Physical, social infra to increase growth: FICCI
FM's third Budget focuses on physical infra in the form of roads, ports, airports and power, as well as social infrastructure.india Updated: Feb 28, 2006 17:25 IST
The Indian economy is all set to sustain a higher growth rate aimed at 10 per cent in the next two to three years, with the Union 2006-07 budget focus being on the creation of physical as well as social infrastructure, the Federation of Indian Chambers of Commerce and Industry (FICCI) said on Tuesday.
"The Union Budget for 2006-07 has sought to lay the foundation for the country to achieve a 10 per cent growth in the next two to three years," FICCI President Saroj Kumar Poddar observed, adding that the emphasis of the budget on growth and investment is reflected in higher allocation for critical sectors.
Finance Minister P Chidambaram's third Budget in Parliament focuses on physical infrastructure in the form of roads, ports, airports and power, as well as social infrastructure by way of education, healthcare, water supply and rural empowerment.
Mr Poddar said a major positive feature of the Budget is the clear signal given by the Finance Minister on the introduction of a comprehensive Goods and Services Tax (GST) by 2010, which should serve to integrate the economy and make India a single common market.
The FICCI chief while hoping that the timeline on the implementation of the GST would be adhered to, welcomed the Finance Minister's decision not to undertake drastic changes and introduce new taxes in this Budget.
He felt that over the course of the last two budgets, the Finance Minister has put in place a long-term fiscal and taxation structure which need not be tampered with every year.
Mr Poddar also appreciated the Finance Minister's efforts to simplify the FBT, although he expected more in this area. On the tax front, major reforms have been initiated both in Direct and Indirect Taxes.
The increase in the threshold of Rs 1 lakh towards super-annuation fund is a step in the right direction. On simplification and rationalisation of tax laws, FICCI has urged that a modern, forward-looking and simple income tax law should be introduced at the earliest so as to reduce the litigations in the courts.
The reduction in the peak customs duty from 15 per cent to 12.5 per cent is a step that would align our rates, with those of ASEAN countries.
FICCI has also urged the government that reduction in peak customs tariff should be calibrated with internal reforms.
The Chamber is of the view that the country should have a National VAT with total incidence of 20 per cent (12 per cent CENVAT and 8 per cent State VAT). The increase in the Minimum Alternate Tax (MAT) from 7.5 per cent to 10 per cent should be reviewed.
However, FICCI was hopeful that the cascading effect of Dividend Distribution Tax (DDT) would be ironed out in the Budget and felt that the Finance Minister could have pursued the policy of reforms of PSUs and disinvestments.
Mr Poddar pointed out that in the context of coalition politics, the Budget has remained silent on the issue of disinvestments. Industrialists present at FICCI's budget meeting were appreciative of the gradual reduction in excise duty rates and said that this step would make the Indian manufacturing industry more competitive.
Points were raised about the DDT, the FBT and the MAT and it was felt that the Finance Minister could have tackled these in a more positive manner.
FICCI welcomed the Finance Minister's move to revise upwards the FII investment limits in corporate debt and government securities. Further, allowing Indian investors greater exposure in markets abroad was also hailed as a step in the right direction.