'India is moving towards a stable policy regime'

India is slowly moving towards a stable policy regime on gold, the import of which has caused a drain on its foreign exchange earnings. A policy of self-financing in terms of foreign exchange for gold is what the 80:20 rule envisages and this norm is going to stay, says Economic Affairs Secretary Arvind Mayaram.

In a conversation with Deccan Herald’s Annapurna Singh, he spoke extensively on issues related to SEZ, GST, black money and the new bank to be set up by BRICS nations. 


The New Development Bank by BRICS grouping has been announced and India has been given its presidency. By when do we expect it to be a reality?

All the five signatory nations need to be approved the agreement first. Some countries will have to go to Parliament. We too have to get an act passed by Parliament to set up the New Development Bank.

Once the agreement is ratified and the bank is registered in Shanghai, there will be Board of Directors that will subsequently lay down the qualification of its president and the conditions of his appointment. The bank will be reality only after these formalities are finished. Let us hope it is a reality soon.  

Can India have an integrated policy on gold somewhat in line with China. They have a five-year-plan and well thought out strategy on gold. We have a temporary clamp down on gold which is lifted after a period but does not really solve the problem in the long run?
We have now introduced an integrated policy under which the minimum import of gold should have a direct linkage to export and the 80:20 ratio has to be maintained.

That will add to our foreign exchange earnings and will offset the increase in the cost of import of our gold. Now, the idea is to slowly move towards a policy of self financing in terms of foreign exchange for gold so that you do not have a charge on the foreign exchange earning of other sector for gold.

We do not know how soon it can be achieved in the Indian context. But this is the policy direction in which we have decided to move. And, the 80:20 is the good direction which we have established and it is working well.

The FM has asked the Income Tax department to unearth black money in India. How are we planning to move on that? We do not even have an estimate black money inside the country?

You have an SIT (Special Investigation Team) that is studying the trends and magnitude of the menace of black money and generation of illegal funds. Once you have an idea how you tackle it offshore, then you can also apply the same tools and principles inside the country.

The finance minister recently said that India will have a law ready on GST before the end of this year. What does it mean? We will have the GST passed by Parliament and ready for implementation?

The moment the law is ready, the actual implementation will not take time. If you are able to introduce the bill in the winter session and if you are able to get it passed by the Budget session in February next year.

Then, only the ratification by states is the problem. Budget session of most of the state assemblies begin only after the Central Budget session. If the states get it ratified in their Budget session, we can easily implement it by December 2015.

But that exactly is the problem, will the states be ready? They have lot of problems, many of the taxes that they do not want to let go?

Not many states have the problem after the Centre has agreed to compensate for CST losses. The major opposition was from Madhya Pradesh and Gujarat. MP has relented. Gujarat still has some reservations. They are in the process of being sorted out.

The government had lauded the move to revive the special economic zones in order to revive manufacturing. The exporters body wanted a roll back of minimum alternate tax on SEZ in the budget to boost overseas shipments as well as domestic manufacturing. Yet, there was no such announcement in the Budget.

My feeling has always been that you reduce the cost of transportation, give 24 hours power, give better road and port linkages. That is being done to give them concession. Tax incentive is a highly inefficient way to compensate for that. You are saying that I reduce taxes because for Delhi to Mumbai, if I carry a container, it will take me six days.

So the cost demurrage of six days, I should compensate by not charging you taxes. What kind of logic is this? You have to ensure that the turnaround is 24 hours so that the five days demurrage that you have saved is more than the tax concession given. There has to be a 24-hour customs clearance for the goods to move continuously. These things have to be fixed and not tax exemptions.

How is India going to improve on its ‘ease of doing business? It has fallen by three spots to 134 in the list of 189 countries as per the latest World Bank report?

The government of India is going to do major changes in the ease of doing business in the coming months and years not because of what world bank is saying. It is because India wants to get investment back, economic growth and employment back.

As fas as the World Bank’s ease of doing business is concerned, it has major flaws in its methodology and we (India) have told them (WB) that their ranking based on imperfect methodology sends wrong signals to the investors looking at India.