Union Finance Minister Pranab Mukherjee on Tuesday hinted at the possibility of tinkering with the corporate taxes and giving a thrust to infrastructure and research and development in his budget for 2011-12.
Mr. Mukherjee spoke on the issue during his pre-budget meeting with captains of industry where he underlined the role of industry in not only ensuring the overall growth of the economy but also “the growth of government revenue to fund critical public expenditure on social and infrastructure development.”
The Finance Minister was more specific when he called from industry leaders and bodies for “specific observations about the corporate tax collections in the current financial year which are not keeping up with the anticipated trend.”
The Finance Minister's other area of interest was in sustaining a double digit growth in industry and for stepping up the growth of manufactured exports in the short and medium term. Mr. Mukherjee praised the performance of the industrial sector in the past few months and the improvement in investment and business confidence.
Mr. Mukherjee's main concern related to pace of development of infrastructure and investments in research and development (R&D) stressing that both of them had a direct bearing on the productivity of Indian enterprise.
While investment in infrastructure was a key to sustainable and inclusive growth, spending on R&D as a ratio of gross domestic product (GDP) was low and “we need to make all possible efforts to invest in R&D and innovate in order to remain competitive.”
Private initiative
Underscoring that the government alone would not be able to achieve the desired outcomes in both these areas, the Finance Minister hoped for complementary efforts from the private sector either as a purely private initiative or in the form of public private partnership.
Emerging from the meeting Videocon Chairman Venugopal Dhoot said that the Finance Minister was not in a mood to cut taxes but appeared likely to continue with the stimulus package. He said that the Finance Minister was against cutting taxes as it would affect fiscal deficit targets.
Federation of Indian Chambers of Commerce and Industry (FICCI) President Rajan Bharti Mittal laid stress on the need to support domestic demand and ensure that there was no roll back of the stimulus package. To prop up employment generation he suggested abolition of surcharge and education cess, moderation of corporate tax, removal of the cascading impact of dividend distribution tax, rationalise MAT as a specified percentage, retention of the peak customs duty rate of 10 per cent and reduction in CST from 2 per cent to 1 per cent.
Associated Chambers of Commerce and Industry of India (Assocham) President Dilip Modi demanded that the government retain the concessions that make the infrastructure sector attractive to ensure that investment did not slow down.
Confederation of Indian Industry (CII) President Hari Bhartia called for opening up sectors and raising foreign investment levels to encourage foreign direct investment (FDI) as in multi-brand retail and defence sectors.
PHD Chamber's newly elected President Salil Bhandari hoped that the Finance Minister would provide a medium term strategy for fiscal consolidation to ensure growth, clean up the public distribution system, focus on infrastructure development and initiate agricultural reforms and food security.
