Policy instability deterred investment in India: FM Arun Jaitley

India has the potential to grow at 8-9% or even more in the next one to two years and global investors cannot ignore such an economy, Finance Minister Arun Jaitley said on Friday while blaming policy instability for deterring investment in the past.

Jaitley, responding to questions at a talk organised here by the Columbia Business School during his last day in the city, said there is certainly an improvement as far the investment in India is concerned.

He said Foreign Direct Investment last year grew by 39% and the break-up between FDI and Foreign Institutional Investor (FII) is "almost equal".

Pointing out that the Foreign Investment Promotion Board received almost 350 requests in one year, which is almost one per day, Jaitley said he is "sure" this will continue to increase.

"As I visualise, an economy which comprises of a huge market, with a lot of trained human minds and a potential to grow at 8-9%, may be somewhat more in the next one or two years, that is an economy which the global investors can't really ignore," he said.

Jaitley, who left for Washington DC after the talk, said global investment into India was deterred in the past due to "instability of policy, particularly taxation policy." "What investors always look for is that the policy would either be stable or improve. They don't want it to move backwards," he said adding that in terms of taxation, "we didn't do ourselves a favour by adopting an approach which was not sustainable."

Jaitley informed the audience of students, academicians, business chiefs and analysts that the direct corporate tax rate will be brought down to 25% over the next few years.

On the Goods and Services Tax (GST), he said he is targeting to bring the tax regime into effect by April 1, 2016.

Terming GST as an idea that has been accepted by the states and country for its "obvious advantages", Jaitley said, "I don't think GST can be defered much more in this country...
the only sadistic pleasure that somebody can get out of delaying it is whether it is April 1, 2016, or April 1, 2017.

But that sadistic pleasure will be at the cost of the Indian economy.".

He urged the opposition to cooperate in the exercise.

Jaitley said retrospection taxation was an issue that he got on his table "unresolved".

The Narendra Modi government has made it clear that it would "never use the power of enacting retrospectively." The pending cases of retrospective taxation are being resolved through the judicial process, he said.

Jaitley assured that there is "no difficulty as far as the future is concerned but the past legacy continues to haunt us." On transfer pricing also there has been a considerable headway, he said.