India has buried the "ghost" of GAAR, Finance Minister P Chidambaram said today asserting that there is no threat of a rating downgrade in view of key economic decisions like allowing FDI in multi-brand retail and hiking fuel prices.
He said there is revival of investor interest in India as a result of a number of measures taken by the government since September.
Chidambaram was also hopeful that fiscal deficit will be contained within the targeted 5.3 per cent of the GDP this fiscal and trimmed to 4.8 per cent in the next. Growth is likely to climb to 6-7 per cent from 5.7 per cent expected in the current year, he said.
"There is universal acknowledgment that we have handled the GAAR situation fairly effectively and buried the ghost that GAAR will be some kind of a monster," he said in an interview.
Here on a day's visit for an investor conference, the Finance Minister said as expected investors raised issues relating to the controversial provision of GAAR that was introduced in the 2012-13 Budget by his predecessor.
The General Anti-Avoidance Rules (GAAR) gave unbridled powers to taxmen to check evasion of taxes by foreign investors that created huge apprehensions among investors. Last week, Chidambaram announced that GAAR implementation has been postponed by two years to 2016.
"On specific questions on GAAR and I took some time in explaining all the measures we have made to GAAR and told them how market has received it very well here. There is universal acknowledgement that we have handled the GAAR situation fairly effectively and buried the ghost that GAAR will be some kind of a monster," he said.
Kicking off his campaign to woo investment, Chidambaram met over 200 top investors at the "India for Investment Conference" organised by the Citibank and BNP Paribas.
He made a strong case for their investment assuring that all their concerns were being addressed and that the government has taken all measures including to contain fiscal
"It is a very well attended meeting. Virtually everybody who is anybody in the financial sector was here including wealth funds, sovereign funds, banks asset management companies. It gave me an opportunity to explain the economic situation in India, the steps we are taking to put the economy on high growth path," he said.
Chidambaram, who will be in Singapore tomorrow on a similar mission, said India continues to post growth even now. "We are undeniably growing faster," he said pointing that out only China and Indonesia are ahead of India.
"But this growth is not sufficient for us. We need to accelerate it. So I told them steps we are taking to accelerate growth," he said.
He said the first step in that direction is fiscal consolidation and commitment to the path of fiscal prudence.
"At that at the end of this year, we will achieve the target of 5.3 percent of fiscal deficit and next year I will budget for fiscal deficit no more than 4.8 percent," he said.
He said he has also explained to the international investors the number of measures taken in this regard.
"I thought it was a fruitful conference. I could get a sense of the concerns of investors. Happily many of the concerns were addressed in the last three of four months," he said.
Chidambaram said the investors were concerned about the rating down grade.
"I think the steps we have taken assured everybody that there will not be a rating down grade. They were concerned about our ability to stay the course after we announced the decisions. They are happy we stayed the course after announcing FDI in multi brand retails," he said.
He said the investors and rating agencies were concerned that we will not correct fuel prices. "But even the small steps we have taken has given them confidence that we will correct the fuel prices. I think each of the measures has boosted their confidence in the Indian economy," he said.
While the government had in September last capped the supply of subsidised cooking gas and raised the price of petrol and diesel steeply, last week it had virtually begun the process of deregulation of diesel price.
On GDP growth projections, he said "projections I have received is that economy will grow above six percent (in 2013). My own assessment is it will be between six and seven percent. Will be happy if it is closer to seven percent but we should be happy if it is six to seven percent".
On revival of investor interest, he said, "People are coming to us for inquiries, approaching banks. There is a clear revival. I am not saying there is investment taking place but there is a revival of interest".
"There is revival of confidence that we will stick to our promises to contain the fiscal deficit and lowering it by 0.6 percent every year by the next five years," he said.
The confidence is showing up even in the bottom rung of many companies. This quarter results of many companies are encouraging in some sectors demand for goods quite high. This means people are willing to buy more, he said.
"Next year we should see six and seven percent. If investment gathers pace, year after we should get back to our growth rate of eight percent. India's potential growth rate is above eight percent above. We have done it before. We will do it again," he added.