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Economic survey 2008-09
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CII welcomes long-term strategic direction of Indian Budget 2009-10
Warmly welcoming the Budget for 2009-10, Mr Venu Srinivasan, President of Confederation of Indian Industry (CII), said that positive indications for the long term have been announced on a number of important issues such as subsidies, infrastructure and FRBM. The Budget's spending package for inclusive growth and large outlays on infrastructure and NREGS will help revive the economy by stimulating investment and consumption. The Budget has reiterated the importance of reverting to the growth path of 9% and stressed private sector investment and FDI as major growth drivers of the economy.
Steps to increase expenditure under the NREGS and the sharp hike in Bharat Nirman for rural infrastructure as well as expanded spending on rural roads, urban housing under Rajiv Awaas Yojana, and JNNURM will bridge the regional disconnect and add to rural spending power.
President CII welcomed the intent to rationalize the tax regime by introducing a new Direct Tax Code for consultation within 45 days. The creation of an alternative dispute resolution mechanism for the resolution of transfer pricing disputes will help encourage foreign investors. The President appreciated the abolishing of FBT and CTT as well as surcharge on personal income tax.
Under Indirect Taxes, the stability in peak Customs Duty at 10%, excise at 8% and service tax at 10% is very welcome under the current challenging economic environment. CII had called for maintaining the peak customs duty in light of adverse global conditions. However, the increase in excise tax from 4% to 8% on many goods may adversely affect some sectors, he added. CII expressed appreciation that FM reiterated the government's commitment to introduce GST as scheduled on April1, 2010, and that the roadmap has been largely agreed upon.
CII welcomed the steps announced to improve delivery mechanisms and make procedures more transparent and accountable. The Unique Identity scheme, headed by Mr Nandan Nilekani, is expected to come out with the first numbers within 12-18 months, and this represents private sector partnership in government schemes. The measure to exempt donations to electoral trusts to the extent of 100% will add transparency to contributions to political parties.
Special attention has been given to the sectors particularly affected by the global economic crisis. The stability in the indirect tax regime would help manufacturers, who have been suffering due to low external demand, said Mr Srinivasan. Stress on infrastructure would aid upstream and downstream sectors such as steel and cement.
For the export-oriented manufacturing sectors, FM has expanded the list of raw materials and equipment imported by manufacturers of leather, textile and footwear that are fully exempt from customs duty. Special measures have also been taken for micro, small and medium businesses to simplify administrative procedures for businesses with up to Rs 40 lakh turnover, extend additional credit of Rs 4000 crores through RIDF, and extend interest subvention of 2% on certain sectors.
Commercial loans for public private partnership projects will be refinanced by IIFCL to a certain extent, while certain sectors such as road development under NHAI, railways, and urban development have received sharp hikes in funding.
For ensuring energy security, the incentives given for petroleum pipelines have been extended to natural gas pipelines as well to create a National Gas Grid, which was a long-standing demand of industry. The announcement of extension of income tax holiday for companies involved in production of oil and gas will help in increased investments in indigenous production. The constitution of a committee to review deregulation of oil and gas prices is a welcome step to align domestic prices with global prices.
CII also appreciated the steps taken on education, especially to reduce female illiteracy by half in three years. Interest subsidies for economically weaker students, including in vocational education, provision for Mission in Education through ICT and setting up of polytechnics as well as central universities in all districts will help add to India's human capital.
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