The Lok Sabha on Tuesday passed the finance bill 2012 with amendments. In a strong message to Parliament, the finance minister said on Tuesday defended the amendments to IT act. He said the Supreme Court may interpret the law, but the parliament can amend the law.
Terming the high current account deficit (CAD) of 4 percent a matter of concern, Finance Minister Pranab Mukherjee exuded confidence that government would be able to overcome the situation and sought support of political parties and states for approving key tax reform bills.
“Yes, it is matter of concern Current Account Deficit but as there is a saying if there is crisis in food that does not mean that we shall start eating lizards,” he said in his reply to the Finance Bill.
He also cautioned that the high fiscal deficit, 5.9 percent in 2011-12 and budgeted 5.1 percent in the current fiscal, will be a major hurdle in putting the economy back on the path. “I do believe that if we can see just the three fiscal legislations passed, two major tax reforms passed, the entire atmosphere will be changed,” he said, seeking support from the Opposition benches.
Current account deficit rose to 4 percent of GDP in 2011-12 against 2.7 percent in the previous fiscal. As regards the Goods and Services Tax and Direct Taxes Code, Mukherjee said, these two reforms would bring in sea change in tax administration.
Agreeing that confidence in economy will return once key bills are passed, the FM said the government will introduce strong measures to bring it back to recovery path.
“If we can do these two things, I believe that there will be a sea change, a major reform in the Indian Tax System which will be transparent; which will be non-discriminatory; which will be viable; and which will provide tax buoyancy, as it has been established with the introduction of VAT,” he said. “…please help us have the necessary reforms in the introduction of the GST,” he added.
Mukherjee also warned that when the global economy recovers, crude could climb to $150 a barrel and will make things very difficult for the economy.
“If the prices go up to $150 per barrel, it is not merely my imaginary fear, what will be the effect?” he said, urging all stakeholders to help work out a solution in which everyone takes a haircut. “Partly, it will be passed on to the consumers, partly, it will be absorbed by the States and partly by the Union Government,” he said.
He also said that the government will address issue of under-recoveries of OMCs. However, fuel price hikes would add to inflationary pressures. “”Right now, under-recoveries in case of diesel is Rs 14.50 per litre; in case of kerosene, it is Rs 31.88 per litre and in case of LPG, it is Rs 412 per cylinder of 14 kg. Is it possible to maintain this level of subsidy?” Mukherjee asked.