PM Narendra Modi said he was preparing the ground for India to turn into a -trillion economy from trillion now.. (Source: PTI photo) PM Narendra Modi said he was preparing the ground for India to turn into a -trillion economy from trillion now.. (Source: PTI photo)

Prime Minister Narendra Modi said Friday he would not cut subsidies, reform the complex tax system to attract foreign investment and work to make the government system fast and flexible.

Speaking at an event organised by The Economic Times here, Modi said: “In 20 years of liberalisation, we have not changed a command-and-control mindset. We think it is okay for government to meddle in the working of firms. This must change.” The word “reform” figured 15 times in his speech that lasted a little less than 40 minutes.

With the budget just six weeks away, the Prime Minister made it clear that he would not cut subsidies. “I believe that subsidies are needed for them (poor). What we need is a well-targeted system of subsidy delivery. We need to cut subsidy leakages,” he said.

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As part of improving governance, Modi said India’s tax system was complex and was crying for reforms. He said tax stability, along with ease of doing business, and a positive regulatory framework were being pushed ahead.

Making a strong case for a policy-driven state, he pointed out that he has often called for ‘Minimum Government and Maximum Governance’. The state, he said, should focus only on five functions: public goods (defence, police, judiciary etc), its externalities (such as pollution), empower markets (restrict monopoly), fill information gaps and a well designed welfare and subsidy mechanism. Other than this, the government has no business to be in business, he said.

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Listing a string of initiatives of his government such as Digital India, Swachh Bharat and Jan Dhan and work in areas including expenditure management, petroleum reforms, inflation control, land acquisition, coal and mining, Modi said he was preparing the ground for India to turn into a $20-trillion economy from $2 trillion now.

In the same breath, he, however, said: “Reforms, economic growth, progress — all are empty words if they do not translate into jobs. What we need is not just more production, but mass production and production by masses.”

Development which must result in jobs, he said, seemed to have become the agenda of only the government. “It is seen as a scheme.That should not be the case. Development should be everyone’s agenda. It should be a people’s movement,” Modi said. While the mantra of independence was satyagraha and its warriors were satyagrahis, the mantra of New Age India must be swachhagraha, and its warriors swachhagrahis.

Finance Minister Arun Jaitley, who was also present at the event, admitted tax issues were hampering flow of foreign investment. He said the government was seized of the matter and was looking into suggestions made by investors.

“One of the reasons (for reluctance of NRIs to return to India)… is tax climate… The issue is under serious examination,” he said, while referring to his meeting with a group of entrepreneurs from Singapore. The government, he said, was seriously examining a proposal to incentivise use of debit card by providing marginal tax incentive.

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