 "Budget should rekindle business sentiment and investments: CII")
The focus of the Union budget for 2016-17, which will be announced at a time when the macro-economic milieu continues to be domestically and globally challenging, should be on stepping up the pace of investment expansion for achieving higher growth and job creation. The Confederation of Indian Industry (CII) is looking forward to suitable policy interventions which would rekindle business sentiment and thereby help to debottleneck the economy.
“Considering that broad based revival of private investment is being constrained on account of weak order book situation resulting in capacity overhang, there are hopes and expectations that the forthcoming Budget would increase spending by the government, the public sector and by quasi-government bodies,” said Chandrajit Banerjee, director general, CII.
According to CII, higher public investment in key projects especially in infrastructure sectors such as roads, railways, power and waterways would ‘crowd in’ private investment and in turn have a cascading effect on growth. CII wants the government to speed-up the implementation of industrial clusters and parks such as NIMZ, DMIC & DFC projects. The National Investment and Infrastructure Fund (NIIF) needs to be activated to provide more avenues for infrastructure financing.
Low-cost housing has one of the highest multiplier effects on the economy as there are over a hundred and fifty industry segments directly linked to the home construction Industry. It also provides the largest number of semi-skilled and unskilled jobs. CII has, therefore, recommended that deduction on interest for housing loans should be set at Rs 50,000. Also, it wants housing loan repayment to be covered separately and should be out of the purview of exemptions under Section 80C.
On revenue generation, CII maintained that at a time when tax revenue is stressed, stepping up non-tax revenue through spectrum sales and PSU divestment becomes crucial. To raise revenue, the government should sell all its stake in the Specified Undertaking of the Unit Trust of India (SUUTI) which can yield nearly Rs 50,000 crore to be used for investment.
On expenditure control of non-productive items, CII has recommended better targeting of subsidies by linking subsidies on fuel, fertilisers and electricity to direct benefit transfer. Fertiliser subsidy should be paid directly to farmers as cash transfers.
The budget should announce some bold steps to address the problem of non-performing assets (NPAs) in the banking system. As of September 2015, NPAs constituted over 5 percent of banks’ total advances. The government should consider the creation of a National Asset Management Company (NAMCO) which would take NPAs off the banks’ balance sheet and also focus on rehabilitation, recapitalisation and refinancing of banks. This would release capital, provide banks with lendable resources and restore their health.
According to CII, the budget should aim at restoring the strength of the rural economy, which has been adversely impacted by two consecutive droughts, by taking steps to stimulate rural demand. Rural demand has to be supported not only through higher spending on rural infrastructure such as roads and irrigation, but also through measures to enhance rural purchasing power. Rural inflation has been consistently higher than urban inflation and measures are needed to mitigate the impact on rural incomes. CII has suggested increase in allocation for schemes such as Pradhan Mantri Gram Sadak Yojana and the Pradhan Mantri Krishi Seenchayi Yojana.
Measures such as reduction in corporate tax rate will go a long way in improving the tax base. CII has urged the government to announce a year-wise roadmap for reduction of corporate tax rate from 30 percent to 22 percent along with withdrawal of incentives. However, CII feels that the incentives should be phased out in a calibrated manner, in line with the reduction in tax rate and on a prospective basis so that any investments made on the basis of these incentives are not affected.
“Considering that broad based revival of private investment is being constrained on account of weak order book situation resulting in capacity overhang, there are hopes and expectations that the forthcoming Budget would increase spending by the government, the public sector and by quasi-government bodies,” said Chandrajit Banerjee, director general, CII.
According to CII, higher public investment in key projects especially in infrastructure sectors such as roads, railways, power and waterways would ‘crowd in’ private investment and in turn have a cascading effect on growth. CII wants the government to speed-up the implementation of industrial clusters and parks such as NIMZ, DMIC & DFC projects. The National Investment and Infrastructure Fund (NIIF) needs to be activated to provide more avenues for infrastructure financing.
More From This Section
CII has also recommended incentivising ‘off balance sheet’ investment proposals, such as NHAI projects, railways, etc, where it is possible to generate adequate revenues. The idea should also extend to identifying and promoting more PPP opportunities where the viability gap funding helps facilitate a much greater economic return.
Low-cost housing has one of the highest multiplier effects on the economy as there are over a hundred and fifty industry segments directly linked to the home construction Industry. It also provides the largest number of semi-skilled and unskilled jobs. CII has, therefore, recommended that deduction on interest for housing loans should be set at Rs 50,000. Also, it wants housing loan repayment to be covered separately and should be out of the purview of exemptions under Section 80C.
On revenue generation, CII maintained that at a time when tax revenue is stressed, stepping up non-tax revenue through spectrum sales and PSU divestment becomes crucial. To raise revenue, the government should sell all its stake in the Specified Undertaking of the Unit Trust of India (SUUTI) which can yield nearly Rs 50,000 crore to be used for investment.
On expenditure control of non-productive items, CII has recommended better targeting of subsidies by linking subsidies on fuel, fertilisers and electricity to direct benefit transfer. Fertiliser subsidy should be paid directly to farmers as cash transfers.
The budget should announce some bold steps to address the problem of non-performing assets (NPAs) in the banking system. As of September 2015, NPAs constituted over 5 percent of banks’ total advances. The government should consider the creation of a National Asset Management Company (NAMCO) which would take NPAs off the banks’ balance sheet and also focus on rehabilitation, recapitalisation and refinancing of banks. This would release capital, provide banks with lendable resources and restore their health.
According to CII, the budget should aim at restoring the strength of the rural economy, which has been adversely impacted by two consecutive droughts, by taking steps to stimulate rural demand. Rural demand has to be supported not only through higher spending on rural infrastructure such as roads and irrigation, but also through measures to enhance rural purchasing power. Rural inflation has been consistently higher than urban inflation and measures are needed to mitigate the impact on rural incomes. CII has suggested increase in allocation for schemes such as Pradhan Mantri Gram Sadak Yojana and the Pradhan Mantri Krishi Seenchayi Yojana.
Measures such as reduction in corporate tax rate will go a long way in improving the tax base. CII has urged the government to announce a year-wise roadmap for reduction of corporate tax rate from 30 percent to 22 percent along with withdrawal of incentives. However, CII feels that the incentives should be phased out in a calibrated manner, in line with the reduction in tax rate and on a prospective basis so that any investments made on the basis of these incentives are not affected.