The industries call for improving tax structure and eschewing progressive taxation
With the picture from across the boundaries not boding well, a self-propelling economy may well be the solution for regenerating the growth trajectory and staving off the global bad tidings threatening to wallop our shores.
For reviving the investment cycle, the first precondition would appear to be arming consumers with sufficient purchasing power, improving agricultural productivity and executing the proposed reforms and infrastructure projects.
According to India Inc., the multiplier impact of these measures will be essential for tackling the problem of declining exports and kick-starting the sluggish manufacturing sector, which has been bearing the brunt of the prevailing supply-side food inflation.
Warning that the current situation was worse than that of 2008-09 and pointing to the United States fiscal cliff problem, the industrial bodies will urge the UPA government not to further damage the prevailing sentiments when presenting the general budget on February 28.
The next few months would be critical and a close watch on the situation by the PMO was the need of the hour.
Moreover, Confederation of Indian Industry (CII) president Adi Godrej expects better coordination between fiscal and monetary instruments to boost investment and growth in the coming months. All policy actions have to be taken to keep sentiments positive, across the spectrum.
Cautioning that this was not the time to further damage the confidence of investors, Federation of Indian Chambers of Commerce and Industry (Ficci) president Naina Lal Kidwai said it was necessary — as a first policy direction to improve the economic sentiment — to improve the income tax structure and not impose a higher rate of taxes on high-income-group taxpayers. Amid a dampened global demand, it was of paramount importance to boost domestic consumer expenditure through a further relaxation in income tax rates. Like all major industry and chamber bodies, Assocham (Associated Chambers of Commerce and Industry of India) president Raj Kumar Dhoot said the consumer need to be provided with greater purchasing power, scope to save and demand produced commodities.
The demand is to apply the peak 30 per cent rate on income above Rs. 20 lakh as its imposition on income above Rs. 10 lakh affected the middle class, leaving little surplus in their hands for spending. The other suggestions include reintroduction of standard deductions, hiking the income tax exemption limit to at least Rs. 3 lakh, and increasing deductions such as medical and educational allowances, besides increasing investment limits under tax benefit schemes and providing greater subsidy on home-loan interest.