Finance Minister Arun Jaitley with Arvind Panagariya at Columbia University. (Photo: Twitter)
The series of reforms initiated by the Modi government like demonetisation and the GST has put the Indian economy on a "far more stronger track", said Union Finance Minister Arun Jaitley on Wednesday at the Columbia University in New York.
"Some of these steps, the demonetisation, the GST because the GST could lead to de-stocking of existing stocks can have for a quarter or so a transient impact on manufacturing. But in the long run, these are institutional reforms and structural changes, he said.
"These are changes have put the Indian economy on a far more sound track so that we can look forward for a much cleaner much bigger India economy in the days and years to come," Jaitley said, addressing the students of the Columbia University in New York.
Jaitley said, "Consistent steps have been taken to formalise and expand the more formal economy as far as India is concern. And wanting to formalise that economy, one after the other steps are taken against shadow economy."
Talking about the use of discretion by ministers in investment, he said it needed to be withdrawn and left to market mechanisms, while the world could expect a bigger and cleaner Indian economy in the coming years.
He also said that when the NDA government came to power in 2014, global investors had lost confidence in India due to rising corruption and scandals.
The rise of corruption was mainly because of the "extraordinary discretion" vested with the government.
Referring to the series of economic reforms that India has undertaken since 1991, Jaitley said the Indian model now seems to be emerging.
"Even as the Indian economic reforms started a few decades late, the direction that India followed is probably the direction that helped the country considerably. And therefore, any form of debate, discussion or suggestions to go back to more regulation, to go back to stricter controls, not to integrate itself, I think, we are in the process of dispelling any notion of that kind," he said.
Moreover, foreign direct investment (FDI) faced hurdles as the "doors were too narrow", the approval mechanism was slow and tax legislations unclear, he said.
"Our doors were too narrow. Our limits did not allow them. The second hurdle was even when we allowed them, between the decision to start businesses in India and the eventual commencement of business. You could spend years and years before you got to your permissions, he said.
"It was quite challenging to convince investors all over the world," he added.
Earlier at an investors roundtable jointly organised by the CII and the US-India Business Council, he said that the Indian government has been able to change domestic public opinion in favour of inviting foreign investment into sectors of production that were earlier considered out of bounds both for ideological as well as security reasons.
"What you require is an additionality of evidence. And therefore, you have to create an environment in India where people find India a friendly place to invest in," he said as he described the key hurdles in the process.
"India has opened up in sectors where there was a scope for opening up. And not in a single case the government faced a protest," he said.
"We have been able to invest FDI in almost every sector of the economy," Jaitley said at an investors roundtable.
"Areas that were earlier considered sacrosanct, like defence manufacturing, we have been able to convince public opinion that it is better to invite foreign expertise to set up manufacturing in India," he said.
"Suddenly we find a lot of joint ventures coming up (with foreign firms) for defence investment."
Jaitley is on a week-long official visit to the US during which he will attend the annual meetings of the World Bank and the International Monetary Fund to be held in Washington.