India carried out key structural reforms at the right time — when the growth rate was high — and it will serve the country well in the days to come, Finance Minister Arun Jaitley said on Saturday.
Some of the key reforms, including demonetisation and the Goods and Services Tax (GST), were carried out keeping in mind their long-term benefits to the country’s economy and as a result India’s growth rate is now headed for a higher trajectory, he said.
“When the world was growing at two-and-a-half per cent, India was the fastest-growing major economy in the world. That was a time to really fix the roof. You don’t have to wait for a downward slide in order to do it,” Jaitley told a group of Indian reporters at a news conference in Washington.
“I think, this was just the right time to bring about structural changes,” he said.
The finance minister took a shot at his critics who claim that demonetisation has hurt the Indian economy — at least in the short-run.
“The fundamental question is: Does India continue to indefinitely be a cash dominated economy? To say it’s a very risky proposition, it will have adverse consequences for a quarter or two, so let’s not attempt it? Can India say, you will have de-stocking, so lets not attempt a GST?,” the finance minister asked.
Among his critics were several leaders from the opposition Congress party; Jaitley said the Bharatiya Janata Party (BJP) simply did what the Congress couldn’t while they were in power.
“Attacking or ending this black money was never a priority for the Congress. So their concern (about demonetisation) is natural. And GST was a Congress move. But since (the Congress) party is an opportunist party, it is opposing it,” he said.
“Populism is what we did not indulge in. We could have let people live in a cash dominated economy and let India continue to have a shadow economy and have everyone really prosper on that basis. (But) we struck a blow to that kind of an economy. That’s not populism. That was the right economic policy to follow,” he said.
The Indian government has, however, received support from top leaders of the International Monetary Fund (IMF) and the World Bank who have called the slowness in recent Indian growth rate “an aberration” and a short-term one.
Jaitley said the positive responses and statements about the Indian economy by the world leaders had “increased the confidence of India”.
“There is a global appreciation of the fact that India has the capacity and courage to carry out structural reforms like demonetisation and GST,” he said.
Jaitley said the upgraded global growth projections should be a further help to India’s own growth rate.
“Now that you have the global economy also improving, and that’s the mood that I’ve seen at the IMF-Bank this time — the IMFs own projection for the world economy this year is 3.6 per cent and next years is 3.7 per cent — the global tailwinds will also give better impetus to domestic growth,” said Jaitley.
“I think, we should be looking forward to a much higher growth trajectory (for India) in the days to come,” he said.
Responding to a question on the next phase of reforms, Jaitley said the government would now focus on large-scale investment in the infrastructure sector and rural area.
“The government is working in that area,” he said.
Jaitley asserted that there is a great interest about India in the United States and among its investors.
“There is a great interest about India in the US and among its investors,” Jaitley told reporters as he winded up his week-long visit to the US during which he had meetings with US treasury secretary and the commerce secretary, addressed students of the Columbia and Harvard Universities and interacted with investors and American corporate leaders in New York, Boston, and Washington DC.
“Both, those inside the government and the US companies, have shown great interest in investing in India now,” he said.
“You have Indians investing in the US, you have US companies investing in India. And, in November, a large contingent of US corporates are coming to India to invest,” he said.
According to the United States Trade Representative (USTR) figures, India was US’ ninth-largest trading partner with the total two-way trade of $67.7 billion last year
It is loaded in favour of India, which runs a surplus of $24 billion.
Jaitley said the relationship between India and the US on the Foreign Direct Investment (FDI) was a “mature” one.
“..and expansion of key sectors like aviation and defence would play a key role in increasing the bilateral trade to $500 billion per annum,” he said.
The finance minister said India was among the largest recipients of FDI since it had “one of the most open policies as far as investment is concerned.”
“I’m quite sure that we will continue to get the benefit of that investment,” he said.
“I think it’s a strategic relationship which is bound to be further consolidated,” he said.
Source : http://www.business-standard.com/article/economy-policy/reforms-like-demonetisation-and-gst-carried-out-at-the-right-time-jaitley-117101500084_1.html