Jaitly bats for a fully open economy

Finance minister Arun Jaitley on Tuesday suggested that India must completely open up its economy to global investment, except perhaps some select sectors that have security implications.

He said from "directions which we have seen in the last 15 months, I think one of the first principles was except for rare sectors, India must accept that it has to completely open up".

Speaking after launching State Bank of India's mobile wallet app, 'Buddy', in Mumbai, Jaitley said foreign investment flows will help the economy grow at a faster 8-10 per cent rate for a significant number of years, thereby also helping the country find an answer to poverty.

"And therefore, sector after sector which remained closed, we have to offer ourselves as a recipient of global investment, and that is the direction in which the present policy regime of the government has moved," he said at the SBI Banking and Economics Conclave.

"It's only then we will be able to create jobs. It's only then we will be elevated to a category of society which is able to realise its entire full potential," he said.

He said while the macroeconomic indicators like inflation and industrial production were positive, the slow credit off-take posed a challenge to boosting investment and economic growth.

"Positive side is our services will grow well. Rain Gods have been somewhat kinder to us this year... Monsoon except for two patches - Marathwada and Rayalseema - by and large has been adequate with rains in most parts of the country and therefore, we are expecting a good harvest," Jaitley said.

The finance minister said indirect tax collections have also been good so far this fiscal and is indicative of a positive trend. 

Jaitley said as a hugely consuming nation, India stands to benefit from transfer of wealth, which is taking place in the form of low oil prices.

"We have many many competing economies facing challenges of their own kind. If we are in a position to put our house in order, we obviously have an opportunity where we can exploit the current global situation to our advantage," he said, adding India's retail potential is 9-10 per cent growth rate.

He also pointed to the need for expediting the process of regulatory clearances so that the time taken for setting up projects is curtailed.

After the success of LPG subsidy transfer through 'direct benefits transfer' (DBT), Jaitley expressed hope that it would be extended to other areas. He further said direct transfers have resulted in huge savings.

Declining oil prices have helped the government in pushing the 'users-must-pay' policy, he said, adding that people are now paying the cost of diesel.

He felt that Indian Railways has to rationalise its expenditure, which could somewhat offset the lack of investment from the private sector.

"Private sector is good when the going is good, but in challenging times they want government help," Jaitley said.

On the National Infrastructure and Investment Fund (NIIF), he said the government is in touch with a number of foreign investors, and the Prime Minister's overseas visits have helped.

Jaitley also said the situation in the banking sector is not alarming but challenging while mentioning last week's initiatives of revamping PSU banks.

On the new black money law, the finance minister mocked at those who suggested they were against illegal money, but were also opposed to the strict law. He said such contradiction cannot exist and a tough law is needed to bring back black money.