Postponement of the implementation of the General Anti Avoidance Rules (GAAR) for a further two years will help improve the investment climate, said Planning Commission Deputy Chairman Montek Singh Ahluwalia.
“Investors had interpreted GAAR as a very negative step. If the Finance Minister has now postponed its implementation, it is an excellent decision. Many things boost investment. This is one of the things we could have done to improve the investment climate,” he said, while talking to reporters on the sidelines of a seminar.
Earlier, delivering the JRD Tata Memorial Lecture, he said investment inflows were key to reducing the fiscal deficit, which in turn will help sustainable growth and development.
“Investments inflow has significantly declined by about three percentage points since 2007-08 in the aftermath of the global economic crisis. We need to reverse this trend to achieve high economic growth and for this we need fixed investment of 35 per cent by the end of the Plan period from the level of 34 per cent in 2007-08,” he said.
He listed the areas of the economy where radical rethinking was needed for 12th Plan’s effective impact and for the country to become the third largest economy of the world behind China and the US by 2030. In this context, he lauded the step of Railway Minister Pawan Kumar Bansal in raising the passenger fares.
“The subsidy component of the railway fare at present comes to Rs 20,000 crore annually. This was sought to be moderated through overcharging freight. The existing freight to passenger fare ratio is as high as 5:1. This made the industry non-competitive,” he pointed out.
He advised industry to ask for ending cross-subsidisation. “Many other areas of hidden subsidies reduce the ability of the system to deliver,” Ahluwalia asserted.
He termed the plan to rationalise fuel prices as a challenge, but said there was a need to align domestic fuel prices with global rates since all fuels, barring petrol, were currently under-priced.
shishir.sinha@thehindu.co.in