CII wants fiscal deficit addressed

The Confederation of Indian Industry (CII) has said though the economy is upbeat with manageable inflation and a gross domestic product (GDP) highly coordinated with that of the world, there is an immediate need to focus on the rising fiscal deficit and insufficient investment in infrastructure.

"India's GDP is highly coordinated with that of the world GDP and the current inflation, despite being high, would be manageable due to a sharp decline in oil prices and the depreciating rupee," CII President Sunil Kant Munjal said here.

At the recently-concluded CII National Council Meeting, the council members expressed concerns over the rapid growth in the current account surplus, which was increasing at a steady pace and stood at $10.6 billion.

This was equivalent to exporting $10 billion to the rest of the world, which India could not afford.

There is a need to increase the absorptive capacity in the economy, especially through investments in infrastructure and turn this surplus into a deficit, Munjal said.

The council said there were "capacity constraints" in the manufacturing sector which was suffering from severe inadequacy in infrastructure services such as ports, airports and power, and suggested putting in place a target for gross capital formation in the sector.

On taxation, the council recommended widening of both the direct and the indirect tax base.

A high rate of 36-40 per cent incidence of indirect taxation made India one of the highest-cost countries in Asia. This was evidently unsustainable.