Finance Minister Arun Jaitley warned that disruptive ISIS activities could impact the world economy.
“Meeting the challenges of development will now be increasingly diverted towards security measures and which part of the world is safe itself will become a great question,” he said while speaking at the annual meet of an industry chamber.
He further said that what ISIS has been doing across the world in the last few months poses a new danger to civilisation and “therefore its impact on global economy cannot be understated.”
The terrorist outfit Islamic State or ISIS has captured territories in Iraq and Syria and launched attacks in western world, including the recent attacks in Paris that killed 129 persons.
“And which part of the world will be safe itself will become a good question,” he said adding ISIS activities will have consequential bearing on buoyancy in currency, trade, and tourism.
Jaitley said that earlier management of the economy was easier because there was one crisis in a decade or more, “but now, today, you live in a world, which is full of turmoil, full of volatility and you have to be think ahead of others because you are continuously busy dowsing the impact of one fire and trying to put firewalls around your own economy so that you can be saved of that crisis.
“I do believe the new global norm is volatility and turmoil. It is no longer stability and things can change very fast.”
Moreover, he added, the patchy recovery and occasional green shoots witnessed in BRICS (Brazil, Russia, India, China, South Africa) nations were overtaken by certain geopolitical factors which has created global instability.
Jaitley further said that global resources which were earlier intended to be spent on poverty alleviation and meeting the challenges of development will now be increasingly diverted towards security measures and “which part of the world will be safe itself will become a good question.”
“India carves out its own place. Even if we can’t insulate ourselves from global trends, how do we minimise its impact in adversity, and how do we take advantage in emerging global situation. History presents us with this challenge,” Jaitley said.
Referring to the government’s decision to reduce tax exemptions as a prelude to bring down corporate tax from 30 percent to 25 percent over four years, he said, “we have already notified the first slot.
“Obviously when you bring down the tax rate from 33 percent down to 25 percent, some exemptions will have to go (as) too many of these exemptions eventually make the tax policy of India a rent-seeking exercise.”
Simplification of tax structure and bringing down tax rates to global levels by reducing exemptions, he said, were needed as the nation aspires to be a global leader.
The Minister further said the government would try to introduce changes in the arbitration law in the forthcoming session of Parliament beginning Thursday. He said government will try to introduce some the legislations aimed at making it easier to do business in India.
Commercial port laws and arbitration law for early disposal of all commercial disputes are all part of the agenda to make business easier, he said.
To give push to real estate sector there is need to simplify procedure further, he added.
Finance Minister said China has slowed down but it still shoulders a large part of global growth. “The world markets have shrunk, therefore the export sectors are globally suffering. In India’s case it’s specially volumes.”
Without referring to the impact of devaluation of Chinese yuan, he said currency battles across the world will also have an impact on the rupee and Indian markets.
The task ahead is to grow India into an economy where global investors feel to invest, he added.
“We in India must seriously realise that globally the investors are looking forward to us. We are getting more investment than any other country in this world,” he said.
On the issue of increased financial burden that will result from implementation of the 7th pay commission at a time when the economy is facing challenges of low investment and subdued global demand, Jaitley said his mantra is to get one or two extra percentage points in the GDP growth.
This would also give protection to the Indian economy from the fast changing and difficult global environment marked by geo-political situation with the rise of ISIS and the terror threats.
He said given the kind of challenges facing the economy despite India doing better than others, the government would need a popular support that hurdles are not created in the reforms process.
India of 2015, he said, is not the India of 1990s, it is not only the middle class but also an aspirational India which wants growth and larger opportunities. “Those who stall reforms must realise that their number is smaller” than those who support the progressive agenda.
Listing out steps taken by the government in the recent past he said the banking sector faces a major challenge that is being addressed through steps like package for discoms.
On the issue raised by the industry on threat of cheap imports of steel from China, the Finance Minister said that the government has already intervened twice but it will reexamine the surge in the inflows.
He said that real index of ease of doing business is “when captains of the industry stop coming to north block (the seat of Finance Ministry). That is the high point of the economy.”
Jaitley expressed satisfaction that a large number of states are now competing with themselves to attract investment.
On specific problems of sectors like real estate, he said that states would be advised to cut down the red tape and reduce the number of clearances required for the projects.
Jaitley further said the global economy is going through challenges and India must seize the opportunity and take cumulative steps to boost growth.
Listing out adversities facing the economy, Jaitley said geopolitical situation, export market and private investment are a concern.
The Finance Minister said that structural reforms has to be undertaken and business process needs to be eased to attract foreign investment.