Monetize fiscal deficit, reduce interest rates; Labour, GST Top Priorities for Competitiveness.
The Confederation of Indian Industry (CII) today made recommendations to the new Government on the 100 days action plan. Titled “Economic Agenda for Action: CII Suggestions”, the paper aims at addressing resilience and competitiveness of the Indian economy. Key recommendations include monetisation of fiscal deficit and reducing interest rates to counter large government borrowings which are negating efforts of RBI. The report stated that the Government would have to undertake policy measures for the short term as well as for medium and long term.
Releasing the paper, Mr. Venu Srinivasan, President, CII said, “During the last year, the economy has had to face significant challenges due to the onset of the global financial and economic crisis. It is imperative that the Government takes concrete steps in strengthening policies that will promote employment and growth across the key sectors of agriculture, industry and services along with driving investment in infrastructure and manufacturing. We would volunteer for an opportunity to work with the Government in a spirit of collaboration.”
Welcoming the new UPA Government Mr. Chandrajit Banerjee Director General, CII said, “We would urge the government to take the lead in creating an enabling environment on the roadmap for economic recovery. Our recommendations in the “Economic Agenda for Action’ is targeted at supporting government initiative in that direction.’
Some key recommendations in the report include:
- Quick disinvestment of profit-making PSUs as it will immediately help soften interest rates and assist fiscal management
- Repo and reverse repo rates must be reduced by at least 50 basis points to 4.25% and 2.75% respectively
- Monetise fiscal deficit
- Reduce interest rates by at least 50 basis points
- Labour reforms: Raise IDA limits for workers from 100 to 500
- Allow Government to acquire land for industrial purposes and establish land banks for non-cultivable land
- Raise FDI limit in insurance to 49% and allow 26% FDI in pension fund management
- Implement GST at 12% by April 2010
- Allow disinvestment in PSUs to raise Rs 30,000 crores
- Liberalise higher education
A key suggestion to fast-track projects such as NHDP, Dedicated Freight Corridors, ports and airports is a single window agency. UMPP, low-cost housing and urban infrastructure under JNNURM are other top priorities for expenditure and action.
The paper urges the government to promote public-private partnership in infrastructure by easing norms and financing mechanisms. It also moots the establishment of Land Bank Corporations to acquire non-cultivable land to ease land acquisition. In the power sector the CII suggests concerted initiatives to alleviate the constraints, with immediate changes to pricing and tax policies and longer term measures, such as coal sector reforms, for adding capacity.
The paper also calls for Electronic Data Interchange to be enabled at all customs stations and concessional marketing assistance loans to reputed exporters, especially in the SME sector and incentives for investments in Africa and Latin America aimed at boosting exports.
In agriculture the paper calls for effective redesign of The Model APMC Act for particular sectors such mandis and horticultures for uniform implementation. It also recommends moving towards a common market for farm produce. CII calls for the incentivisation of private investment in agriculture, agri infrastructure and extension services and create policies geared for building linkages between farms and markets. Food safety and quality regulations should also be implemented, added CII.
CII has strongly recommended the introduction of GST of 12% by April 2010 in order to increase the share of manufacturing in the economy and also generating employment. The paper calls for a National Manufacturing Policy focusing on domestic value addition and promotional measures that would help meet targets for employment and technology. Private sector participation in defence production should also be encouraged by creating a ‘level playing field’ between private and public manufacturers and increasing projects in the ‘Make’ category.
In a special section on MSME competitiveness, the paper asks for funds to be designated for technology adaptation and full depreciation on IT equipment to mitigate the effects of economic crisis on this group. Other procedural and administrative matters must also be rationalised by Central and State Governments and local bodies. According to CII, to reach advanced country levels there was a need to stimulate industrial technology, R&D and innovation through facilitative fiscal policies and incentives through adoption of a comprehensive approach.
CII calls for the designation of infrastructure status to Healthcare and Tourism and recommends granting industry status to retail. The report highlights concerns of key services sectors that can play a critical role in the economy, including healthcare, tourism, retail, telecommunications, design and entertainment.
The paper states that higher broadband penetration has the potential to create 25.85 million jobs by 2014, with 20.68 million of these in rural India; hence, CII suggests that taxation and fees in the sector must be re-examined, among others.
CII calls for raising the FDI in insurance to 49% and in pension fund management to 26% and pending legislation in banking, insurance and pensions to be expedited. The paper accords precedence to financial inclusion through liberal branch expansion and a national biometric identity card. The corporate debt market must be expanded and increased access to international debt markets facilitated, added the industry body.
CII recommends the increase in the public expenditure on health from 0.9% to 3% of the GDP and incentivisation of private sector participation. A large number of recommendations in the CII report pertain to the social sector. In skill development, education must be linked to employability with courses available at the 6th-8th grade levels. The Industry body states that liberalisation of higher education sector must take place through self-accreditation, overhauling UGC, educational loans, and autonomy to set fees among others.
