Correct the imbalances 

The economy has two concerns that affect the banking industry — a positive output gap (with many industries hitting the ceiling of their installed capacity) and the slowing down of fixed capital formation (net of stocks). Sorting this out will provide the solution to many problems, specifically with regard to demand-push inflation. My first concern is the slowdown in deposit growth, which is not aligned with the demand for credit in the system. This anomaly needs to be corrected, especially as the banking industry still has a key role to play in the development of the productive capacity of the economy.

Currently, bank deposits are at a tax disadvantage vis-à-vis some other competing asset classes in the economy, such as investments in mutual fund schemes. The Finance Minister should take a look at correcting this asymmetry. We firmly believe that financial inclusion will be the way ahead for the future of the banking industry. The FM should examine innovative ways of making financial inclusion viable for the banking industry. The current cost structure is deterring many banks from adopting inclusion whole-heartedly. In fact, I believe that, strategically, financial inclusion can provide adequate ballast during times of financial crises.

Amitabh Chaturvedi,

MD and CEO, Dhanlaxmi Bank

Tax reforms on shopping list

Someone once said, ‘A budget should not aspire to be a dream budget — dreams are ephemeral — but should aspire to be a good balancing act.' Top on the list of pre-Budget expectations is the retail industry's long-standing demand of giving it industry status with its own Ministry. This decisive step will be truly reforming in organising this highly unorganised sector.

The Indian retail industry is the fifth largest in the world, where 95 per cent of it is unorganized. With growing market demand, the industry is expected to grow at a pace of 25-30 per cent annually; and it accounts for over 10 per cent of the India's GDP, and around 8 per cent of the employment.

Imposition of service tax on rentals adds severe burden on us, costing 1-1.5 per cent of our annual turnover. This is a big amount considering that retail itself is a ‘3 per cent profit' business. Also, the cost of occupation is high (as high as 12 per cent of the turnover).

We hope the Budget is big on tax reforms for retailers. Service tax elimination and implementation of GST should be considered. It will be ideal to adopt a single rate structure with a common rate for goods and services. Such a tax regime will benefit the retailers and consumers as the streamlining of taxes will help reduce the retail prices of most of the items.

Another important topic of discussion for a while now has been 100 per cent FDI in retail. Allowing FDI into the sector would help reduce the gap between prices of a commodity from farm to fork. Large investments in infrastructure would lead to a rise in farm productivity, manufacturing, processing and cold storage facilities. This would cut down wastage caused due to difficult road connectivity and spurt growth in employment, exports and GDP. This would also help revive textile and handicrafts sectors. With appropriate control in place, our exports can double in three years. 

FDI is only going to benefit customers, economy and infrastructure. Our experience in telecom, automobile, insurance sector clearly shows the success of FDI policy.

Govind Shrikhande, 

Customer Care Associate & MD, Shoppers Stop Ltd

Hoping for well-constructed steps

On the top of the wish list is infrastructure, which is directly linked to prosperity of society and the nation. Unless we build roads connecting every major town and port, we cannot provide suitable business infrastructure for development. In order to proceed aggressively, we need to focus on the segment with more attention. We strongly believe that investments in infrastructure, rightly identified as a priority area, should be stepped up from 7.5 per cent of GDP now to 9-10 per cent of GDP by 2012. A legal, administrative and regulatory framework should be in place for encouraging public-private partnership and inflow of FDI in infrastructure. There is a significant gap in demand and supply in hotel accommodations and that gap should be bridged. The hospitality segment witnessed a major setback amid the economic slowdown last year but has now emerged as a key segment with big business potential. We are looking forward for some tax relief for the hotel industry. There is a significant demand for affordable housing. Giving developers a tax holiday on affordable housing projects will help bring shelters over more heads. The income-tax rebate on home loans must be continued. There is a tax exemption on the interest amount paid on a home loan for a house that is rented out. A self-occupied house too should get this benefit. The industry is also hopeful of real estate mutual fund (REMFs), which could provide essential financial support. The Government should also come up with new policies

Vinay Phadnis,

Chairman & MD, Phadnis Infrastructure Ltd

Subsidies can cut healthcare costs

The challenge the general insurance industry is facing is growth in a profitable and sustainable manner. Elimination of service tax on premiums charged for rural products and social products will help increase insurance penetration. Making the personal accident cover and health cover mandatory will also improve insurance penetration. The 80D tax exemption limit for health insurance could be increased to Rs 50,000 to make it in line with health care cost inflation. Given the burgeoning costs of healthcare, which indirectly affects consumers through higher insurance premiums, one of the things that the Government can do is to have subsidies for the health care industry to improve the supply-side situation and to enable creation of more health care facilities. A better framework to check quality of treatment and costs is required.

Exemption of service tax on third party cover for commercial vehicles would increase the net realisation to insurance companies without causing additional burden to transporter. The Government should also consider the various recommendations and suggestions made by the insurance industry before tabling the Bill on the Direct Taxes Code in the Parliament. Specific provisions clarifying payments to foreign re-insurers are not subject to tax deduction at source, so that India can benefit from the re-insurance capacity that is on offer globally.

Amarnath Ananthanarayanan,

MD & CEO, Bharti AXA General Insurance

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