Rating agencies’ fear keeps off populism

New Delhi: Finance ministry officials feel any deviation from fiscal deficit targets due to populist measures — when growth hasn’t returned — will not go down well with rating agencies. Also, if the deficit is not controlled, the Reserve Bank will not get any head room to cut interest rates to boot growth. The industry chambers, in their interaction with the FM on Friday, also urged the government to follow the path of fiscal consolidation, a finance ministry statement said. Mr Jaitley told industry leaders that the current economic situation was quite challenging, but there was enthusiasm in industry to turn it to its advantage. He said there was a need to give directional thrust to translate this into better results. Industry representatives urged the government to follow the “3Cs” path —  credibility of policy, continuity of decisions and clarity of legislation, among others, the finance ministry said.

Ficci chief Sidharth Birla noted that there was too much pressure on tax officers to maximise revenue collection, that led to delays in refunds, disputes and pointless litigation. “Revenue generation depends on economic activity in the country; revenues cannot be enhanced by prescribing artificially high targets for tax officers. The government should make earnest efforts to move away from the aggressive revenue approach and provide a genuine non-adversarial and conducive tax environment,” Mr Birla said at the meeting. The industry leaders also demanded that GAAR be deferred for at least the next three years, no retrospective amendments in the tax laws as it hurts business sentiments and discourages foreign investment.