Retain tax rates: India Inc

NEWDELHI: Amid global economic slowdown, moderation in domestic growth, tight liquidity and deceleration in investment activity, Finance Minister Pranab Mukherjee on Friday said the Indian economy needs to grow by over 9% for a sustainable period to achieve inclusive growth.

Addressing industry leaders during a pre-Budget consultation meeting here, he said keeping  inflation and fiscal and revenue deficit to manageable levels among others are some of the major challenges facing the economy.

GDP growth had moderated from 7.7% in April-June quarter to 6.9% in the second quarter of this fiscal.

While headline inflation has started moderating, easing sharply below the crucial 9% level in December to a two-year low of 7.47%, indications are that the government is likely to slip on meeting its fiscal deficit target of 4.6% for 2011-12 financial year.

Earlier this week, Prime Minister’s Economic Advisory Council Chairman C Rangarajan said the government is unlikely to meet the fiscal deficit target. In its third quarter review of the monetary policy, the Reserve Bank of India too had expressed concerns over the rising fiscal deficit, saying that any reduction in policy rates will be contingent upon the Centre setting its house on order on the fiscal consolidation front.

On its part, India Inc made a strong pitch for retaining tax rates at existing levels and suggested that service tax base may be widened with a negative list.

“We have made a case for retaining tax rates at the present level. There should be no increase in corporate tax, service tax and excise,” FICCI  President R V Kanoria said.

Some business leaders suggested that there is a need for amendment of the Fiscal Responsibility and Budget Management (FRBM) Act with a roadmap for reduction in fiscal deficit in the next five years that would help in infusing a sense of discipline in raising revenues and containing expenditure.

 Most of the industry captains were in favour of reduction in interest rate at least by 50 basis points to boost demand and investment sentiment. It was also suggested to shift to accrual based budgeting from cash based budgeting for better outcome of money spent.

To give an impetus to healthcare, India Inc suggested that a benefit of tax deduction of  Rs 10, 000 be given to citizens for preventive health check-up.