Indian Finance Minister Arun Jaitley’s plan to increase public investments in infrastructure projects got the backing of the industry, even if it results in the government’s failure to meet the fiscal deficit target.
“All chambers were in general agreement that >public spending in infrastructure should be scaled up further even if it meant pushing the fiscal deficit target. This would be more productive in the long run to prop up economic growth,” said Harshavardhan Neotia, FICCI President, told The Hindu.
Though the government had covered a lot of ground in bringing the economy back on track, there was still much to be done, Mr Jaitley said in his opening remarks during the pre-budget consultations.
“The Indian economy has achieved robust growth rate despite volatility and uncertainty in global economy. This was made possible by enhanced public investment kick starting stalled projects, improving the status of financial inclusion significantly, improving governance through systematic changes like open auction of natural resources like coal and spectrum in a transparent manner and greater fiscal federalism and improving business environment through reforms in policies and regulation among others.”
In its recommendations to the finance minister, the country’s premier industry lobby, the CII said that “ >demand conditions remain subdued and the appetite for investments in the private sector is below par. Given that exports will remain on a declining trend on account of global economic downturn, it is imperative that domestic demand is stimulated. We would recommend that capital expenditure on key projects in sectors such as roads, railways, irrigation and power be increased substantially.”
The information technology sector wanted mitigation of the tax liabilities for startups and e-commerce firms.
“We discussed issues relating to startups and e-commerce. The startup ecosystem is thriving but it can grow much faster if it is provided the right environment,” R Chandrasekhar, President, NASSCOM, said following the meeting. Industry bodies also called for a clear roadmap for the reduction of corporate tax and the elimination of exemptions saying this would help companies in their financial planning.
“The government needs to provide a clear roadmap for the reduction in corporate tax. In addition, it must remove exemptions only, once the tax rate is lowered,” Mr Sumit Mazumder, President, CII said.
“The minimum alternate tax should also be withdrawn in a calibrated manner. While removing MAT, it should be clarified that MAT credit can be carried forward and set-off against their normal tax liability in future,” according to CII’s recommendations which were echoed by most of the other industry bodies as well.
“As the government draws up a plan to eliminate exemptions and reduce the corporate tax rate, we feel that it must simultaneously look at a reduction in the Minimum Alternate Tax rate,” according to a statement from FICCI.
One important recommendation made was to > stagger the Seventh Pay Commission payouts by the states as a one-time payment would place quite a lot of fiscal stress on them.
