FM Nirmala Sitharaman interview: ‘Strong mandate has brought stability, made India attractive’
Finance Minister Nirmala Sitharaman said the new tax regime will be the default system, but not compulsory, and that the government intends to gradually attract people to this new regime. Excerpts from her post-Budget interview with DD News
You have tried to put more money in the hands of employees and employers. What kind of results do you expect out of this move?
First of all, when you look at the economy, you can see that it is very clearly showing signs of robust revival. With a robust revival, sectors like services are facing a huge attrition and, at the same time, because they’re moving towards greater and greater use of sophisticated technology – they are also seeking people with such skills. So, to pay better, is also to pay better for people with the required skills. And that is why the Government of India has, in this Budget, through various different ways, underlined the need for skilling, upskilling and also skilling for the Industrial Revolution 4.0. We have placed specific emphasis (on the last point), because today the world is moving towards greater use of Web 3. And for that, if Industry 4.0 is coming up, employers also will pay more when you have people with the right kind of appropriate skills. We are spending (a lot of) money and bringing in that kind of training for people to be better paid. So, the government is pushing it from a different supply side readiness. Obviously that will have to be absorbed by the industry.
The old system is complicated and several requests in the past have been made to simplify it. Suggestions were to simplify the process, reduce taxes and improve compliance. We have done all of it in the Budget and the new system will also be the default system but not compulsory. Our intent is to gradually attract people to this new regime.
Before GST, you were paying tax on household items at 18% or 20% and so on… some even 30-35%… all of them have been brought down… There is potential for more reduction in taxes, and work is happening on that.
What do you say on the hope that new direct tax regime will help increase earnings since there are arguments in the public domain that too much is relied on the GST sector to fill up coffers?
That’s not true! Because this year, I think direct taxes have also shown such buoyancy. You are able to see that more income is also being generated through direct taxation. So it is not that we rely on GST, which is indirect tax, and fill our coffers through it.
Before GST, you were paying tax on household items at 18% or 20% and so on… some even 30-35%… all of them have been brought down. The revenue neutrality was somewhere in the range of 15.5%. It has come down to 11% – which means items have become cheaper. So, GST itself should convey that message… that even as it is now, you’re paying far lesser on household items than what you paid prior to the introduction of GST.
There is potential for more (reduction in taxes), and work is happening on that. But here, direct taxation this time has also shown such buoyancy that today you can’t say this government is only earning from GST indirect tax but not from that (direct taxes).
We brought corporate tax down. Also, we extended the period by which many of them will have to bring in additional capacities or establish new units. All these measures are working now in favour of the private sector to invest.
Record investments by the government helped promote growth, potential job creation, but how much of crowding in of private investment is actually taking place as a result of this?
In fact, in the media conference this evening, it was very clearly explained how between 2021-22 and now, there has never been a negative impact on private investment because of increasing public investments in infrastructure.
The crowding-in that we spoke about has been questioned, saying “what kind of crowding in, this is the first time”. But you see that private investment because we brought the corporate tax down. Also we extended the period by which many of them will have to bring in additional capacities or establish new units.
All of them together are working now in the favour of the private sector to invest. So when you go to the market to borrow, you find many of them are equally able to raise revenues or raise money in the market and that has not stopped anybody. That is exactly what crowding in means – people are able to come in and raise revenues, banks are able to raise revenues, private sector is able to raise Indian equity. This is not as though money is coming from elsewhere. So, it is the right combination of policies, which I think has enabled crowding in, not just the public investments in infrastructure.
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