New Delhi: Prime Minister Manmohan Singh said on Monday that the tax regime should be liberal but equitable.

Addressing the Federation of Indian Chambers of Commerce and Industry, he said, "In the long run, our tax regime should not have too many exemptions, which make tax administration an unnecessarily complex exercise vulnerable to misuse." The country would now move towards a common goods and services tax and better harmonisation of the value added tax. Besides, he emphasised that tax rates should not only be liberal but also transparent. " I have a great faith in the inherent honesty of our people, and we must respect that and build on that. When there is transgression, it must be visited upon by predictable action."

As India gradually integrates with the global financial system, the Government would move into a less restrictive foreign exchange regime. "The recommendations of the Tarapore Committee are a step in this direction, mixing caution with optimism."

On the boom in the capital markets, he underlined the need to guard against irrational exuberance and ensure their stability. "Amidst all the hype about accelerating growth and a buoyant market, we must not lose sight of the fact that we have to sustain a much higher rate of investment, keep inflation under control, generate more employment opportunities, impart a new element of dynamism to our agriculture and wage a decisive war against poverty, ignorance and disease."

"Good times"

Describing these as "good times for Indian business," Dr. Singh urged the corporate sector to become more socially responsible in terms of protecting the environment as well as in empowering weaker sections such as the Scheduled Castes and the Scheduled Tribes and minorities.

Supply chains

Dr. Singh asked big business houses entering the retail sector to build supply chains directly reaching the farmers to ensure remunerative prices to them. The integrated food bill passed by Parliament would be operationalised in the next few months. This would impart a new dynamism to agro-processing, he said and added that agriculture and allied sectors need to be transformed.

Dr. Singh said he had asked the Finance Ministry and the Investment Commission to suggest an institutional mechanism to tackle hurdles in large-scale projects, involving inter-ministerial coordination.

On the power sector, he said a meeting of the Chief Ministers had been called in February to address the bottlenecks constraining the sector, particularly the viability of distribution companies.

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