Chidambaram hints at modifying tax norms, cut deficit

New Delhi -  Finance Minister P. Chidambaram Monday said the government will fine-tune policies to meet investor expectations, cut fiscal deficit and revive growth.

"Our policies have to be modified or fine-tuned in order to meet the expectations of different stakeholders," Chidambaram said during his first media interaction after assuming the charge of  finance portfolio.

Chidambaram unveiled a roadmap to revive growth by boosting investment.

"The key to restart the growth engine is to attract more investment, both from domestic investors and foreign investors. Since investment is an act of faith, we must remove any

apprehension or distrust in the minds of investors," he said.

"We will improve communication of our policies to potential investors. The aim will be to remove the perceived difficulties in doing business in India, including fears about undue regulatory  burden or regulatory over-reach," the finance minister said.

Chidambaram said Indian companies, especially public sector enterprises which have large cash balances, would be encouraged to restart investment. "Proposals pending with the Foreign

Investment Promotion Board will be processed and decisions taken expeditiously."

In an apparent reference to the controversial amendments in taxation norms, especially the General Anti-Avoidance Rules (GAAR), and retrospective changes in tax legislation introduced by

his predecessor Pranab Mukherjee, Chidambaram said the government will fine-tune these policies to reassure investors' confidence.

"Clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary will provide great assurance to investors,"

he said.

Chidambaram said the government will soon unveil measures to bring more discipline in spending and return to the path of fiscal consolidation. “We intend to unveil, shortly, a path of fiscal

consolidation,” he said.

The finance minister said he has formed a three-member panel to assist the government in formulating the path of fiscal consolidation. “We expect that the work will be completed in a few

weeks."

On inflation, Chidambaram said the government would work with the Reserve Bank of India (RBI) to tame inflationary pressure.

"Non-food inflation is already declining. We are confident that inflation can be moderated in the medium term. Fiscal policy and monetary policy must point to the same direction and must

move in tandem,” he said.

Earlier in the day, RBI Governor D. Subbrao met the finance minister and both discussed the macro-economic situation.

The finance minister said he was confident that India will get back to a path of high economic growth.

"I am confident that we will prevail and we will return to the path of high growth."

He said the country faced similar economic problems in 1991, 1997 and 2008, and overcame these successfully.

"It is widely acknowledged that today the Indian economy is stronger and better prepared to face the challenges. Moderate growth in two out of eight years should not dent our confidence,"

said Chidambaram.

India's economic growth slumped to nine-year low of 5.3 percent in the quarter ended March. For fiscal 2011-12, India's GDP expanded by 6.5 percent, substantially down from 8.4 percent

growth registered in the previous year.

The growth is likely to remain sluggish in the current financial year as well. The Reserve Bank of India last week lowered its growth outlook to 6.5 percent.