‘New tax regime gives spending flexibility’

Finance Minister Nirmala Sitharaman: First of all, when you look at the economy, you can see that it is showing very clear signs of a strong revival. When there is a strong recovery, and especially when you take the example of the services sector, the kind of repetition that that sector is facing but at the same time because they are moving towards using more and more technology, sophisticated technology, they are also looking for people. with such skills. Better pay is also better pay for people who have the necessary skills and that is why the government of India, in this budget, through various different means, has emphasized the importance of skills, upskilling, skills for the revolution industrial 4.0. In that we put particular emphasis because skills are one thing, there is further training, but today the world is moving towards making great use of Web 3. For that reason, if Industry 4.0 is emerging, it will pay employers also more when you have people with the Web. right type of appropriate skills. We are spending that kind of money and bringing in that kind of training to pay people better.

So, the government is pushing it from a different supply side, obviously the industry has to absorb it.

For the common people, the most significant thing about the budget is the new tax system. What is the reasoning behind that?

FM: Whenever direct taxation of Bharat (India) is discussed, it is usually on two issues – reduce tax rates and secondly, don’t complicate taxes so much, when you are reducing a certain tax and making a surcharge you apply to another person, or yourself. you will only get an exemption when you take out insurance. So due to such difficulties, if the old regime seemed beneficial to you, it also seems complicated. For that reason, in relation to the old (tax) system, many committees also reported that it needed to be simplified. One of the main reasons for tax evasion and avoidance is that when the rate is high, people find other ways to avoid it. If the rate goes down, people will be more willing to pay up. Taking all these factors into account, two years earlier, we introduced a second low rate tax regime. But this time we have reduced the rate in each tax slab, and finally the surcharge which has the highest tax rate in India has been reduced. Therefore, whatever proposals have been made for reducing and simplifying rates, everything has been incorporated in the new regime. And we’re creating a default system, which means when you log on to your computer to file taxes this is the form that will show up first. This does not mean that you must necessarily follow this. If you want to follow the old regime, you can, but make that decision wisely. Gradually, we are trying to attract people from the exemption regime to the new regime.

Many people are saying that they could invest in PPF, NHS or other 80C exemptions in the old regime, for long-term savings for retirement, etc, so that they have some future savings. But in the new regime, those exemptions would not exist. Why do you think this is a more profitable option?

FM: We need to change this thought process. When the rate is low, and you are saving money, it is your choice where you want to invest it. In the old regime, the rate was high. In the new system, there is no pretending that the rate is high but we are giving you some exemptions. This regime is simple. You are paying less, and with the money you save you can invest anywhere, your child’s education, whatever you want. I think the taxpayer knows how to spend his money.

Clearly, simplifying taxes will increase compliance and help formalize the economy as many more people are willing to participate. Is the informal sector merging with the formal sector in a natural course or are you giving them some incentives to draw them in and formalize them?

FM: We are trying to ensure that people join the formal sector because of the incentives we are giving for digital payments as well. When people enter their account into the formal procedure – for example, one of the announcements we made today for MSMEs and professionals, if 95% of your operations are formal, if there is a check based at least we are giving a demonstration level higher for you. your demands. We are promoting the informal sector to benefit from formal. The 59 minute loan that happened through the digital format where people could tell the bank that they want it, and get a loan in principle in that time, and after that without visiting the bank you will get bank assistance yet. These are ways we are formalizing.

Today the country saw a very strong picture of women’s empowerment, when you went to meet the President. The budget also focuses on women empowerment, which the Prime Minister recommended. When you want to create a paradigm shift through SHGs (self-help groups), and introduce a new culture, you also said that this is a big weapon in Amrit Kaal to drive growth. How will you approach growth through women’s empowerment?

FM: Just for comparison, the Prime Minister in 2016 introduced a policy for start-ups, and after that in every budget there is something or other to facilitate them. Because our youth are so innovative, the number of start-ups has increased, and today there are more than 80,000 startups. There are more than 100 among them already unicorns. In India, men or women, they should be encouraged through policy support without any choice.

In the same way, if SHGs can be largely united in clusters, and provided with quality raw material and help them to run in a professional manner, with marketing support etc, we believe that the startup revolution has happened in such a short time. During that period, the same can happen with women empowerment and through that we can do well in both manufacturing and services.

If we talk about fiscal consolidation, all over the world, governments are spending for their people, but you are talking about consolidating the fiscal deficit to 6.4% and talking about the adherence to the gliding path to reach 5.9%. How are you managing this fiscal consolidation? And what is the sign that you are sending global investors to you through this budget?

FM: I keep talking about financial management. Not only are funds allocated to different departments in the budget, but there are gaps in revenue growth that are not being filled. On both sides, you need to fill the income gaps, bring in efficiency, use technology to find out that someone is not paying even though they can. Secondly, when you give funds to departments to spend, are they being used effectively? If the money doesn’t get to the bottom, the whole intention is that funds will help the growing demand, that has not been achieved. I believe that if the finance ministry pays attention to the budget, it should pay triple attention to implementation, avoiding loopholes, stopping evasion, stopping the diversion of funds and acting, during the year. The finance ministry needs to work on their toes to implement all these. The banking sector, for example, during covid implemented the emergency credit guarantee scheme announced by the government. If the banks did not implement this effectively, the purpose of the scheme would have been defeated. Every sector within the finance ministry, every department must deliver topnotch performance.

Since you have increased public investment for three years continuously, what was the reasoning behind that?

FM: The money spent through public investment, in that the returns are high. Every penny (penny) spent on infrastructure investment has a multiplier effect. We strongly believe that this is a way the economy will grow. We have seen this since covid, and it has had positive results. If we want to grow at that pace, public spending is definitely the way to do it.

The entire interview is available on Doordarshan.

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Updated: 02 February 2023, 05:42 AM IST

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