As finance minister Pranab Mukherjee puts the finishing touches to the UPA government’s budget 2012-13, the country’s corporate heads seem to be nostalgic about the 1991-92 budget, in which Prime Minister Manmohan Singh unleashed a wave of economic reforms.
In the wake of the dismal performance of the UPA in the recent state assembly elections, hopes of further economic reforms appear to have all but faded out, and India’s corporate honchos have evinced their low expectations in a recent poll of CEOs conducted by HT and MaRS (Monitoring and Research Systems). As the fiscally-strapped government gropes for ways to boost growth and inflation shows no signs of abating to levels low enough for an interest rate cut, the CEOs said they expect the country’s growth rate for 2012-13 to be between 6-8%. Half the CEOs polled did not expect the GDP to cross the 7% mark, while 46% expected a slightly improved growth rate at 7-8%.
India’s growth for the third quarter ended December slowed to 6.1% from 6.9% in the second quarter. The government has projected a full year growth rate of 6.9%, against 9% forecast in last year’s budget.
India’s industrial output growth also slowed down to a dismal 1.8% in December. Most CEOs say that the government should give top priority to boosting infrastructure development and industrial production – 72% and 58% respectively.
Calling for radical measures to revive the dormant industrial growth, Rajiv Kumar, secretary general, Federation of Indian Chambers of Commerce and Industry (FICCI), suggests that Coal India be dissected, and its progenies be privatised.
“This will help to address the problems facing the power sector which threaten to cripple industry,” he said.
While taming inflation remains a primary objective, Indian industry also suggests increasing the cash in hand of consumers to increase spending power. “A hike in exemption limit of income tax would benefit the common man,” said RN Dhoot, president, Associated Chambers of Commerce and Industry of India (Assocham).
The survey throws up several surprising findings, with only a miniscule percentage of CEOs (2%) seeking any focus on agriculture, or wanting healthcare to be accorded infrastructure status in the budget.
As corruption dominated the national agenda for much of last year, a significant percentage of CEOs — 42% — favoured granting a one-time amnesty for recovering black money.
“Concessions given should not be too large but include a real amnesty against criminal charges. This should be coupled with strict enforcement of tax laws so that future leakages are plugged,” suggested Kumar. “Also government should announce that all individual incomes that are not 100% agriculture will be charged the full tax rate. This will also plug evasion.”
A major chunk of black money is generated through real estate transactions. “The circle rate needs to be notified every year on the basis of data for the preceding year (to keep them upto date),” said Dhoot. “A stamp duty rate of 3% is fair and reasonable rate,” he said.