As India’s economic growth declined to nine-year low of 6.5 per cent in 2011-12, a Parliamentary panel has rapped the government for policy paralysis and asked it to hasten reforms to bring back economic growth on track.
In its report on current economic situation and policy options, Parliament’s standing committee on finance stated there is total stalemate in policy reforms, those in the know of things told Business Standard.
The report was adopted by the committee yesterday, and will be tabled in Parliament tomorrow.
The panel, headed by former finance minister Yashwant Sinha, said there was a hard-pressed need to put the economy back on track through a well-planned revival policy. It wanted the government to replace its policy inaction with vibrant governance and clear-cut decision making.
The committee also asked the government to expeditiously clear projects, bring in more transparent tax regime and take steps to raise domestic investment.
The government has drawn flak from various quarters on its proposals on General Anti-Avoidance Rules (GAAR) and retrospective amendments to the Income Tax Act. As such, it is in the process of reviewing both the tax proposals.
Taking note of the government’s commitment on fiscal deficit, which was pegged at 5.1 per cent of GDP during 2012-13, the panel recommended to the government to raise resources through disinvestment by framing a concerted policy in this regard.
It also wanted the government to revisit its current policy on estimating underrecoveries of oil companies on the basis of import parity pricing mechanism for petro products than on actual refinery costs.
Saying that the Centre’s fiscal policy and RBI’s monetary policy work at cross-purpose, the committee pulled up the government for incoherence with the central bank. It wanted the government to ensure adequate fiscal steps to check inflation and push up economic growth.
As the current account deficit touched a record 4.2 per cent of GDP last fiscal, the panel wanted the government to cut import of crude, and make import of gold and silver unattractive. In this concern, it also recommended the government to expedite the ethanol blending programme for petrol, which is stuck for long.
The Sinha-headed panel drew the attention of the government to the increasing trend of financing current account deficit with short-term debts, and asked it to finance it with more stable inflows. It wanted the government to narrow down the current account deficit, check rupee depreciation and increase long-term capital investments through reforms.
The panel wanted the RBI to reduce the volatility of the rupee through proper interventions.
