Arun Jaitley expects after implimenting GST, UAE to invest soon in Infrastructure fund in India

Dated 18th November, 2015

FM Arun Jaitley on Tuesday said he would prioritise growth over cutting the budget deficit, urging critics both within and without the party to back Prime Minister Narendra Modi's economic reforms agenda.

Jaitley, in Dubai to attract investments from Middle Eastern sovereign wealth funds, said the government was ready to discuss all issues with the opposition to pass key constitutional amendment to pave the way for the GST to become law.

"Without compromising on the architecture itself, and keeping a general consensus between the states and the centre in mind, I think a discussion is reasonably possible," he said, signalling flexibility over a proposed state levy that some say would make the tax complex to administer and defeat its original aim of cutting red tape.

Modi is seeking to regain the initiative after a bruising election setback in Bihar earlier this month, the Congress having fought a successful rearguard action against his reforms in the Rajya Sabha.

That has prevented the passage of a national goods and services tax (GST) Bill. By unifying Asia's third-largest economy into a single market the GST would add as much as two percentage points to the economy, some have estimated.

Jaitley said he hoped growth would exceed 7.3% in the fiscal year to March and had the potential to reach rates of 8-10%. In his budget, he estimated growth of 8.1 to 8.5% in the current fiscal year. The World Bank has, meanwhile, forecast growth of 7.5%.

"I would stick to my fiscal deficit target of 3.9% (of gross domestic product) this year and the priority will be to spend whatever resources the government has within the fiscal deficit target," said Jaitley.

He declined to be drawn on the fiscal deficit target that the government would set at its next budget.

In addition to GST, the government plans to push ahead in the winter session of Parliament with reforms to bankruptcy law, changes to foreign direct investment rules and a faster disputes resolution mechanism for public contracts.

The minister said he expected the Abu Dhabi Investment Authority (ADIA) to start investing soon and eventually commit up to $75 billion.

ADIA's first investment in India could be with the National Investment and Infrastructure Fund, set up in August with a mandate to co-invest with strategic partners and own 49% of projects.

"Long-term investors want to ensure predictability, growth and returns. We also need to have legal structures in place," Jaitley said. "India has now proved to the world its commitment to reforms. It is growing faster than other emerging markets. There is a stability and predictability of the policy regime," he said.