BackJaitley, Chidambaram face off over economy
Jaitley blames the steps taken by the UPA government for the country's sub-5% growth
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New Delhi: Finance minister Arun Jaitley faced off with his predecessor P. Chidambaram on the state of the Indian economy on Friday, with the former blaming the steps taken by the previous government for the country’s sub-5% growth and the low level of confidence among foreign and domestic investors in the Indian economy and the policies of the government.
In an interaction at the launch of journalist Rajdeep Sardesai’s book, 2014: The election that changed India, Jaitley said the National Democratic Alliance (NDA) government had inherited an economy that was in a poor state.
“The economy we inherited was in a challenging position. It had registered sub-5% growth for two consecutive years. Investor confidence, both of domestic and foreign investors, was low due to steps like the retrospective taxation. There were areas of corruption that added to the concerns of the foreign investors," Jaitley said, citing irregularities in the allocation of 2G spectrum.
Chidambaram admitted that the Congress government did make mistakes in its handling of the economy.
“Some mistakes (were made) but mainly it was global events," he said, but added the decisions of the United Progressive Alliance government were taken when he moved to the home ministry, implicitly putting the onus on President Pranab Mukherjee who was the finance minister when the government brought in retrospective taxes, spooking foreign and domestic investors.
Both Jaitley and Chidambaram blamed each other for not taking corrective action on retrospective taxation.
Chidambaram said, given the majority that the NDA government enjoys, it could have brought in an amendment to the income tax Act to reverse the retrospective tax.
“If we had a complete majority, we would have done it (when we were in power). I hope that you do it in budget 2015," Chidambaram said, adding that the NDA government’s decision to not take the bold step was disappointing.
Countering Chidambaram’s argument, Jaitley pointed out that though Chidambaram had made noises about correcting retrospective taxation when he was the finance minister, no such step was taken. Defending his decision, Jaitley said the government’s assurance it will not introduce retrospective taxation to tax laws if it creates any fresh liability has been welcomed by foreign investors. He reiterated that the government will wait for the courts to give a judgement on these retrospective tax cases.
Both also blamed each other’s parties for stalling a higher foreign investment limit in the insurance sector over the last few years. Jaitley expressed hope the select committee of Parliament looking into the Bill will give a favourable report and the Bill will be passed in the upcoming winter session of Parliament.
The Insurance Laws (Amendment) Bill proposes to raise the foreign direct investment cap to 49% from 26%. The NDA had introduced the Bill in Rajya Sabha in the budget session but it was referred to a select panel after the opposition demanded it.
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