?Search on to boost rural demand?
ECONOMISTS, TAX consultant and academicians placed their expectations and suggestions at the panel discussion organised by School of Economics on, ?Union budget 2006-2007: Prospects and expectations,? at Jall auditorium in DAVV campus on RNT Marg this morning.india Updated: Feb 23, 2006 14:24 IST
ECONOMISTS, TAX consultant and academicians placed their expectations and suggestions at the panel discussion organised by School of Economics on, ‘Union budget 2006-2007: Prospects and expectations,’ at Jall auditorium in DAVV campus on RNT Marg this morning.
Introducing the subject, School of Economics Head Dr G Kawadia said that Indian economy has reached a take off stage with adequate reserve of foreign exchange (US$ 140 billion) as rate of interest and exchange, balance of payment and inflation are well under control.
Stating that with India poised to achieve a 10 per cent growth rate, he said search is on for new rules of the game to boost the demand in rural economy specially when the country is shifting from deficit economy to surplus economy and the focus has been moved from demand deepening to demand widening. The Indian economy is prepared for risk and has ingredients to sustain it for next 10 years.
National Rural Employment Guarantee Scheme, Bharat Nirman, health welfare schemes for urban and rural poor are all aimed to widen the demand, Dr Kawadia maintained and added that country’s political stability is the result of continual growth rate though coalition governments are ruling it for past six years.
He said since India has the lowest tax ratio, there is scope for improvement though shortfall in excise duty due to exemptions is cause for concern. He, however, stressed the need for top class universities, world-class infrastructure facilities to maintain the economy of high growth rate.
Tax consultant Tribhuvan Sachdev said that the country has managed to increase its revenue despite cutting down the tax rate but there have been back door entries like surcharge, education cess and fringe taxes. He said that the prevailing tax rate is unlikely to be disturbed in the oncoming budget.
Nevertheless, few proposals like taxing affluent godmen, rich charitable trusts and wealthy farmers with additional income sources are doing the rounds. It will be a revolutionary step if imposed but will invite lot of hoopla, he added.
Citing reason for splurge in share market, he said it is because of the exemption granted on profit earned from sale of company shares after 12 months of purchase and 20 per cent tax concession offered if sold in less than the stipulated time.
This has drawn foreign investment to Indian shores including Japanese who are conservative investors. Reflecting on the upcoming budget, he added that the Union finance ministry might soften the Fringe Tax Benefit (FTB) against which industries have been protesting.
He said that 10.2 per cent service tax, collected deftly like a honeybee sucking juice without disturbing the flower, may be extended to lawyers and doctors. He suggested a cut down in Government expenses to be used for more constructive purposes.
Exposing the fissures in the rosy façade of Indian economy, well known economist Dr V D Nagar said that all is not well as foodgrain stock has fallen, rabi production is less, 69 small industries have been de-reserved and Government is buying money from market to pay interest of earlier loans, which is bad economics. He predicted a shortfall of Rs 13,000 crore in income and increase in fiscal deficit.
According to Dr Nagar, there would be no need to buy money from the market if attempts are made to recover Rs 9,800 crore tax arrears, cut down non-planned expenditure that is over Rs 3 lakh crore and use the unclaimed sum of Rs 110 lakh lying with 82 endowments. He said that finance ministry is worried about erosion of banks’ capital base and non-performing assets.
Speaking further, he lashed out at Government for launching employment guarantee and Bharat Nirman schemes at the end of financial year, questioning that where would the money come from to spend on them.
Summing up, Dr Nagar said that Indian economy is passing through a churning process and suggested use of black money under an amnesty scheme for constructive purpose.
“Nevertheless, its right time for take off,” he remarked.
First Published: Feb 23, 2006 14:24 IST