Tax transparency needed for investments : RBI Chief

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Dr. Raghuram Rajan indianbureaucracy
Dr. Raghuram Rajan indianbureaucracy

In a investment news update, Reserve Bank Governor Raghuram Rajan on Monday batted for transparent taxation policies and a business-friendly environment to attract stable inflow of foreign capital for strong growth and make Centre’s flagship ‘Make in India’ programme successful. “Let’s create the frameworks, let’s make the business easier, let’s make taxation more transparent, more predictable and let’s do all the things necessary to allow our businesses to create what is needed. I think micro-managing the future is going to become very very hard. And that is why again and again I say let’s make in India but what does that mean… let’s not restrict what we make in India,” Rajan said.

The government is fighting multiple cases in various higher courts and at international arbitration fora filed by a clutch of global corporations like Vodafone against its retro tax laws, he said. The government had to shelve the plan to impose minimum alternate tax (MAT) on foreign investors in the wake of strong protests from investors recently.

“One of our solutions of problem of employment was to create small scale industry but they got decimated by competition from elsewhere. It would have been better if we would have allowed large scale industry in those places. They would have employed far more,” he said at the Think 20 regional consultation meeting organised here by Gateway House, a private think-tank on foreign policy.

T20, the sub-forum of the G20 multilateral forum, is responsible for contributing ideas and research to the G20 on global economic issues. On achieving higher growth without inflation, Rajan said: “We have to create underlying supply conditions that would allow us to sort of have a much higher demand. To achieve 9 per cent growth, there is a need for large investments which could lead to higher demand, he said. “In some sense, I see nine per cent growth as a situation where we are investing tremendous amount and thus creating the supply which will then help the demand. So, what we need to do is not just boost demand but we need to boost supply also, which means a lot of work on a number of fronts which currently the government is engaged in,” Rajan added. He said nine per cent growth rate is a steady process and cannot be attained overnight. “That (the nine per cent growth) is certainly an aspiration we should have but we need to eliminate the supply constraints, including our human capital,” Rajan said.

However, he cautioned against populist policies, saying they are driven by a desperate need for growth while the fact is that the real ways of growth are really hard. Rajan said India does not have many good economists who could represent the country in various international fora and working groups. “The G20 framework working group is suppose to be co-chaired by Canada and India. Canada has seven strong economists working on this group and trying to further the agenda while India brings fewer people to the table because we don’t have that strength in the number of economists that we can actually contribute,” he said. Rajan also called for more coordination between the leading central banks, saying there is a need for more optimal use of the monetary policy tools globally as the world is increasingly staring at deflation.

Guv slams IMF for ‘applauding’ easy policies Mumbai: RBI Governor Raghuram Rajan came down against the IMF for sitting on the sidelines and applauding accommodative policies of developed nations which have created ripples in the emerging markets. Emerging markets had to absorb the consequences of capital flows, he said. “The IMF is supposed to look at these in a global sense, but the IMF has been sitting on the sidelines applauding these kinds of policies ever since they were initiated and hasn’t really questioned the value of these kinds of policies,” said Rajan. Central banks across the world are worried about deflation and want to promote growth to avert it at any cost, he said. “Unfortunately if we look at central banking mandates across the world, no central bank has a mandate for the world. Its mandate is purely domestic..,” he added.

RBI governor Raghuram Rajan on Monday made a surprise visit to his alma mater — Indian Institute of Management, Ahmedabad — and held informal discussions with the faculty members and students at the institute.

IndianBureaucracy.com wishes the very best.

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