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Infrastructure spend will spur economic activity, says Sitharaman

Finance Minister Nirmala Sitharaman on Sunday strongly defended her first full-fledged budget saying it has taken the infrastructure route to lift the economy because it is worth spending in a sector that has a multiplier effect in the near, medium and long-term.

Infrastructure spend will spur economic activity, says Sitharaman
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Nirmala Sitharaman (Photo: PTI)

New Delhi

In an interaction with a group of select journalists, a day after the budget presentation, she said the new personal income tax regime announced in the budget is aimed at ameliorating the pains of the middle-class taxpayers and the lower middle income groups. Excerpts:


Rationale behind re-organisation ofpersonal tax regime


In the new scheme, we have made deep cuts in the tax rate for the middle class and the lower middle income groups. The idea was that they should have more money in their hand. The second objective was that, gradually, we have to move to a regime where the tax rates are significantly lower than what it is today and simpler to comply with. That can happen when we remove all exemptions. Like in some countries, if you are earning say, about Rs 50,000, you pay X amount in tax and get away. There are no exemptions. There are no ifs and buts. We are not saying, let’s move to that regime today. But eventually… we should. We have started the process and kept alive the old scheme too. Opt for whatever suits you.


Insurance products may lose importance after the new tax regime


When you move out of the socialist model of governing the economy and equally you open the stock market and also witness that the bond market is attracting retail investors, you are out of the command-driven economy, in which certain incentives force you to move into a particular direction. It no longer gels. Leave it up to the investor. And if that is a worry that this incentive will impact insurance, I will tend to believe that this incentive alone is not the reason for an investor not to choose insurance. And, if at all it does have a bearing, now the options are open. Money will only go towards something else, which is also going to help the economy. People will put it in mutual fund, they will buy bonds. That too will trigger a lot more activities.


Infra sector push is fine but what about immediate relief to a slowing economy?


When government spends money, it does such expenditures to create assets. In doing that, the benefit spills over to people, who are engaged in creating those assets. Further, those assets stand out as catalysing economic activity. So, the expenditure plan has both near term and long term effect.


Tax numbers for next year


Numbers are not given always in anticipation of what is going to happen and therefore that is not wrong. The assessment based on the development in the economy may be different from what turns out to be in reality.


Lofty disinvestment target but not even reached halfway through last year’s target


We have done a lot of ground work. We may not have generated money through our disinvestment programme in the current year but we have initiated the process and the sale may take sometime to happen owing to prevailing market conditions. The benefit may not accrue this year but a lot of the ground has been covered. That gives me the confidence that we will reach the target next year.


Lowering of food and fertiliser subsidies


High time this country understands the level of fatigue the land has reached because of excessive chemical fertiliser usages. Consumers today too prefers organic food. They do not want overly fertiliser-driven growing crop. Incentivisation of fertiliser use today is more towards chemical fertiliser rather than organic fertilizer. That correction is required. On food, the government will pay more if you utilise more. The estimates were made for the full year, but the usage were only for about nine months, so obviously the allocation had to be revised.


Your approach to sectoral focus in the budget


I did not have any particular constituency in mind. I did not go through any sectoral approach. If you are looking the economy and what the macro economic fundamentals are, you have to give equal importance to all the sectors that are contributing to the economy. We have laid a path before everybody to see where the money is going to be spent. Investment, asset creation and infrastructure are the areas where we think it is worth spending and we have taken that route.

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