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Economy Jul 1, 2012

No chance of 7.6 percent growth, admits Montek

New Delhi: The Finance Ministry under Prime Minister Manmohan Singh will very quickly "resolve" uncertainty among investors caused by anti-tax avoidance rules which were unveiled in the Budget, Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

"As soon as Budget was presented, it was clear that General Anti Avoidance Rules (GAAR) is going to createproblem," he said in an interview to Karan Thappar on CNN-IBN's Devil's Advocate show.

However, he said, the Finance Ministry, now under the Prime Minister, "will resolve uncertainty among investors".

When asked if former Finance Minister Pranab Mukherjee was a problem, he said, "No, I think this is something we don't want to be carried away ... newspapers are always trying to put one minister against another.

Replying to questions on economic expansion, he said India is likely to clock a GDP growth rate of 6.5-7 percent this fiscal. Earlier, the government had forecast the growth rate of around 7.6 percent.

Planning Commission Deputy Chairman Montek Singh Ahluwalia.PTI

On economic growth, Ahluwalia said they should happen, but they should not be seen as reasons behind economic slowdown as the country had posted over 9 percent GDP growth in their absence. He said he was for FDI in multi-brand retail sector and liberalisation of the foreign investment norms in the civil aviation sector also.

He also pitched for diesel prices should be aligned with the global rates.

On Current Account Deficit (CAD) which touched the highest level of 4.2 percent of GDP in 2011-12, Ahluwalia said it would be less than the previous year.

He also did not appear particularly worried by the apprehensions that the 5.1 percent fiscal deficit target for 2012-13 would not be achieved as GDP is likely to slow down.

"The Art of taxation is difficult ... you have to give credit to the previous Finance Minister, after all he postponed the application of GAAR".

He said that GAAR is a larger issue and it "caused lots of uncertainties among investors ... The government actually recognised that by postponing implementation of GAAR".

Referring to the Finance Ministry's draft guidelines on GAAR provisions, he said they have taken care of some of the problems.

"I think the government should look carefully at informed opinion and informed comments on whether these rules take care of all the problems that are creating difficulty and then address them," he added.

On retrospective tax amendments, the Deputy Chairman said he does not think it was introduced because of Vodafone tax issue.

"It is possible that high profile attention Vodafone got complicated everything else. I am talking about all the other things," he said adding the issue of Vodafone tax will have to be handled by the Finance Ministry.

PTI


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