In the pre-budget consultation meeting with the Ministry of Finance, the Confederation of Indian Industry has strongly urged for an early implementation of GST, as a surefire means of lifting investor sentiment and putting the Indian economy back on track.
It is important to ensure that the Constitution Amendment Bill does not have the sectoral exemptions built into it. In terms of stimulus, nothing can be better than a well-crafted GST, CII noted in a statement.
Elaborating further on the proposals to facilitate growth and investor confidence, the CII stressed on meeting the fiscal deficit target and mentioned that a road map for adhering to the fiscal deficit target should be drawn up and announced in the Budget.
Commenting on the need for maintaining fiscal discipline, Chandrajit Banerjee, Director General, CII, said fiscal consolidation is an important constituent of the reform agenda and imperative to maintain India’s image as a stable investment destination. "It would be important for the government to spell out a strategy for revival of growth while maintaining fiscal prudence,'' he added.
The CII has further suggested the extension of short-term stimulus package involving reduction of excise duty on certain goods up to March 31, 2015. In the interim budget presented on February 17, 2014, this reduction in the range of 2-6 per cent was provided up to June 30, 2014.
The CII has also urged the Government to bring down the general rate of excise duty from the current level of 12 per cent to 10 per cent across the board to revive demand in the economy.
Stimulus package
Commenting on the stimulus package, Banerjee said that, "the time is not right to do away with the stimulus especially as the economy is in the midst of a slowdown and the manufacturing sector growth is in the red. At the present moment, it is a tough balancing act, since the industry would need fiscal support for some time to come out of negative territory."
The CII underscored the importance of augmenting revenue by creative interventions which would provide fiscal maneuverability to incur expenditure. The CII has suggested that a 10 per cent rationalisation of subsidy expenditure, could result in savings to the tune of Rs 25,000 crore.
PSU banks
A holding company structure model for PSU Banks, diluting government stake in public sector banks to 51 per cent and aggressively pursuing disinvestment were among some other suggestions for revenue generation by the CII.
The priority is to revitalise demand by fast-tracking project clearance. The CII has sought reducing the threshold limit of CCI clearance from the current level of Rs 1,000 crore to Rs 500 crore.
The CII has strongly advocated the promotion of manufacturing as one of the priorities to kick start the flagging economy. Manufacturing requires sustained investment, but equally enhances employment generation.
It has further recommended tax incentives such as allowing 25 per cent accelerated depreciation for investments in plant and machinery, reducing MAT rate and dividend distribution tax to 10 per cent, among others.
Incentivise savings
During the meeting, the CII cautioned that financing investments could be a challenge, since financial savings are on the decline. To incentivise savings, there is a dire need to increase disposable incomes of households by raising the basic exemption limit and removing surcharges.
CII also mentioned that the Central government should reduce its dissaving by lowering revenue deficit through reduction in subsidies and other revenue expenditure. The other way to shore up revenue would be to raise foreign direct investment limits in sectors like insurance, defence, etc, the statement added.