Maintain excise, service tax rates, bring on GST: CII to PMEAC
Industry body says fiscal stimulus necessary but unreasonable given the size of the fiscal deficit.
The Confederation of Indian Industry (CII) said on Tuesday that all policy actions taken at this time must be aimed at keeping sentiments positive.
CII was conveying Indian industry’s points of view to C Rangarajan, Chairman, Prime Minister’s Economic Advisory Council and other members of the council.
CII has called for maintaining the current excise and service tax rates and maintaining the peak customs duty at 10 percent in the forthcoming Union Budget.
CII president Adi Godrej told the council that the conditions of industry and economy are causing a lot of concern all around. The IIP figures for November are an indication that the talk about an industrial turnaround after the October figures came out was pre mature, a CII statement said.
He mentioned that the lack of investment demand is perceptible across all sectors. New project announcements are at a low. The need for boosting business confidence of investors can, therefore, hardly be overemphasized, which would be critical for reviving growth momentum of the economy.
In its suggestion to the PMEAC, CII has said that given the condition in which industry is at the present moment, it would have been a natural expectation that the government should intervene with a stimulus package involving reduction in excise and service tax rates. However, looking at the escalated level of fiscal deficit is, this could be an unreasonable demand and therefore, CII suggests the present rates of excise and service tax rates are maintained.
On the same vein, CII has mentioned that the global excess capacity poses a threat in terms of cheap imports flooding the Indian markets. CII, therefore, believes that the peak customs duty should also be maintained at 10 percent in the forthcoming Union Budget.
Godrej made a special mention of GST, saying that this is a ready stimulus and could supplement GDP growth by 1.5 t0 2.0 percent. All effort should be made to effect an early introduction of GST, Godrej said.
Referring to the importance of keeping sentiments positive, Godrej mentioned that talks of inheritance tax and other such measures of additional taxation could negatively impact sentiment.
CII has also suggested monetizing unutilized assets of PSEs and also putting to good use the investible surplus of PSEs, which are in the region of Rs 2.5 lakh crore. In order to step up forward and backward linkages and create demand, CII has suggested that interest rate subvention for low-cost housing should be applicable for housing up to a value of Rs 35 lakh – up from the present Rs 25 lakh.
Commenting on the cost of funds, CII has recommended that the RBI reduce repo rate by 50 bps at least and also reduce CRR.
Alluding to the enlarging fiscal gap, CII pointed out to the need for better targeting of subsidies, as has been started now.
According to CII, there is a scope for the government to gradually phase out the subsidy provided on diesel over the next three years. Further, CII has also recommended the consolidation of overlapping parts of central schemes, which could yield revenues of up to Rs 10,000 crore.
With tax revenues showing little sign of returning to buoyancy from next year, CII has suggested that the government should set a target of raising at least Rs 50,000 crore by way of disinvestment next year, which should be spread out through the course of the year.
Godrej also suggested that the recommendations of the Kelkar Committee be acted upon soon. CII pointed out that the lackluster performance of exports has escalated the current account deficit to a historically high level. This is being contributed by the poor demand conditions globally.
It would be helpful if the interest rate subvention of 2 percent is extended to all products and sectors to ensure that Indian exports can tide over this exceptionally difficult phase.
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Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan today said all the measures proposed in the Budget for 2013-14 taken together will help the country register a growth of 6.5 per cent in the next fiscal year.
The slowdown in the sector reflects the operation of market forces which hopefully will compel new development to factor the consumer paradigm appropriately for better offtakes.