Finance Minister Pranab Mukherjee told the Rajya Sabha that the government needed to deal with a difficult situation in the wake of the rising prices of the crude oil in the international market and said efforts would be made to push growth which declined to a disappointing level of 6.9 per cent in 2011-12.
Mukherjee, who was replying to a debate on Finance Bill at a time when the BSE sensex dipped below the psychological level of 16,000 mainly on account of global factors, cited this as an example of how the international crisis was impacting India. The House later returned the bill marking the completion of the three-stage budgetary exercise for 2012-13 by Parliament.
"This is a difficult world, international situation is difficult. Country after country is facing major economic crisis," he said.
Highlighting the fiscal difficulties being faced by the government, Mukherjee said, "somebody has pointed...that I am going to take a little bit of unpopular steps. I am going to issue some austerity measures..."
Not revealing the nature of the austerity measures he was planning to take, the Minister said, "Some sort of austerity measures (have to be taken) to convey the signal that we are responding to the situation as needed."
At the same time, he said, "I do not want to press the panic button."
Referring to the three-phased austerity measures announced earlier, Mukherjee some of the cabinet colleagues had problems.
"At one point of time not long ago, my ministerial colleagues, particularly, those who are tall and high, became very angry with me when I said you will have to travel in the normal class, 'Y' class, not 'J' class. They said there is no adequate leg space", he said.
Expressing disappointment over moderation in economic growth to 6.9 per cent in 2011-12 from 8.4 per cent in the preceding two years, he said, there are projections by some sections that it might not improve this fiscal.
The government projected a growth rate of 7.5 per cent for 2012-13. "It may be correct or may not be correct, but I am not pinning my hope merely on such assumptions.
"To achieve the higher growth, we have to take certain steps," the Minister said, adding some of these have been taken and in this regard he referred to the demand-driven strategy in the agriculture sector.
He sounded confident that growth will pick up as "Indian growth story is intact...it would move up. We shall have to see this in the compass of 4, 5 or 6 years, and not in one quarter or two quarters or three quarters."
On the eurozone crisis and its impact on India, Mukherjee said the government had to meet the challenge. "Don't think I am trying to pass on the buck to somewhere else. Buck stops at me, I agree. Buck stops at our door...I am owning the responsibility," he said.
In the same light, he sought to reach out the Opposition, saying major challenges have been dealt and "atmosphere can be created...by not merely words but by our joint action...We are pursuing (reforms in direct and indirect taxes)".
Referring to members mentioning about the Finance Minister biting the bullet, Mukherjee said, "I am not hesitating to bite the bullet if it achieves the goal, not if it is ending in a fiasco."
On the decision to amend the Income Tax Act with retrospective effect following Supreme Court decision in the Vodafone tax case and concerns expressed by certain members, Mukherjee said, "Indian Parliament is omnipotent...It has the power to amend any Article of the Constitution."
He said Vodafone was clearly told that it has to pay tax on its acquisition on Hutchison's stake in the Hutchison Essar through a USD 11.2 billion deal which was signed in Cayman Islands.
Vodafone had earlier won the tax case in the Supreme Court after it turned down the judgement of the Bombay High Court. The amendment to the I-T Act seeks to tax overseas mergers and acquisitions involving domestic assets.
Mukherjee said each organ of the Constitution has its own responsibility and the government's decision to amend the income tax law with retrospective effect, "is not a disrespect to Supreme Court.
"It is not to ignore the constitutionally assigned responsibility of the Supreme Court...As judiciary has the right to interpret law, legislature has the right to enact a law. In the process, if there are divergences of opinion it should be treated as confrontation, it is the honest difference of opinion. If we make an attempt of reconciling that honest difference of opinion, it is not wrong."
Following the amendment, the British telecom major Vodafone would have to pay Rs 20,300 crore as tax, interest and penalty.
Mukherjee said he had even told the British government that retrospective tax amendment undertaken by India was "exactly" the same as was done by the UK earlier.
He said the failure to amend the tax law in the wake of the Supreme Court judgement would have cost the exchequer Rs 40,000 to Rs 50,000 crore as several companies, which had not contested and paid their dues, would have demanded refunds.
"India is not a tax haven", he said, adding the country cannot be compared with Cayman Islands and Isle of Man.
The amendments to the Income Tax Act, the Finance Minister clarified, will not override provisions of the Double Taxation Avoidance Agreements (DTAA) which India has with 82 countries.
Referring to the issue of rising oil prices in the international market and its impact on the country, he said he has asked C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council (PMEAC), to suggest ways to reduce the country's dependence on imported oil.
He said indepth study and discussions are required to find a solution and "exactly the Prime Minister is trying to achieve that."
Attributing spiraling prices of crude oil in the international market for financialisation of commodities, he said, "If we do not take corrective action, we will have to face disastrous consequences."
The oil prices are rising by leaps and bounds, he said, adding the Centre, states and other stake holders would have to collectively take a decision to deal with the crisis.
"I cannot take decisions sitting here alone, unless I have all states on board. I cannot simply give diktat...the problem is complex and to complex problems you cannot expect to have a simplistic solution," Mukherjee said.