Reforms required for Strengthening Economic Recovery and creating jobs: CII President

At the pre-budget Consultation meet with the Finance Minister, Mr. Arun Jaitley, CII President Ms. Shobana Kamineni presented the industry body's recommendations for the Budget. With the Budget being presented at a time when the economy is on the cusp of a recovery, the main focus of the recommendations was on how the recovery process can be strengthened without compromising the government's fiscal targets. The CII President said that the Minister was very receptive to the ideas presented by her.

To strengthen the package for the turnaround of the banking sector, the CII President said that the government needs to lower its stake in public sector banks to 52% and progressively to 33%. The banks may be allowed to reissue the recapitalisation bonds and securitize good loans.

The power sector is in urgent need for reform to address challenges in distribution and prevent a build-up of stressed assets. A unique idea presented by CII is the creation of a National Power Distribution Company which can buy power from stranded assets and help formulate a national pricing benchmark. The involvement of the central government is required alongside states to sort out the issues in the power sector, she said.

Land is a scarce resource and many public entities hold excess land in urban areas. A Land Bank Corporation should be set up by the government to create a publicly accessible inventory of such land and raise resources for the government by monetizing land. This could be a huge source of land for industry which wishes to invest.

Investments in physical and social infrastructure need to be commensurate with what the country needs. While the government needs to step up its capital expenditure, it is also important to revitalize Public Private Partnerships in the country. Large amounts are locked in arbitration, and there is a need to ensure contractual sanctity by putting into place effective independent regulators. All efforts to strengthen the Municipal Bond Market would be helpful to raise funding for cities.

In health and education, the government needs to step up its spending and create separate funds. A fund of Rs 10,000 crore for teacher training would go a long way in boosting technology usage in schools. CSR contribution of companies can be attracted to augment this fund with simple incentives in the form of giving a 150% weightage, while calculating the CSR numbers for the year.

To reap the benefits of large scale scientific farming, the contract farming laws need to be amended to allow leasing of farm lands to corporates/growers without transfer of titles. CII has also suggested an Empowered Group of State Agriculture Ministers be formed to implement reforms in agriculture.

On direct taxes, it is suggested that a roadmap for reduction in the corporate tax rate be laid out. CII suggests that this should be brought down to 18% at the earliest with withdrawal of tax incentives and exemptions and withdrawal of surcharges and cesses. This will send a powerful message to Indian industry and global investors that India is an attractive investment destination and will be a huge enabler for job creation.

In line with the goal of promoting a cashless economy, CII has suggested that cash transactions above a particular threshold be penalised by levying a cash transaction tax. The merchant and the consumer should be incentivised with tax breaks for using and accepting Debit / Credit Cards.

The government needs to extensively use of IT tools, Data Analytics, etc with minimum taxpayer interface, so as to track undeclared wealth and improve tax administration system. The Blockchain technology should be explored for greater tax compliance and reduction of evasion.

Finally, on GST, CII believes that the tax will transform the indirect tax system and usher in a harmonised national market of goods and services. By paving the way for formalization of the economy and moving towards a simplified, assesse-friendly tax administration system, it is deemed to contribute significantly to the growth of the economy. CII suggested that for the tax to be truly transformative, there is need to move towards just three rates - a 'standard' rate for items of mass consumption which will merge the 12% and 18% rates into a single rate; a rate of 28% to apply to demerit goods and a rate of 5% for merit goods including goods used by the poor. Further, CII suggests that the government should actively consider inclusion of key sectors such as petroleum, real estate, alcohol and real estate within the ambit of GST while extending quarterly return filing across the board and not just to SMEs.

CII strongly advocates resolving the problems on account of input tax credit so that onward recipients of goods/services are not penalised for the fault of the previous vendor in the chain. Similarly, the problem of multiple registrations needs urgent resolution.

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