.

He said the idea of keeping corporate tax down to 25 per cent was included in the Direct Tax Code (DTC), which the then Finance Minister P Chidamabaram had mooted.
"GST was first mooted by Chidambaram and then introduced by the present President when he was finance minister and there is no point in taking a reversal as far as those issues are concerned," he said.
On the Congress demand for capping the GST rate at 18 per cent, he said, it is a fair stand but "whether you put it in the Constitution or (it is the) GST Council (of the states) who suggests that (rate)."

"I have no problem with the rate," he said.
He added that there is now a demand to keep luxury items out of the proposed taxation system, which would mean that luxury items are subsidised by essential goods.
"I am then reminded of President Clinton's comment on economy -- you can't create a situation where GST moves up into 20s by keeping luxury items and then say that now maintain it at 18 per cent," he said.
Jaitley said there was a "greater need for a mature level of thought and discussions as far as these issues are concerned."
This, he said, was not a problem specific to India. "As I travel around the world I see a lot of democracies having it."

Asked whether he would term the reform initiatives as Big Bang, Jaitley said the government has taken a series of incremental reforms, which taken together are much more than Big Bang.
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"One of the great successes have been that today India doesn't faces any political opposition to reforms, that's because India is becoming more aspirational, people are feeling the benefit of reform process and carrying that section of opinion along with you, I think, is a big challenge which we have succeeded," Jaitley said.
He said the government is dealing with stressed sectors separately and that will help clean up balance sheet of the banks.

"In next one or two quarters, balance sheet of steel companies will start looking better.... As global economy improves, you will start seeing impact on bank balance sheet," he added.
He said bad loans of banks or NPAs occur mainly on account of two reasons -- losses, which occur on account of business environment and second is loans which are given without adequate amount of due diligence.
Jaitley said there have been significant movements, which have taken place in infra sectors including power, oil and gas sectors. And government is trying to put resources in infra, agri sector and rural India where it is needed the maximum.

"You don't have now to lobby with ministers for policy or for natural resources... So that's a clean transparent that we have introduced," he said.
As far as taxation, we have started to make India's taxation globally competitive.
"On the individual taxation side we are are much better off than most developed parts of the world. Our rates are much more reasonable and attractive," he said.
Jaitley said corporate tax also is being made as one of the attractive one in the world and work on rationalisation of direct taxes is on and in right direction.
On Indirect taxes, he said, the government is trying to make it reasonable once GST comes in.