New Delhi on December 29
NEW DELHI: Blaming high cost of capital for slowdown in manufacturing sector, Finance Minister Arun Jaitley has pitched for removal of entry barriers and favored a globally competitive taxation regime to attract investments and boost growth.
“We have to put house in order,” Jaitley said, to accelerate the growth, as the manufacturing sector was not growing as per its potential and radical steps might be required to revive growth in this key segment, although as results will not be visible overnight.
Speaking at a day-long workshop on Make-in-India, he however said Indian economy may improve slightly after two years of slowdown and the next fiscal will be even better.
“The entry point into the manufacturing sector itself has to be eased. Our initial barriers have to be lowered and perhaps even removed. If we keep the doors closed investments won’t come in,” he said.
Jaitley said tax regime should be compatible with rest of the world as when people buy goods “they do not like to purchase taxes along.”
Stating that manufacturing will remain a challenge unless radical steps are taken, he said cost of capital is the single factor that has in recent times slowed manufacturing.
On ease of doing business, the finance minister said, “What is it that has happened in the last few years that added to complication of doing business (in India). Was it the uncertainty over the tax administration (that) has scared investors away? Has it not resulted in close down of plants which were comparable to global competitors?”
Referring to the tough Land Acquisition Act, he said the law itself is going to add to the complications for investors.
“Danger would be if we lost out on cost, if we lose out on quality then we will be faced with a situation, where we become a nation of traders rather than a nation of manufacturer,” Jaitley said.
He said there was a need to ensure liquidity in the markets. “We need to ensure capital is available; we need to ensure that those sectors which are starving we are in a position to provide adequate capital to those industries.
Rajan criticized
Criticizing the monetary policy of RBI Governor Raghuram Rajan, Jaitley said high interest rate is the “singular factor” which responsible the slowdown in manufacturing sector.
“The entry point into the manufacturing sector itself has to be eased. Our initial barriers have to be lowered and perhaps even removed. If we keep the doors closed, investments won’t come in,” he said.
He further said there is a need to ensure liquidity in the markets. “We need to ensure capital is available, we need to ensure that those sectors which are starving we are in a position to provide adequate capital to those industries.”
Jaitley also rejected Rajan’s criticism of Modi’s pet program ‘Make in India’, saying that it is about manufacturing of quality products at low costs and it was not relevant whether they are sold in India or abroad.
“Whether Make in India is made for consumers within India or outside is not so relevant. The principle today says that consumers across the world like to purchase products which are cheaper and are of good quality. They hire services which are cheaper and good quality,” Jaitley said.
Earlier this month, Rajan had sounded a word of caution about the new government’s ‘Make in India’ campaign, saying it assumes an export-led growth path of China and it should rather be ‘Make for India’ with a focus on manufacturing products for the domestic market.
The Governor had said he was “cautioning against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China.
“India is different, and developing at a different time, and we should be agnostic about what will work”.
Stressing on the importance of domestic manufacturing, Jaitley said: “… if we lose out on cost, quality then we would be threatened with a situation where in we would become nation of traders rather than nation of manufacturers”. -PTI
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