The Hindu : National : Promote investments, stimulate demand, moderate corporate tax

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National

Promote investments, stimulate demand, moderate corporate tax

K. Balchand

NEW DELHI: With the United Progressive Alliance government set to present the first budget in its second term amidst economic slowdown, the expectations of industry and commerce bodies and their financial managers are at a level that no government had, perhaps, to contend with in recent times.

Even as the agricultural sector, which provided a cushion against the adverse impact of the industrial downturn, is facing a less than normal rainfall that threatens to affect the crop yield, industry captains are calling for efforts to increase consumer demand.

For Confederation of Indian Industry (CII) president Venu Srinivasan the mantra lies in fiscal prudence, capacity creation, promoting investments and fuelling consumption through an “investment budget” with an 8 per cent growth rate trajectory.

Well aware of the predicament of the agriculture sector, thanks to its dependence on the rain gods, Federation of Indian Chambers of Commerce and Industry (FICCI) president Harsh Pati Singhania has called for a second Green Revolution and proposed extending infrastructure status to the cold chain projects.

Associated Chambers of Commerce and Industry of India (Assocham) president Sajjan Jindal has stressed the need for stepping up investments in infrastructure, stimulating demand, moderating corporate tax, removing inadvertent custom duty structure and extending help to Software Technology Parks of India to accelerate exports.

PHD Chamber president Satish Bagrodia expects the government to focus on infrastructure, inclusive growth, good governance, agriculture, fiscal discipline and financial sector reforms for reviving the economy.

Pessimistic of the recovery of the world economy at the desired rate, industry chiefs have underlined regulations in the banking and financial sectors for liquidity and further moderation of interest rates for creation of infrastructure and revival of demand.

The general anguish is over the refusal of commercial banks in lowering the lending rates, which industry feels is negating the initiatives of the Reserve Bank to inject liquidity into the system for fresh investments, generate employment potential and spur consumer demand.

For stimulating demand, industry bodies have called for reducing personal tax rates and raising the threshold limit to Rs. 2 lakh in the hope that it will result in savings with the multiplier impact on demand for consumer goods.

Industry also wants the government to reduce tax incidence on household purchases to less than 20 per cent from the current 45 per cent which, it felt, is dampening the demand in the wake of the slowdown.

The stability of the new government, industry hopes, will give the opportunity to usher in reforms in sectors such as pension, health and education and disinvestment to put the country on the next higher level of growth.

The imperativeness for disinvestment of government equity in leading public sector undertakings up to 49 per cent is suggested to tide over the growing fiscal deficit. The other measure suggested is reduction in excise duty, particularly on those relating to medicine.

Tax policy

For promotion of investments, a consistent tax policy has been called for. Industry is seeking re-introduction of investment allowance to encourage front-loading of investments. Besides, there is also a demand for abolishing surcharges, fringe benefit tax and cess to simplify and streamline the tax structure.

Specific attention has been sought for the SMEs (small and medium enterprises), exports, textiles, commercial vehicles, infrastructure and housing sectors, which have been adversely affected by the global financial slowdown.

Corporate bodies are looking forward to a reduction in corporate tax rate, pointing out that the economic downturn has sharply eroded profits affected by depressed primary markets and lower corporate lending by banks.

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